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Procurement Vigilance: Building Resilient Defences Against Fraudulent Schemes.

Updated: Aug 29, 2023

Effective procurement fraud prevention isn't merely a process; it's a culture that values accountability, honesty, and a shared commitment to safeguarding resources.

Procurement fraud prevention

Prevention is the shield that preserves both reputation and revenue


There is anecdotal evidence in sectors such as construction and infrastructure that winning large tenders requires providing bids with the lowest price, that means minimal profit on bid submissions that will be recovered through contract variations, inflated invoices, and fraud during the lifetime of a project. Quality, quantities, 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.


The challenge of procurement fraud prevention is increased where resources and expertise allocated to project management is limited in areas such as quality and project assurance, procurement and finance.


APPROACH TO PROCUREMENT FRAUD PREVENTION

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.


Vigilance is the cornerstone of procurement integrity – where transparency and scrutiny thrive, fraud finds no room to hide

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.


When assessing your organisations risk a coordinated approach should consider the following areas:

  • Introduce a planning process that evaluates the current adequacy of systems and controls, policies and procedures, expertise and capabilities.

  • Review of organisation anti-corruption and counter fraud policies and procedures.

  • Assessment of current culture, confirming whether individuals are confident in discussing ethical issues and reporting, without fear, corruption concerns.

  • Mapping out current approach to risk identification and mitigation.

  • Using assessment and interviews to determine strength and/or non-compliance with control measures.

  • Determine the types of data sources generated within the procurement lifecycle and anti-corruption environment and how they can be better used to identify procurement fraud risk.

  • Does an organisation have the ability to profile the procurement fraud risks that it is targeted by.

  • How are these risks documented and reported within the organisation

  • Establish the additional level of prevention methods and control measures that should be introduced as a result of the risk assessment.

  • Identify and introduce consistent methods and techniques to detect procurement fraud risk.

  • Introduce an approach where procurement fraud suspicions and subsequent response is coordinated.

  • To ensure consistency in response to procurement fraud suspicions or allegations consider introducing a response plan to give ownership to key individuals and department.

  • Introduce a strategic approach to risk and the planning of a continued risk identification and mitigation approach.

  • Measuring and monitoring the performance of a new approach and its continual improvement is essential to success.

  • Where appropriate, education and awareness should be part of this new approach to ensure that all personnel know their responsibility within it.



Although this is a simple perspective on a procurement fraud prevention method method and the introduction of a governance framework, when looking at the target areas of procurement fraud and corruption within projects and the 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?



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