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Predictive Analytics
and the Risk Function
Frank Fiorille
Sr Director of Risk Management
Paychex
Using Your Data as a Crystal Ball
Paychex Payroll - HR - Retirement - Insurance
Market Cap: $21 Billion
More than 600,000 clients
One out of every 12 private
sector employees in the United
States is paid by Paychex
$3 Billion Annual Revenue in
FY16
Risk Management @ Paychex
Credit
Preventing returns of over
$320 billion of Risk exposure
last year on over 27 million
ACH transactions.
Collections
Minimizing actual annual
write-offs of under $2.5
million, less than 1% of
exposure.
Financial Services
AR Write-Offs less than one
tenth of a percent of sales
Compliance
Navigating the complex
regulatory environment
Operating Risk
94% Penalty Abatement
Data Science & Predictive
Analytics
Over 30 predictive algorithms
in circulation
P
Big Data: What does it mean? Every day, the world creates 2.5
quintillion bytes of data.(18 zeros)
That’s 100 quadrillion new phone
numbers. (17 zeros)
There are 7.125 billion people on
Earth.
That means, every day, we add the
equivalent of 14,035,088 new
earths worth of phone numbers!!
2 trillion bytes represent clients employees’ wage data.(12 zeros)
Data Governance
A strong data governance
infrastructure creates long-term,
sustainable value through
improved data quality.
The creation of Data Definitions,
Owners, Stewards and Controls.
Commitment to Data
Governance as a means, not an
ends.
Data
Governance
TECHNOLOGY
How does Risk Utilize Big Data?
Big Data
E.T.L.
Analytics
Descriptive Predictive Prescriptive
Risk Big Data Users
Communication
Paychex/
Business
ExpertiseStatistics
Expertise
Database &
ETL
Development
& Management
Data
Scientist
@
Paychex
Uncovering Signals
Discovering and
investigating data points
and trends within your
data that are
representative or
predictive of larger
patterns.
Signal Example
9
Investigating variability in
application load durations.
Initially performed clustering
to form data defined
segments.
Comparing clusters
uncovered an unexpected
variable driving high load
times in one of the clusters.
10
Risk
Portfolio
Scores past due invoices based on probability of turning 60 days past due.
AR 60 Days Past Due
CollectionsModel identifies which accounts are most likely to liquidate within 90 days.
Portfolio Credit ModelIdentifies clients likely to return within the next 3 months, for ‘controllable’ reasons.
Strategy
Portfolio
Sales Territory & MappingPredicts number of units and the inherent opportunity per zip code
Employee RetentionModels for assistance in employee retention with Human Resources
Prospect ModelingPrioritize NSS call queues by likelihood for booking an appointment.
Identifies current clients and CPAs most likely to produce a referral lead.
Client & CPA Referral
Client SegmentationIdentifies target client profiles for strategic targeting.
Predictive Model Ecosystem
Sales
Portfolio
Retirement Upsell Identifies Core clients mostlikely to purchase 401(k).
Agency UpsellModels to predict likely to purchase Health and Benefits or Workers Comp.
Time & AttendanceCore cross-sell model for most likely to purchase time and attendance solutions.
HR Solutions UpsellCore upsell model predicting clients best suited for ASO or PEO.
Determine which product a new Core client is most likely to purchase next.
Next Best Offer
Product Road MapModeling of clients at first load to define their strategic growth of products.
Retirement ConversionModeling to determine client likelihood to convert to a Paychex 401(k) plan.
Operations
Portfolio
Models predict retention, revenue and price sensitivity.
Core Retention Models
Major Market RetentionMMS client retention model targeting controllable losses.
ASO RetentionPredicts which ASO clients are likely to churn.
401(k) retention model for controllable losses for use in discount decisions.
401(K) Retention
ASO Discount SensitivityPredicts which ASO clients sensitivity to changes in discounting.
Sure Payroll RetentionSure Payroll churn model for potential use in business model fit .
Risk Algorithms
11
SalesUpsell and Cross-Sell
Targets
Sales models are used to set
goals, define targeted strategies
and help business units deliver.
Service
Assists Operations
generate referral leads by
suggesting the clients ready
for new products.
Marketing
Monthly campaigns for
high scoring HR
Solutions, Insurance and
401(k) clients.
Salesforce.com
Model scores for retention and upsell,
client referrals, 401(k), co-
employment & Time and Attendance
are available to our reps in the field. .
Direct Sales
Calls monthly lists
generated by predictive
model scores.
1212
Payroll
DiscountingDiscount decisions are
made using model
scores to increase
retention.
Client RetentionThe Client Retention
Team works clients most
likely to leave, proactively
retaining at risk clients.
Support the field with
Retention, Price
Sensitivity and
Revenue predictions
on clients.
The ModelsRetention models for
Core, MMS, 401(k) and
ASO and Price
Sensitivity models for
Core and ASO
OperationsRetention & Discounting
Discount Decision Engine
Predictive algorithms measuring price elasticity
and retention probabilities prescribe
recommendations for systematic client discount
reductions.
Established
Client
Discount
New Client
Discount
14
Strategy & Risk ManagementProtecting and Planning
05
Retention
Equipping Senior
Leadership with
predictive
intelligence to
improve employee turnover.
Mapping
Helping Sales tap
into developing
markets and
identifying
opportunities for sales growth.
Referrals
Providing Sales with
the ability to focus on
clients and CPA’s
more likely to refer new business.
Collections
The bottom 50% of MARCO scores
are referred to an agency.
Credit
Knowing the probability of a return helps
Portfolio Management mitigate Risk.
Billing
MARIA filters out likely payers to make
invoice collections more efficient.
Modeling Credit Risk
Building algorithms that
analyze credit risk on a
transactional level in real
time.
Leverage models to focus
risk efforts on the highest
cost areas, improving
operational efficiency
while creating value.
Collections Algorithms
As 68,000 receivables roll past due annually, our model filters out
clients that are likely to pay without intervention, allowing our
collections team to optimize staffing and workload.
Product Recommendation Algorithms
Equipping Marketing and
Online Advertising with
the means to produce
smarter, targeted
strategies.
Using client product
purchases in conjunction
with job and wage data,
can we better understand
how a small business
grows?
Other Industry Recommendation Engines
Deployments that Optimize Value
Forecasting
“The Good News on Small-Business Hiring Trends…
Data released this week by both Intuit and Paychex |
IHS show a strong hiring trend for small businesses.”
- Fox Small Business Center
“In Washington state, small businesses are adding jobs faster
than any other state in the country, according to a report from
Paychex and IHS. It's also the state where minimum wage, at
$9.32 per hour, is the highest.” - CNN Money
“San Francisco's small businesses are growing faster
than those of any other big city or the nation as a
whole, according to new data from payroll-processor
Paychex and research firm IHS.”
-The Huffington Post - Business
Making Paychex an integral part of the
discussion on the economic situation!
Paychex | IHS Small Business
Jobs Index
National TrendTrends with BLS
Regional
Performance
Positive Press
Establishing yourself as
an information leader
creates opportunities.
Building our data
expertise has led to
consultations with the
Washington Post, Wall
Street Journal, Inc. and
more.
Any questions?
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