Business rules play a critical role in the efficient operation of an organization — they express business goals, regulations, guidelines, and performance requirements while automating processes.
Business rules are typically expressed using logic qualifiers, such as: “If-Then”, “If-Else”, “When this, do this", etc.
Common examples include assigning an account manager to a new customer, making personalized recommendations to online shoppers, dynamically changing prices, and detecting fraudulent transactions.
While employees can certainly manage these processes, organizations risk creating bottlenecks if decisions aren’t made in a timely manner.
This is why implementing business rules is so powerful — rules automate decision-making, streamline business operations, and reduce errors.
The Importance of Business Rules
Without business rules, updating processes are immeasurably more time-draining, arduous, and error-prone.
Business rules are instructions that help guide various business processes by establishing business requirements that must be followed.
As a result, these conditional statements outline a company's goals and specify how business processes need to be carried out; when they should start, stop, or be updated.
For example, lenders look at applicants' relevant information such as income, credit history, assets, and debts when deciding which loans to approve. Applicants are automatically rejected if they don't meet specific criteria laid out by the company's own business rules.
Business Rules Are the Answer to Tribal Knowledge
Unfortunately, many businesses and organizations suffer from tribal knowledge, which describes the undocumented information, processes, and rules that are only known by certain employees.
Typically, tribal knowledge refers to the information necessary for making important products or services and it causes problems in production, quality, business analysis, and the overall customer experience.
For instance, since this information resides only in the minds of a few people, it presents a serious risk for the business when these individuals leave.
Business rules are able to circumvent this problem by capturing all the knowledge of subject matter experts and sharing it across an organization.
The best way to implement business rules is to use them as a part of business process automation tools, which would enable users to add conditional business logic to workflows for increased efficiency.
Now let’s look at the many ways organizations across industries can apply business rules to enhance their business operations.
Common Business Rules Examples
Manual decision-making is typically inefficient, prone to human errors, and higher operation costs, which can result in delayed projects.
Underwriting in insurance is the process of collecting an applicant's data in order to determine the scope and price of the coverage. To do so, the underwriter looks at information, such as profession, salary, family health history, medical conditions, lifestyle choices, etc.
The problem facing insurance companies is that underwriters are often overwhelmed by the sheer volume of applications that need to be handled. This prevents insurers from responding in a timely manner, which leaves applicants frustrated.
Effective business rules are able to streamline the underwriting process by carrying out accurate risk assessments in a fraction of the time it takes a human underwriter. If a candidate meets the eligibility criteria, then the application is passed on for review.
Let's take a look at a common business rule example in the insurance industry: if a candidate is under 30, doesn't have a history of heart disease, and does annual medical checkups, then they qualify for coverage at the lowest possible rate. These types of requirements can easily be represented by business rules.
Straightforward cases are completed in minutes enabling underwriters to focus their attention on more complicated cases.
Dynamic pricing is a strategy used by businesses that constantly changes prices based on external factors, sometimes in a matter of minutes. The goal is to sell the same item at different price points under different circumstances.
For instance, the airline industry is one of many that have made this pricing strategy a cornerstone of their business model. Many airlines use business rules to change ticket prices based on factors such as the number of seats left, the number of days remaining before the flight, and seasonality.
Business rules are often used to provide customer discounts. For example, a brand can award customer loyalty by setting up a discount policy that offers a 15% discount when a customer spends $1000 in a month on purchases.
A staff member can set business rules that offer discounts after a certain value has been reached.
Loan Interest Rates
Banks collect large volumes of data when originating a mortgage, including information about the borrower's credit history. Business rules play an important role in automating loan processes.
For example, banks can use a business rule that specifies a minimum credit score necessary to qualify for a special interest rate.
In order to prevent fraud, financial institutions and insurance carriers use rules-based automation to identify suspicious transactions and claims. Banks can use business rules to trigger authentication procedures. For example, large out-of-state credit card transactions require the bank's fraud department to contact the client to authenticate the transactions.
Routing Documents and Invoice Processing
Certain documents require several rounds of approval.
For instance, an employee creates and submits a purchase order to their manager for approval. The purchase order is then routed to a manager for approval before it’s sent to the finance department for processing.
Obviously, there would a serious bottleneck if an executive had to approve every single purchase order. Therefore, to speed up the processing, a company could write a business rule that only routes purchase orders to managers that go over a certain value (for example, $15,000).
Lower value purchase orders can automatically go to the finance department for final processing.
Routing Customer Service Calls
Efficient routing doesn't only apply to purchase orders or sales contracts; it is also an important component of customer service.
One of the frustrations that people face on customer service calls is having to repeat themselves. Fortunately, companies that leverage business rules can help customer service representatives deliver a better experience.
It's fairly simple to implement a business rule that routes calls to the right department based on the nature of the issue. For example, if a customer is experiencing technical issues, then they are automatically routed to the tech support department.
Data entry mistakes are a very common occurrence in most companies. An employee incorrectly fills out a form, which means that a manager will have to return the document back for corrections before reviewing it again.
To avoid these types of preventable manual data entry errors and delays, companies can add business rules to their form controls that validate the input data.
In this example, a business rule alerts the user when an error is made before submitting the form for review.
E-commerce businesses show relevant products to individual buyers by applying business rules.
As a result, online retailers can personalize their offerings by showing relevant products at various stages of the customer journey. For example, business rules can show products purchased by other shoppers to visitors who viewed the same products.
When properly set up, recommendations enable e-commerce brands to upsell and cross-sell, thereby driving more revenue.
Many Advantages of Business Rules
These are only some of the most common examples of business rules that can streamline business operations and significantly reduce overhead. To do so, however, organizations need to use tools that automate business rules.
Business Rules Management Systems (BRMS)
Business rules management systems (also referred to as business rules engines) are powerful software solutions that help organizations automate decisions by using business rules.
Traditionally, automation involved hard-coding business rules directly into workflows, which made it impossible to make quick updates in response to market changes because software developers were required to make even the smallest modifications.
Hyperon is a user-friendly business rule management system (BRMS) that enables non-technical subject matter experts to create, implement, and manage business rules without any help from the IT department.
Hyperon shortens the deployment time of complex products down to minutes. Ready to see how our business rules engine can optimize your organization's process management? Get in touch with us today and learn what our rule engine can do for you.