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Tuesday, June 17, 2014

Changing value proposition for control assurance solutions

I work for an organization whose main goal is to generate a positive impact on customers’ business through intelligent business processes. Hence all our sales efforts focus only on one aspect – what impact can we generate for our customer? This in simple language means – how much money can I save for my customer or how much positive influence can I have on their topline or bottom line? We have seen the business paradigm change from being a labour arbitrage based cost out game to one where high end consulting services lead to innovative ideas that drive process efficiency and effectiveness.

While all this is well and good, where risk and control specialists like me face a challenge is quite simple. Risk and controls specialists have traditionally dealt only in two products:

·         Fear – fear of non-compliance and related fines, penalties, loss of reputation and even the ocassional jail time

·         Assurance – assurance that our services will prevent the above disasters from materializing

My experience suggests that we need to start looking at our sales process differently. Assurance is no longer an adequate enough value proposition. While assurance still is quite critical, the average corporate customer has over the years realized that it is possible to get “Assurance+” services. I call them assurance+ because as a principle any service offered by a risk advisory practice is to help a customer identify and mitigate risks. We are still in the business of assurance. But customers now demand that assurance lead to greater process efficiency, assurance comes at a lower cost and assurance comes with greater transparency and visibility. So assurance needs to be accompanied by an efficiency and or a cost metric to make it a compelling value proposition. Anyone who has been in the business long enough knows that none of these “pluses” are radically new. Infact they have always been a natural outcome of most assurance advisory projects. However where we see a change is that the customer has become acutely aware of these byproducts and sees the immense value in them. Hence they are no longer a significantly underplayed offshoot – they are the front and centre objective of customer expectations.

The only area where fear still overrides all business sense is when there is a new regulation (fear of the unknown) or when there is an enforcement action (fear of the known). Any service which helps a company comply with a  regulation which has the power to shut down or at least significantly cripple businesses from an existence and / or revenue perspective do not require any additional value than the fact that it can keep you in business.

This change, like all others, can be viewed from a positive as well as a negative perspective. If we think positively, what this has done is allowed assurance professionals to claim credit and charge additionally for all the hard $ valuea that their advisory services generate. So companies are now experimenting with outcome based pricing, value based pricing even for risk advisory services. This is quite a change from the project based or resource based pricing that risk consulting projects are traditionally used to. The risks in such a business model are great, but the rewards are greater with risk consultants rising from being mere assurance providers to being trusted business advisors.  The flip side of the equation is that quantification of our value proposition is quite a challenge. Over the years, we may have helped many of our customers avoid potential losses, identify potential leakages etc. But one of our handicaps is the basic premise that audit and assurance is never 100%, it is always sample based. Hence the only way for us to put a $ amount on value we have helped generate is by extrapolation, which may not be the best or most prudent option. There is also the argument that the more we chase “number targets”, the more we dilute our main value i.e. assurance.
All said and done, the world of risk advisory services is undergoing radical changes and once needs to be in tune with changing customer expectations or risk getting left behind as the ostrich with its head in the sand. Any risk advisor in that position wouldn’t be too good a advisor now, would it?

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Mumbai product - went around the world - got hitched and escaped from the Silicon city of India to the land of glamour and royalty - London. I write every time my heart stirs......