Procurement fraud is growing

Kroll's 2013/14 Global Fraud Report has just been published and it comes as no surprise that the greatest increase is in the world of procurement and conflicts of interest. 71% of companies in Europe have been affected by fraud. 19% have suffered vendor, supplier or procurement fraud - an increase of 7% from last year. We're talking about 1.4% of revenue slipping out of organisations.

Areas of interest to us also include outsourcing and offshoring which have increased the risk of fraud for 28% of respondents, and joint ventures and partnerships which have increased the risk of fraud for 20%.

It's only a few days ago Peter Smith drew our attention to Transparency International's report on UK Corruption in Local Government which also highlighted that procurement needs to be particularly vigilant throughout the procurement cycle given the dismantling of some of the former protection systems.

So what should you do?

1. Recognise that your organisation is unlikely to be immune;
2. Introduce a whistleblower culture (The TI report claimed whistleblowing had been more effective than audit, internal monitoring, or police investigations);
3. Train staff and encourage them to ask questions;
4. Put in place a strong governance system;
5. Ensure no-one is outside the 'scope';
6. Embed within procurement risk management;
7. Ensure the correct polices, procedures, processes and controls are in place;
8. Make use of eProcurement solutions;
9. Apply due diligence to all aspects of the procurement cycle, particularly in selection of new partners and outsourcing;
10. Create a cycle of learning from others and from past fraud attempts.