Operational Decision Management - Top 10 Use Cases

1. Operational Decision Management- Top 10 Use Cases Bálint Tóth IBM Hungary

2. Common Themes that Signal a good fit for ODM • Frequency of rule changes • Frequency of rule changes • Frequency of rule changes • Frequency of rule changes • Frequency of rule changes • Frequency of rule changes • Rules are hard to manage/buried in applications • Need for increased business user involvement • Need for increased business user involvement • Need for increased business user involvement • Need for increased business user involvement • Need for increased business user involvement • Need to boost straight-through processing • Need to boost straight-through processing • Need to boost straight-through processing • Need to boost straight-through processing • Lack of consistency of rules across applications and channels • Lack of traceability / auditability • Lack of traceability / auditability

3. Top Ten ODM Scenarios … Credit & Loan Approvals Claims Processing Underwriting Compliance & Reporting Dynamic Pricing & Bundling Fraud Detection Eligibility Determination Cross-sell, Up-sell & Product Recommendations Customer Insight & Loyalty Programs Customs & Border Control

4. Credit and Loan Approvals IBM Operational Decision ManagementUse Case

5. Key Challenges in Credit and Loan Approvals Lenders face numerous obstacles to grow revenue profitably Slow manual processes for loan approval Low customer satisfaction Credit & Loan Approvals Changing regulatory requirements Error-prone processes Challenging system integration

6. Areas for Improving Competitiveness in Credit & Loan Approvals Loan Origination Discerning Credit Quality Mortgage Refinancing • Reduce time and cost by increasing straight-through processing • Provide customers immediate visibility into the current state of their loan application • Predict a borrower’s willingness and capacity to repay • Assess value of collateral quickly and accurately using common standards • Ensure complex credit criteria are consistently applied • Continuously evaluate the type of credit and the limit extended to existing customers Key credit approval challenges addressed by operationalizing business decisions

7. Benefits of Using Operational Decision Management

8. Sample Credit & Loan Approval Decisions Examples of Business Rules, Rule Flows and Decision Tables

9. Novagalicia Bank Improve product processing through automation of routing rules Challenges • 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 Solution • 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 Benefits • 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 Software Offerings: IBM Operational Decision Management 9

10. Claims Processing IBM Operational Decision ManagementUse Case

11. Key Challenges in Claims Processing Insurance providers face numerous obstacles to grow revenue profitably High claim processing costs including claims leakage Lengthy claims processing cycle with manual practices Claims Processing Lack of transparency throughout the claims process and need to show compliance Inaccurate claims assessment & delayed settlements Inability to align adjuster skill set with claim complexity

12. Improving Competitiveness in Claims Processing Healthcare Claims Resource Efficiency Customer Retention • Health care reform is leading to retail purchasing models which demand error-free, real-time processing of claims • Use business rules to quickly identify straightforward claims to be routed for immediate settlement with little or no human intervention • Use rules systems to consistently handle all customer touch-points consistently for increased customer satisfaction. Key trends driving decision management solutions

13. Benefits of Using Operational Decision Management

14. Sample Claims Processing Decisions Examples of Business Rules and Decision Tables

15. Worksafe Victoria Improves efficiencies and productivity in their agents Challenges • 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 Solution • 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 Benefits • 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% Software Offerings: IBM Operational Decision Management “[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..” 15

16. Underwritting IBM Operational Decision ManagementUse Case

17. Key Challenges in Underwriting Insurance providers face numerous obstacles to grow revenue profitably Inability to assess risk accurately leading to mispriced rates Low straight-through-processing leading to higher costs Underwritting Inability to create flexible risk tiers to match customer segmentation Inability to roll out new insurance products quickly Aging pool of experienced underwriters

18. Improving Competitiveness in Underwriting Focus on Higher Value Add Process Automation 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 • The next generation of underwriters are focusing on the value-added activities of analyzing, selling, negotiating and managing relationships • Automated underwriting solutions are expanding to deliver policies in a cost-effective manner Key trends driving decision management solutions

19. Sample Underwriting Decisions Examples of Business Rules, Rule Flows and Decision Tables

20. A Canadian Property & Casualty Insurance Group Improves speed to market and transparency across lines of business Challenges • 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 Solution • 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 Benefits • 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 Software Offerings: IBM Operational Decision Management “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.” 20

21. Compliance and Reporting IBM Operational Decision ManagementUse Case

22. Key Challenges in Compliance and Reporting Businesses face numerous challenges to comply with regulations and internal policies Need for transparency and reporting with audit trails Inability to quickly implementcomplex regulatory changes Compliance and Reporting Inability to show why specific transactions were authorized Need to reduce workload and manual touch points Need for common compliance enforcement across lines of business

23. Improving Competitiveness in Compliance & Reporting RiskAwareness TimelyActions Regulations Technology • Companies integrate risk and compliance considerations into all decision-making • Regulatory pressures force financial firms to re-think the value of technologies used to operate effectively and manage risk • Technology brings a new economic system that redefines relationships between bankers, customers, partners and regulators • Firms make actionable, optimized and timely decisions to comply by keeping risks at anticipated and acceptable levels Key trends driving decision management solutions

24. Sample Compliance and Reporting Decisions Examples of Business Rules, Rule Flows and Decision Tables

25. A UK Pharmaceutical Company Accelerating compliance with the Sunshine Act of 2010 Challenges • 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 Solution • 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 Benefits • 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. Software Offerings: IBM Operational Decision Management 25

26. Dynamic Pricing and Bundling IBM Operational Decision ManagementUse Case

27. Key Challenges with Dynamic Pricing and Bundling Businesses face numerous obstacles to growing revenue profitably Inability to roll out new pricing plays quickly Inability to use customer data to create the right bundle for each customer Dynamic Pricing and Bundling Inability to assess the impact of new product bundles on profitability Inability to accurately calculate price for complex product bundles Streamline and scale pricing systems to improve consistency of quotes

28. Improving Competitiveness in Dynamic Pricing and Bundling Dynamic Packaging has Perceived Value Dynamic Pricing Creates Opportunities • Nearly one-fourth of all online travel buyers have bought travel combinations with nearly 80% creating the package themselves • 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 Key trends driving decision management solutions

29. Sample Dynamic Pricing and Bundling Decisions Examples of Business Rules, Rule Flows and Decision Tables

30. Accovia Inc. Enables dynamic packaging and pricing for travel industry customers Challenges • 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 Solution • 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 Benefits • 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 Software Offerings: IBM Operational Decision Management 30

31. Fraud Detection IBM Operational Decision ManagementUse Case

32. Key Challenges in Fraud Detection Financial institutions & insurance providers face numerous challenges to handle fraud Increased fraud costs due to undetected fraud activity Need a systematic approach to handle fraud Fraud Detection Inability to quickly adapt to new fraud patterns Reduce workload on fraud investigators Inability to effectively prioritize potential fraudulent activity

33. Improving Competitiveness in Fraud Detection More Technology Investments Required Growing Incidence of Fraud Automation Critical • 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 • Technology solutions can help avoid the time and labor-intensive processes associated with manual fraud detection • Business Rules technology will help notify legitimate customers of fraud and taking immediate action to prevent fraudsters from succeeding. Key trends driving decision management solutions

34. Sample Fraud Detection Decisions Examples of Business Rules

35. A Large Korean Insurance Company Boost profitability by identifying fraudulent claims quickly and accurately Challenges • 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 Solution • 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. Benefits • 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 Software Offerings: IBM Operational Decision Management “Moving forward, we anticipate that the solution will continue to help reduce the amount of fraud by millions of dollars on an annual basis 35

36. Eligibility Determination IBM Operational Decision ManagementUse Case

37. Key Challenges with Eligibility Determination Social services providers face obstacles to deliver the right benefits to the right people Inability to roll out new benefit programs to citizens quickly Inability to handle complex, changing eligibility conditions Eligibility Determination Inability to prove regulatory compliance during enrollment Reduce the cost of enrollment into social programs Need to streamline eligibility determination to improve citizen experience

38. Improving Competitiveness in Eligibility Determination Aging Population Generating Demand Lower Costs of Maintenance Error-prone Processes • For government caseworkers, the challenge of administering numerous benefit programs can be daunting and error prone • Rules-based systems are simpler to maintain than custom-developed systems and opens up change maintenance by business users • Social security agencies worldwide are focusing on streamlining eligibility determination, case management and benefits delivery Key trends driving decision management solutions

39. Sample Eligibility Determination Decisions Examples of Business Rules, Scorecards and Rule Flows

40. Junta de Castilla y León Improves administration of social services Challenges • 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 Solution • 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 Benefits • 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 Software Offerings: IBM Operational Decision Management 40

41. Cross-sell, Up-sell, Product RecommendationsIBM Operational Decision ManagementUse Case

42. Cross-Sell, Up-Sell and Product Recommendations Challenges to growing revenue profitably with complex products and services Self-service portals lack fidelity to make good product recommendations Inability to connect offers to the right customer segments Cross-Sell, Up-Sell and Product Recommendations Inadequate training to cross-sell complex financial products Improve pre-qualification to increase up-sell accuracy Inability to cross-sell effectively without a single view of the customer

43. Improving Competitiveness in Cross-sell, Up-sell, Product Recommendations Online Technology Spending Increasing Need Comprehensive Customer View Know Your Customer Needs • Agents are given the ability to push relevant, timely, and personalized offers to the right customer at the right time • Need value-added metrics and analytics around the customer's risk, profitability, preferences and satisfaction level • Understanding what your customers needs are, before blindly sending them emails and credit card offers leads to customers feeling valued Key trends driving decision management solutions

44. Sample Product Recommendation Decision Examples of Business Rules, Decision Tables and Rule Flows

45. BNP Paribas Enables personalized offers to their customers through any channel Challenges • 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 Solution • 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 Benefits • 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 Software Offerings: IBM Operational Decision Management 45

46. Customer Insight and LoyaltyIBM Operational Decision ManagementUse Case

47. Key Challenges with Customer Insight and Loyalty Programs Businesses face numerous obstacles to retain and gain new customers Inability to gain customer insight from disjointed loyalty programs Inability to quickly roll out new promotions Customer Insight and Loyalty Programs Inability to make selective and personalized customer touches Need to simplify administration of loyalty programs Need to reduce the cost and workload to run new promotions

48. Improving Competitiveness in Customer Insight & Loyalty Programs Campaign Fatigue Targeted Promotions Customer Centricity • 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 • 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 • 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 Key trends driving decision management solutions

49. Customer Loyalty Decisions Examples of Business Rules and Rule Flows

50. A Beauty Care Retailer Meets customer’s expectations by better understanding their needs Challenges • 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 Solution • 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 Benefits • 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 Software Offerings: IBM Operational Decision Management 50