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The Insiders Guide to Prevent Future Procurement Fraud and Corruption

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, a significant number of resources, and financial transactions that can be difficult to keep track of.


APPROACH TO RISK ASSESSMENT

When you are considering profiling your organisation's threat from procurement fraud and corruption including understanding risk areas within projects, it is important to consider how a criminal might target your organisation to commit procurement fraud, particularly if that individual is an employee.


You should also be aware that an insider understands where the control weaknesses are and must take this into consideration as part of your assessment and prevention response. Additionally, is your 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 your ability to adequately assess the procurement lifecycle and project processes for fraud opportunity.


Once you walk through the procurement lifecycle, project design and planning process to assess opportunities 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. Additionally, the introduction of fraud prevention and detection techniques should be the next step once your risk assessment has been completed.


PREVENTION THROUGH DESIGN

You can now look at the hurdles and guardianship including policies, procedures, and responsibilities of specific staff and roles that are required to mitigate identified risk areas.


Introducing this process creates the basis of your project risk matrix and can be updated as projects progress and new threats are 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 within projects and the three areas of mitigation help create a strong starting point for detection of fraud and corruption 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's anti-fraud and corruption approach complicated and can a less complex assessment simplify your approach to procurement fraud and corruption?