Global economies and organisations are just starting to understand the risks around procurement fraud but is enough being done to prevent it? Procurement fraud is a risk for all organizations that carry out any form of procurement activity. In reality that applies to virtually every organisation globally.
Apart from the financial implications of integrity failures which can be severe, the fallout...
[read more] Global economies and organisations are just starting to understand the risks around procurement fraud but is enough being done to prevent it? Procurement fraud is a risk for all organizations that carry out any form of procurement activity. In reality that applies to virtually every organisation globally.
Apart from the financial implications of integrity failures which can be severe, the fallout from a reputational perspective can be disastrous. Even when the risk of procurement fraud is identified, without the right guidelines and information, risk mitigation can be at best putting a plaster over a significant problem.
It has often being publicized that fraud within the procurement life cycle is high risk as it will often become embedded in the company. If this is the case, organizations may not just suffer recurring losses but it may affect the company’s financial standing and reduce their ability to generate future business. As procurement fraud requires some form of insider collaboration, this presents a high risks to your company’s integrity. Unauthorized outsiders or fraudsters may know your company processes and possess confidential inside information.
There is plenty of published guidance on how to prevent procurement fraud yet it is widely known it continues to happen.
The occurrence of procurement integrity breaches cannot be accurately predicted. Too often organizations go into crisis mode when their procurement integrity has been compromised. Organizations should expect the unexpected and have an incident response plan in place.
To mitigate procurement integrity risks, existing controls, thresholds and procedures should be assessed, tested regularly and improved upon if they are found to be lacking. Although it is not always possible to eradicate these risks, you can monitor them more closely to prevent or detect integrity failures early on. It has been shown that during an economic downtown, the integrity of the procurement process comes under increasing threat.
Prevention is always better than cure, and managing the risk and consequences of such failures is usually embarrassing to say the least.
Excerpt from The Fraud Practitioner’s Handbook (Guile. Paul, 2011. Gower)
“Many frauds committed fall within the banner of procurement fraud as most companies obtain products or services through some form of procurement exercise. Often when concerns are raised, products and services have already been procured and the contracts have been in place for some time. In this case, the fraud is often embedded in the contract and can be difficult to spot. It also presents a further difficulty as often contractual/suppliers relationships have been long established and therefore caution is required when deciding who to approach for information or indeed who to appoint to investigate.”
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