When you look at procurement fraud and corruption and try to narrow down the methodology, how it can be committed within your organisation including a route to mitigation, the simplest route on many occasions is the best solution.
"Life is really simple, but we insist on making it complicated"
There is anecdotal evidence in sectors such as construction and infrastructure that winning large tenders requires providing bids with the lowest price and minimal profit that will be recovered through contract variations, inflated invoices and fraud during the lifetime of a project. Quality, time and resources are much easier to manipulate in projects where there are a lot of moving parts, high volumes of procurement, significant number of resources and financial transactions that can be difficult to keep track of.
APPROACH TO RISK ASSESSMENT
When an organisation is considering profiling its procurement fraud and corruption risk including understands key risk areas within projects, it is important to consider the question of how a criminal might target your organisation to commit procurement fraud.
An organisation should also take the position that an insider understands where the control weaknesses are and must take this into consideration as part of its assessment and response. Additionally, is your organisation anti-fraud environment adequate enough to identify and respond to reported risks.
Understanding the typologies of procurement fraud and the internal and external threats is the first step in an organisations ability to adequately assess its procurement lifecycle and project processes for fraud opportunity.
Once an organisation walks through its procurement lifecycle, project design and planning and assesses opportunity for an insider or contractors to commit fraud, you create the basis of your risk matrix and register to monitor current and future risks.
However the key point here is that individuals that are conducting the risk assessment understand the various methods of procurement fraud and the common areas of the procurement process that can be targeted.
PREVENTION THROUGH DESIGN
You can now look at the hurdles and guardianship including policies, procedures and responsibilities that are required to mitigate identified risk areas.
Introducing this process creates the basis of an organisation or project risk matrix and can be updated as projects progress and new threats identified. Once created this risk assessment methodology is invaluable particularly where projects are duplicated or created on a regular basis.
In constructing a risk mitigation framework three specific areas of assessment need to be considered, specifically Opportunity, Hurdles and Guardianship.
Although this is a simple perspective on the introduction of a governance framework, when looking at the three target areas of procurement fraud and corruption and the three areas of mitigation gives a strong starting point for prevention and detection and a route to risk mitigation.
This simple assessment method should also be used where a new risk or suspicion of procurement fraud is identified.
Is your organisation anti-fraud approach complicated and can a simple assessment simply its approach to procurement fraud and corruption?