Our client suspected that a channel partner was under-reporting royalties. Payments received were trending downward, while the licensee continued to introduce new products that appeared to use the licensor’s intellectual property (IP). Our client asked Protiviti to verify if the licensee was accurately capturing and reporting its royalty obligations.

Protiviti’s Licensing and Contract Risk professionals took the following steps to provide our client with deep insights about their royalty program:

1. Reviewed the licensing agreement and performed analytical procedures on the royalties reported and compared them against contractual obligations.
2. Analyzed the current state of the royalty-capturing process, identified areas of risk and control weakness, and recommended process improvements.
3. Verified all licensee products that contained the client’s IP and determined the percent of sales containing royalty-bearing IP.

Protiviti discovered a potential under-reported amount of $2 million and $600,000 in late payment interest.

The key driver of the potential under-reported amount was the failure to account for bundled and accessory products sold under a single SKU. Protiviti analyzed the master product list and determined through interviews, product research and other inquiries that the licensee was bundling multiple IP-bearing products under one SKU.
 
How We Help Companies Succeed

Effective revenue risk management requires a methodology and thought process focusing on those customer- and product-centered activities that have a significant impact on revenue, as well as the cost-drivers required to generate that revenue. Protiviti’s revenue risk management methodology helps clients reduce costs while increasing revenues, and strengthen partnering relationships.

Protiviti helps provide a product strategy around profitability – increasing profits by as much as 3 percent to 5 percent of total sales, providing a focus on customer risk management and reducing fraud.

​contactus@protiviti.com

Protiviti (www.protiviti.com) is a global business consulting and internal audit firm composed of experts specializing in risk, advisory and transaction services. The firm helps solve problems in finance and transactions, operations, technology, litigation, governance, risk, and compliance. Protiviti’s highly trained, results-oriented professionals provide a unique perspective on a wide range of critical business issues for clients in the Americas, Asia-Pacific, Europe and the Middle East.

Protiviti has more than 60 locations worldwide and is a wholly owned subsidiary of Robert Half International Inc.
(NYSE symbol: RHI). Founded in 1948, Robert Half International is a member of the S&P 500 index.