Operational Decision Management - Top 10 Use Cases

Operational Decision Management- Top 10 Use Cases

Bálint TóthIBM Hungary

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Rules are hard to manage/buried in applicationsRules are hard to manage/buried in applications

Common Themes that Signal a good fit for ODM

Frequency of rule changesFrequency of rule changes

Need for increased business user involvementNeed for increased business user involvement

Need to boost straight-through processingNeed to boost straight-through processing

Lack of traceability / auditabilityLack of traceability / auditability










Lack of traceability / auditabilityLack of traceability / auditability

Lack of consistency of rules across applications and channels

Lack of consistency of rules across applications and channels




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Top Ten ODM Scenarios …

1. Credit & Loan Approvals

2. Claims Processing

3. Underwriting

4. Compliance & Reporting

5. Dynamic Pricing & Bundling

6. Fraud Detection

7. Eligibility Determination

8. Cross-sell, Up-sell & Product Recommendations

9. Customer Insight & Loyalty Programs

10.Customs & Border Control

Credit and Loan Approvals

IBM Operational Decision ManagementUse Case

Key Challenges in Credit and Loan ApprovalsLenders face numerous obstacles to grow revenue profitably

Changing regulatory requirements

Changing regulatory requirements

Error-prone processes

Error-prone processes

Challenging system integration

Challenging system integration

Slow manual processes for loan approval

Slow manual processes for loan approval

Low customer satisfaction

Low customer satisfaction

Credit & Loan Approvals

Credit & Loan Approvals

Areas for Improving Competitiveness in Credit & Loan Approvals

Key credit approval challenges addressed by operationalizing business decisions

Loan Origination

Reduce time and cost by increasing straight-through processing

Provide customers immediate visibility into the current state of their loan application

Mortgage Refinancing

Predict a borrower’s willingness and capacity to repay

Assess value of collateral quickly and accurately using common standards

Discerning Credit Quality

Ensure complex credit criteria are consistently applied

Continuously evaluate the type of credit and the limit extended to existing customers

Category Business Benefits

Externalize Decisions

Enable flexible management of eligibility and credit decisioning rules

Ensure consistency across all products and channels

Focus IT on strategic work and not tedious rule maintenance across multiple legacy systems

Frequency of Change

Improve response times to rapidly changing business conditions through consolidated rules across multiple legacy systems

New products can be taken to market within weeks not months

Empower Business Users

Enable business users to manage updates to policies directly with limited involved from IT

Improved user friendliness for maintaining business rules allows business users to respond more effectively to dynamic business conditions

Reduce Operating Costs

Limit manual work in the decisioning process to make best use of human resources

Using validation methods that show which business rules were used to make a decision, considerably reducing the effort required to develop and maintain applications

Benefits of Using Operational Decision Management

Sample Credit & Loan Approval DecisionsExamples of Business Rules, Rule Flows and Decision Tables

Novagalicia Bank Improve product processing through automation of routing rules

ChallengesChallenges

Routing of product requests to decision-makers required over 173 different business rules

Rules changed daily, and maintaining the routing systems to keep up with these changes was taking too much time

BenefitsBenefits

Time to implement changes to routing rules went from days to hours

Overnight processing of 200,000 non-payments completes in only 14 minutes vs hours previously

Business users are able to manage the business rules themselves

Business rules were implemented within the BRMS system as a group of reusable services

Systems leveraged the new services, executing each request in under 30 milliseconds

Various channels were supported including Web and branch systems

Solution

Software Offerings:

IBM Operational Decision Management

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Claims Processing


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Key Challenges in Claims ProcessingInsurance providers face numerous obstacles to grow revenue profitably

Lack of transparency throughout the claims process and need

to show compliance

Lack of transparency throughout the claims process and need

to show compliance

Inaccurate claims assessment & delayed settlements

Inaccurate claims assessment & delayed settlements

Inability to align adjuster skill set with claim complexity

Inability to align adjuster skill set with claim complexity

High claim processing costsincluding claims leakage

High claim processing costsincluding claims leakage

Lengthy claims processing cycle with manual practices

Lengthy claims processing cycle with manual practices

Claims Processing

Claims Processing

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Improving Competitiveness in Claims Processing

Key trends driving decision management solutions

Healthcare Claims

Health care reform is leading to retail purchasing models which demand error-free, real-time processing of claims

Resource Efficiency

Use business rules to quickly identify straightforward claims to be routed for immediate settlement with little or no human intervention

Customer Retention

Use rules systems to consistently handle all customer touch-points consistently for increased customer satisfaction.

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Category Business Benefits

Externalize Decisions

Enable simple expansion of business into new geographic regions through simple addition of local business rules

Rule logic changes no longer create bottlenecks and impact productivity of IT personnel

Frequency of Change

Increase processing efficiencies and ability to implement rapid changes to claims validation decisions

Achieve an extensible platform that can be re-used to address anticipated future code and policy transformation initiatives mandated by Federal and State governments or other regulatory bodies

Empower Business Users

Give the power back to the business...without the need for IT all the time

Provide systems to enable the business as a key pillar in an IT transformation strategy

Reduce Operating Costs

Provide a platform for innovation, keeping costs down, increasing process agility and visibility, and significantly improving the efficiency of each of the company’s key processes

Process 1 million claims per month while significantly reducing claims costs annually

Benefits of Using Operational Decision Management

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Sample Claims Processing DecisionsExamples of Business Rules and Decision Tables

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Worksafe VictoriaImproves efficiencies and productivity in their agents


Too many manual processes led to long settlement cycles

Needed to improve accuracy and timeliness of payments to treatment providers

Must ensure the correct outcome for the organizations and providers served

BenefitsBenefits

Improved processing throughput by 300%

Reduced payment cycle time from 30 days to 1 day

Increased straight-through-processing rates from 40% to over 80%

Over 2000 complex business rules automate the invoice processing from validation, adjudication, payment and settlement

Business users manage the rules themselves in collaboration with IT

Solution

Software Offerings:

“[Agents] have been given the ability to do the higher valued work that they've wanted to do in the past. Now, we can actually get them to actively manage claims, actively manage our clients to ensure that they get the best outcome as well as us..”


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Underwritting


Key Challenges in UnderwritingInsurance providers face numerous obstacles to grow revenue profitably

Inability to create flexible risk tiers to match customer

segmentation

Inability to create flexible risk tiers to match customer

segmentation

Inability to roll out new insurance products

quickly

Inability to roll out new insurance products

quickly

Aging pool of experienced underwriters

Aging pool of experienced underwriters

Inability to assess risk accurately leading to mispriced rates

Inability to assess risk accurately leading to mispriced rates

Low straight-through-processing leading to higher costs

Low straight-through-processing leading to higher costs

UnderwrittingUnderwritting

Improving Competitiveness in Underwriting


Process Automation

Automated underwriting solutions are expanding to deliver policies in a cost-effective manner

Micro-segmentation

Many insurers are moving towards micro-segmentation:Finding the 18-year-old male drivers who aren’t bad drivers then selling to them at a better price

Focus on Higher Value

Add

The next generation of underwriters are focusing on the value-added activities of analyzing, selling, negotiating and managing relationships

Sample Underwriting DecisionsExamples of Business Rules, Rule Flows and Decision Tables

A Canadian Property & Casualty Insurance GroupImproves speed to market and transparency across lines of business


Many manual practices and hard coding of rules created inflexible processes

Performance issues in existing systems due to use of a rating engine for underwriting

Lack of consistency across processes in different lines of business

BenefitsBenefits

Reduced time-to-market of new products and services by over 50%

Improved automated pass-through rates by 80%

Greater consistency, control and auditability of how business rules are being enforced and their impact

Implemented an e-commerce foundation for common service delivery.

Business rules automate the underwriting process (P&C, Auto), quoting, product selection and application flow

Rule execution performance is in mili-seconds

Solution

Software Offerings:

“We selected IBM because of its ease-of-use, advanced rule management capabilities for business and IT users, and tight integration in a service-oriented architecture.”


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Compliance and Reporting


Key Challenges in Compliance and ReportingBusinesses face numerous challenges to comply with regulations and internal policies

Inability to show why specific transactions were authorized

Inability to show why specific transactions were authorized

Need to reduce workload and manual touch points

Need to reduce workload and manual touch points

Need for common compliance enforcement across lines of business

Need for common compliance enforcement across lines of business

Inability to quickly implementcomplex regulatory changes

Inability to quickly implementcomplex regulatory changes

Need for transparency and reporting with audit trails

Need for transparency and reporting with audit trails



Improving Competitiveness in Compliance & Reporting


RiskAwareness

Companies integrate

risk and compliance

considerations into

all decision-making

Regulations

Regulatory pressures force financial firms to re-think the value of technologies used to operate effectively and manage risk

TimelyActions

Firms make actionable, optimized and timely decisions to comply by keeping risks at anticipated and acceptable levels

Technology

Technology brings a new economic system that redefines relationships between bankers, customers, partners and regulators

Sample Compliance and Reporting DecisionsExamples of Business Rules, Rule Flows and Decision Tables

A UK Pharmaceutical CompanyAccelerating compliance with the Sunshine Act of 2010


Sunshine Act mandates disclosure of financial payments to physicians and teaching hospitals

Requires manipulation of multiple complex rule sets in a rapidly changing regulatory climate.

Since preexisting state laws remain, companies must deal with various standards of reporting concurrently

BenefitsBenefits

Compliance managers can define and maintain the decisions and rules that apply to the Act, reducing the amount of time and effort required to update systems

The sales force has the ability to proactively manage its promotional spending so that it does not exceed its limits and risk noncompliance.

Integrates multiple reporting systems for logging promotional expenses and then verifies and transforms them into a single database

BRMS extracts the data for state reporting, determines what data is appropriate and uploads that data for report generation

Solution

Software Offerings:IBM Operational Decision Management

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Dynamic Pricing and Bundling


Key Challenges with Dynamic Pricing and BundlingBusinesses face numerous obstacles to growing revenue profitably

Inability to accurately calculate price for complex product bundles

Inability to accurately calculate price for complex product bundles

Inability to assess the impact of new product bundles on profitability

Inability to assess the impact of new product bundles on profitability

Streamline and scale pricing systems to improve consistency of quotes

Streamline and scale pricing systems to improve consistency of quotes

Inability to use customer data to create the right bundle for each customer

Inability to use customer data to create the right bundle for each customer

Inability to roll out new pricing plays quickly

Inability to roll out new pricing plays quickly



Improving Competitiveness in Dynamic Pricing and Bundling


Dynamic Packaging has

Perceived Value

Nearly one-fourth of all online travel buyers have bought travel combinations with nearly 80% creating the package themselves

Dynamic Pricing Creates Opportunities

Using the richest information possible – what they buy; how much they spend, how competitors book – dynamic pricing allows online companies to tailor prices to an individual’s spending inclination

Sample Dynamic Pricing and Bundling DecisionsExamples of Business Rules, Rule Flows and Decision Tables

Accovia Inc.Enables dynamic packaging and pricing for travel industry customers


Consumers are demanding more options and control over their travel choices

Pre-packaged and pre-priced products are waning

Tour planning, pricing and booking take place in an increasingly dynamic environment where travellers package and manage their own tours

BenefitsBenefits

Enhances customer satisfaction by enabling booking engines to meet traveler demand for real-time dynamic packaging and booking

Speeds time to market, reducing the time required to build new products from months to weeks

Increases pricing competitiveness

Booking engines can now calculate pricing in real-time as customers design their individualized packages

Specialists develop strategically important seasonal offerings using complex rules

Business users deploy tactical responses to daily fluctuations in pricing

Solution


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Fraud Detection


Key Challenges in Fraud DetectionFinancial institutions & insurance providers face numerous challenges to handle fraud

Inability to quickly adapt to new fraud patterns

Inability to quickly adapt to new fraud patterns

Reduce workload on fraud investigators

Reduce workload on fraud investigators

Inability to effectively prioritize potential fraudulent activity

Inability to effectively prioritize potential fraudulent activity

Need a systematic approach to handle fraud

Need a systematic approach to handle fraud

Increased fraud costs due to undetected fraud activity

Increased fraud costs due to undetected fraud activity

Fraud Detection

Fraud Detection

Improving Competitiveness in Fraud Detection


Growing Incidence of

Fraud

An estimated 10 percent of all U.S. P&C claims are fraudulent, so reducing fraud by as little as one or two percentage points can push millions of dollars to a carrier's bottom line

Automation Critical

Technology solutions can help avoid the time and labor-intensive processes associated with manual fraud detection

More Technology Investments

Required

Business Rules technology will help notify legitimate customers of fraud and taking immediate action to prevent fraudsters from succeeding.

Sample Fraud Detection DecisionsExamples of Business Rules

A Large Korean Insurance Company Boost profitability by identifying fraudulent claims quickly and accurately


No effective and expeditious method of detecting and preventing fraud across over one million policyholders

Company profits were eroding with the rapid growth in policies due to costs of manual processes

BenefitsBenefits

Realize $1.4 billion in additional profits, while reducing liability fees by nearly 12 percent

Accelerate fraud detection process by 50 percent using automated claims processing

Reduce inspection time for 10,000 cases from 2 weeks to 1 day

Scans thousands of claims in real-time, assessing them for legitimacy or fraud based on 800 different factors

Applies business rules, predictive analytics and knowledge models against historical data, detecting patterns and ranking them in order of likely fraudulence.

Solution

Software Offerings:

“Moving forward, we anticipate that the solution will continue to help reduce the amount of fraud by millions of dollars on an annual basis


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Eligibility Determination


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Key Challenges with Eligibility DeterminationSocial services providers face obstacles to deliver the right benefits to the right people

Inability to prove regulatory compliance during enrollment

Inability to prove regulatory compliance during enrollment

Reduce the cost of enrollment into social programs

Reduce the cost of enrollment into social programs

Need to streamline eligibility determination to improve citizen experience

Need to streamline eligibility determination to improve citizen experience

Inability to handle complex, changing eligibility conditions

Inability to handle complex, changing eligibility conditions

Inability to roll out new benefit programs to citizens quickly

Inability to roll out new benefit programs to citizens quickly



Improving Competitiveness in Eligibility Determination


Error-prone Processes

For government caseworkers, the challenge of administering numerous benefit programs can be daunting and error prone

Lower Costs of

Maintenance

Rules-based systems are simpler to maintain than custom-developed systems and opens up change maintenance by business users

Aging Population Generating

Demand

Social security agencies worldwide are focusing on streamlining eligibility determination, case management and benefits delivery

Sample Eligibility Determination DecisionsExamples of Business Rules, Scorecards and Rule Flows

Junta de Castilla y León Improves administration of social services


New laws and regulations for dependent peoples were driving the need to re-engineer its IT systems for implementing programs

New social benefits needed to be offered with precisely defined eligibility criteria

Customer service was lacking

BenefitsBenefits

Faster delivery of social benefits requiring less interaction between citizens and the administration

Transparent decisions through consistent scoring of eligibility criteria across all the agency’s centers

Empowerment of policy managers that allows them to review, validate and maintain policies directly

External business rules are used to provide a decision service to score applications and assess eligibility

Automates the processing of most of the paperwork, while centrally managing rules associated with eligibility

Solution

Software Offerings:


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Cross-sell, Up-sell, Product Recommendations


Cross-Sell, Up-Sell and Product RecommendationsChallenges to growing revenue profitably with complex products and services

Inadequate training to cross-sell complex financial products

Inadequate training to cross-sell complex financial products

Improve pre-qualification to increase up-sell accuracy

Improve pre-qualification to increase up-sell accuracy

Inability to cross-sell effectively without a single view of the customer

Inability to cross-sell effectively without a single view of the customer

Inability to connect offers to the right customer segments

Inability to connect offers to the right customer segments

Self-service portals lack fidelity to make good product recommendations

Self-service portals lack fidelity to make good product recommendations

Cross-Sell, Up-Sell and Product

Recommendations

Cross-Sell, Up-Sell and Product

Recommendations

Improving Competitiveness in Cross-sell, Up-sell, Product Recommendations


Online Technology Spending Increasing

Agents are given the ability to push relevant, timely, and personalized offers to the right customer at the right time

Need Comprehensive Customer View

Need value-added metrics and analytics around the customer's risk, profitability, preferences and satisfaction level

Know Your Customer

Needs

Understanding what your customers needs are, before blindly sending them emails and credit card offers leads to customers feeling valued

Sample Product Recommendation DecisionExamples of Business Rules, Decision Tables and Rule Flows

BNP Paribas Enables personalized offers to their customers through any channel


Cross-sell and up-sell opportunities were not taken advantage of due to critical data in silos across departments

Customer loyalty was difficult to maintain due to inconsistencies in service across local branches, web or mobile phone

BenefitsBenefits

Enables bank to personalize offers through any channel based on each customer’s profile

Reduced time to market for new products from weeks to days

Improved competitiveness with the ability to flexibly and rapidly evolve offers based on market conditions and new regulatory requirements

Using business rules, the bank can precisely define highly variable decision logic with respect to eligibility and pricing

Business users are provided with comprehensive governance capabilities to effectively manage large numbers of interrelated rules

Solution

Software Offerings:


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Customer Insight and Loyalty


Key Challenges with Customer Insight and Loyalty ProgramsBusinesses face numerous obstacles to retain and gain new customers

Inability to make selective and personalized customer touches

Inability to make selective and personalized customer touches

Need to simplify administration of loyalty programs

Need to simplify administration of loyalty programs

Need to reduce the cost and workload to run new promotions

Need to reduce the cost and workload to run new promotions

Inability to quickly roll out new promotions

Inability to quickly roll out new promotions

Inability to gain customer insight from disjointed loyalty programs

Inability to gain customer insight from disjointed loyalty programs

Customer Insight and Loyalty Programs

Customer Insight and Loyalty Programs

Improving Competitiveness in Customer Insight & Loyalty Programs


Campaign Fatigue

Fifty-four percent of consumers surveyed said they are thinking of leaving loyalty programs of brands that offer low-value incentives, impersonal engagements and a rash of irrelevant messages

Targeted Promotions

20% of consumers that belonged to a loyalty club had never received a personalized offer. 73% said they were targets of promotions for products that they already owned

Customer Centricity

Many organizations don’t apply customer data across all facets of their business - they have not committed to putting the customer at the center of their purpose

Customer Loyalty DecisionsExamples of Business Rules and Rule Flows

A Beauty Care Retailer Meets customer’s expectations by better understanding their needs


Paper-based loyalty program offered limited visibility into the buying activities of its customers

Manual processes were slow to capitalize on sales opportunities

Customers and store staff frequently found promotions confusing and difficult to use

BenefitsBenefits

Keeps decision makers better informed with real-time visibility into sales trends and customer buying patterns

Improves customer satisfaction with an automated targeted promotions system

Standardizes promotion efforts across 1500 retail locations

New loyalty program captures sales data in real-time enabling a rapid response to new trends

Using business rules this retailer automates rewards and promotion management to offer customers the best promotions at checkout

Promotions are uniquely targeted based on customers individual buying histories

Solution


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Customs and Control


Key Challenges with Customs and Border ControlGovernments face the need to protect their borders while facilitating trade

Deploy border control resources efficiently and prioritize security threats

Deploy border control resources efficiently and prioritize security threats

Provide e-file customs checks for large exporters and importers

Provide e-file customs checks for large exporters and importers

Apply new border crossing procedures into operation quickly

Apply new border crossing procedures into operation quickly

Pre-validate customs declarations before goods arrive at borders

Pre-validate customs declarations before goods arrive at borders

Pre-screen travelers for red flags before date of travel

Pre-screen travelers for red flags before date of travel



Improving Competitiveness in Customs & Border Control


Security vs Privacy

Our privacy laws and our conceptions of privacy cannot withstand the technological change that is happening and the cyber conflict that is developing

Pre-Screened Traveler

Programs

There will be an increase of automated pre-screening of travelers – technology to determine membership and real-time verification will be required

Automated Traveler

Processing

Virtual Officers are an expanding trend to process trusted traveler applicants and they flag questionable interviews for a follow-up interview with human officers

Sample Customs and Border Control DecisionsExamples of Business Rules, Decision Tables and Rule Flows

Swiss Customs Automates plausibility analysis for customs declarations


Importers and exporters are constantly trying to cheat the customs system that uses 700 business rules to determine plausibility of a declaration

Over 1500 different systems are required to be interconnected to the automatic declarations system

System must process 200,000 declarations per day

BenefitsBenefits

Business rules used within the plausibility analysis are reused by several different clearance processes thus increasing the efficiency of administration

Customs professionals can administer the rules directly thus guaranteeing flexibility and speed in adaptation of the rules

The new E-dec system stores all business rules in a central repository allowing customs professionals to create and adapt plausibility rules.

Business rules also generates detailed reports available to clients on the web site to ensure clients understand what is required to make a correct declaration

Solution

Software Offerings:


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Why Operational Decision Management?

Operationalize policy changes in days versus months Decrease cost of implementing business practices, policies & regulations

Improve straight-through-processing Involve business users for change requests with built-in governance

Implement more fine-grained, targeted decisions Perform what-if and impact analyses prior to deployment

Automate and consistently enforce decision policies Ensure policies and associated semantics are consistent across channels

Track what decisions were made and why (runtime) Track what policies were changed and by whom (rule management)

Agility

Efficiency and Productivity

Decision Quality and Precision

Consistency

Transparency, Auditability, Compliance

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Operational Decision Management - Top 10 Use Cases

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