Updated: Jul 31, 2020
When an organisation takes steps to tackle procurement risk whether it is procurement fraud and corruption risk, quality or health and safety risk from substituted or counterfeit products, one of the first considerations in the planning process should be how do we stop these risks at the front door.
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How do we stop a vendor transferring their risk into your organisation or increasing the opportunity of identifying a fraud or corruption risk at the onboarding stage?
As part of the planning process, is an initial assessment carried out of vendor onboarding process to establish if we are obtaining the correct quality and quantity of data to make a proper assessment of the vendor risk.
Common areas that are introduced as part of the vendor risk assessment may indicate that there is an increased risk from procurement fraud or corruption include conflicts of interest checks, a vendor’s ability to perform the contract, vendor visits, company financials, company formation dates and whether it is it a new company and having sight of their anti-fraud policy and procedures.
In addition to the standard checks and to strengthen the onboarding process a number of additional questions should be asked to assess the level of procurement fraud and bribery risk that a vendor may, if approved, transfer to your organisation:
Are you able to check new vendor details, executives and shareholders against other suppliers for conflicts of interest and bid rigging risk
Are you able to check new vendor details against staff and consultant information for conflicts of interest
Do you contact a vendors previous clients to confirm their contract performance
Are you able to visit a new vendor premises to verify the scale of their operations
Are you able to visit a new vendors premises to verify supply chains, quality of goods and materials including counterfeit or inferior products
Are you satisfied that a vendors management can protect your organisation from child labour and modern slavery risk in their supply chain
Can you verify a vendor’s financial security and ability to complete contract
Do you assess a vendors formation date with how long their company has been trading
Can a new vendor show proactively how they mitigate fraud and bribery risk in their company and supply chain
Do vendors have their own ethics training or do you provide them access to your training before contracts commence.
The vendor registration process should always be under review particularly where a supplier risk is identified within contract management. If it is a significant financial or performance risk, do you need to go back to the vetting process to verify the integrity in the onboarding process and how a vendor got through the vetting process in these circumstances.
The cost and reputation damage of a subsequent investigation where fraud and corruption are identified may be significantly more expensive than the costs involved in ensuring that you have a strong onboarding process is in place.
When an organisation takes steps to tackle procurement risk whether it is procurement fraud and corruption risk, quality or health and safety risk from substituted or counterfeit products, one of the first considerations in the planning process should be how do we stop these risks at the front door, reducing the potential significant cost of organisation checks and balances, investigations and resource response where risk is identified.