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The Expert's Guide to Prevent Future Corruption Risk

There are many challenges in preventing corruption that includes high volumes of business activity, from daily procurement and invoicing to sales and marketing and targeting a new audience or client in business development. But what are the consistent mistakes in creating a corruption prevention approach?

The great aim of education is not knowledge but action


A common mistake in many organisations is not understanding the value to data and its analysis that will help them identify the various risks and introduce, where appropriate, additional corruption prevention measures.


The next mistake in believing that corruption only happens within a tender process and that mitigation controls should primarily focus on this area. Yet, a large number of corruption cases that I've seen over the years happens in contract management, asset management and the end of the procurement lifecycle.


Benefits of data analysis

With this restricted view of corruption risk, what limited data sources can you use to identify corruption and does the individual carrying out the analysis know the methods of committing corruption and its associated fraud and financial crime risk so that any analysis results can be further scrutinised and a risk picture put together.


An insider threat can target many areas of an organisation so the proactive use of data analysis should start at the vendor onboarding stage, procurement route, tender process including award through to contract management, invoicing and asset management.


Education and awareness

Does leadership fully understand the benefits that education can have in protecting an organisation from financial loss within procurement, the impact from procurement fraud and corruption schemes and its ability to identify risk and adequately respond to fraud and corruption within a global supply chain?


I recently polled a number of organisations on the type of corruption and procurement fraud training they provide for their staff. The responses varied from 'we provide eLearning and the procurement staff provide adhoc training' to 'our operations team decide when there is a requirement'.


On many occasions it has been a challenge to persuade leaders of the benefits of procurement, fraud and corruption education and how it can positively impact various roles within an organisation, and although the value of such education can be quite significant, many leaders don’t see or believe that education on the basics of procurement corruption and fraud risk mitigation can have such a positive financial impact on their organisation.


When you cover areas such as risk, prevention and detection including how to design out fraud and corruption risk within an organisation, there can be a significant change in perspective.


A NEW WAY OF THINKING

Staff that understand the typologies of procurement fraud and corruption, areas of procurement at risk, how and where it can be committed allows them to understand what risk looks like within their working environment and how they can respond in their own areas of responsibility. It also allows each member of staff to understand how they fit into the company’s anti-fraud strategy.


The Association of Certified Fraud Examiners in their Report to the Nations highlighted that organisations that provide fraud training see an average increase in 19% for hotline reports. Put together with proactive data analysis has a greater opportunity to identify and mitigate significant levels of corruption risk.


On a number of occasions, individuals that have attended courses suddenly realise having been given live case examples, that the conduct and behaviours that have gone on in their organisation warrant further scrutiny.

The results of our training alone has seen organisations introducing field compliance teams because they recognise that there are gaps in their contract management and compliance regime, that include verifying work as complete and assessing regular failures in equipment for substituted product risk. Resources can also be tasked to check the root cause of the problem and whether there are bigger concerns.


Others have recognised that there are many information sources within their organisation that aren’t being considered as part of its risk assessment and that they are at a much greater risk from non-compliance with the US Foreign Corrupt Practices Act and UK Bribery Act than they realised. Examples have included Event Management contracts organised by a Human Resource departments that included the management of cash for these events, increasing the fraud and bribery risk to the organisation that had previously gone unnoticed.


It is not uncommon for leaders to reassess the reporting systems within the organisation to receive information or allegations and the risk and challenges in protecting the identity of and individual who made a whistleblower report. The result of creating a compliance team to collect and analyse its own data sources and introduce reporting procedures gave a number of organisations a greater ability to profile and respond risks.


NEW APPROACH TO RISK WITHIN PROJECTS

Teaching the basics of project risk assessment and an outline of British Standard BS10501: Guide to Implementing Procurement Fraud Controls, can give an organisation the ability to assess procurement fraud risk within projects and create a risk register that sets the foundation of assessing and monitoring risk within project and protecting revenues of the organisation particularly within high value projects. Projects are another example of where the risk of fraud is rarely assessed prior to its implementation and yet, once given an insight into its value through basic risk evaluation training can have a significant impact to risk identification and mitigation response to protect project costs.


The point in much of this is that discussing procurement risk, global fraud typologies and risk mitigation strategies through educating individuals on risks that it may be targeted by, gives it a greater opportunity to protect its revenues and its reputation.


THE POWER OF RISK ASSESSMENT

In a comment within the Review into the risks of fraud and corruption in local government procurement, MLCLG local government respondents confirmed that although risk assessment was carried out, they highlighted that training in this area was necessary.


There are a number of annual reports and assessments globally including PWC, KPMG, ACFE and Kroll that highlight global fraud and corruption threats and in cases highlight the financial impact of procurement fraud and corruption at a national level and yet few governments globally focus on procurement fraud investigation or have developed a national strategy to enhance risk mitigation. Education is at the centre of any strategy because a natural consequence in awareness of fraud methodology and control measures to mitigate risk should be an increase in reporting of suspected illicit behaviour.


MEASURING IMPACT

And finally, the introduction of awareness and training will create a starting point that can measure the benefits of education and the increase in risk identification and performance of a risk mitigation strategy. Whether it's the increased reporting or information sharing, the increase in cases, or the measurement of revenues protected or recovered. So when asked whether training can have a benefit to an organisation, it isn’t just guesswork the figures speak for themselves.


So does your organisation treat education and awareness as an integral part of preventing procurement fraud and corruption and protecting organisation spend?


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