Profitability of a Fraud Detection Product

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Problem

Assess the overall profitability of a fraud detection product: if the metric improves by 1%, what are the cost savings? Then add investments, calculate ROI, and recommend whether to invest in a new feature.

Asked in the Power Day - Analyst case stage. Clarify the profitability metric, establish the baseline needed to value a 1% improvement, and distinguish avoided fraud losses from operating costs.

Requirements

Define the profitability and improvement metrics.
Calculate annual savings from a 1% improvement.
Incorporate implementation and ongoing investment costs.
Calculate ROI and state the investment recommendation.
Identify assumptions and sensitivity checks required.