Too many businesses are ‘in denial’ about the scale of procurement fraud and are failing to take adequate counter-measures to protect their reputations and finances, says a leading anti-fraud expert. Writing in Financial Director, fraud solutions expert, Laurent Colombant, cites a report from PwC revealing that, a few years ago, procurement fraud was the second-most reported economic crime worldwide, a statistic remaining in place in 2019. Given the extent of the problem, one might expect organisations to adopt robust and advanced prevention measures. But, according to Colombant, this is far from the case. Procurement fraud continues to drain millions from the economy every year because businesses and other organisations are failing to tackle it.
Emphasising that many businesses appear in denial of the problem, Colombant suggests that the reasons relate to failing to understand the motivations behind procurement fraud. These can include forms of vengeance from disgruntled employees, as well as theft, and the reluctance “to probe too deeply into the cracks in their organisation to expose what’s happening.”
Procurement fraud is driven by many motivations. The high-risk, aggrieved employee nursing a grudge and seeking damaging retaliation or, more insidiously, the agreeable, impeccably-behaved team members who have happened upon a loophole or weak spot in the approval chain, and get tempted by the chance of a dishonestly swollen paycheque.
Colombant insists that standard manual checks are inadequate. Besides their core duties of cost reduction, supply relationship management, and category management, etc., procurement pros need to adopt cutting-edge AI/machine learning technologies to deliver continuous, data-driven detection that guarantees transparency and honesty. This, he says, “is the best way to fight procurement fraud and detect errors as well as process breaches. It enables companies to pre-empt fraud rather than simply discover it after it’s taken place.” What businesses are incapable of seeing can hurt them. These integrated, data-driven solutions can spare them the millions currently being lost to procurement fraud.