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Tag Archives: Credit Risk

Fraud has the potential to affect entire business adversely !!!

Here’s a recent incident with one of FM head in SE Asia. The FM head said, as an organization, the focus last financial year (FY) was on acquiring subscribers. The situation however when the annual report was published was :

(a) High growth in subscriber numbers

(b) Significant drop in revenues

(c) Drop in ARPU & AMPU

So, what had not gone according to the plan? Marketing had come up with “jazzy plans” to attract new subscribers. This was an avenue for dealers to inflate sales and earn commissions, as they realised the controls were not stringent (falsified subscriptions, dummy subscribers etc). Hence a significant portion of the new customers were taken on-board, but not generating revenue. This not only affected the top-line growth and in turn impacted the health indicators (ARPU and AMPU), but had a snow balling effect on investor confidence. The stocks have since then taken a beating.

This year the Telco is focusing on cleaning the subscriber base and finding ways to have the others generate more revenue. The FM head said, had we been vigilant while growing, we could have avoided a lot of negative consequences. The learning is fraud not only impacts small pockets of revenue streams. It could potentially impact the business at large. Hence it is imperative to consider fraud aspects as part of the proactive controls when launching new products and services.

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