In recent years with the adoption of more digital platforms to aid the procurement process, we hear from many procurement professionals about the lack of visibility throughout the process. Whilst digital aids can assist with the collection of data, automation, and management in procurement, many feel that these aids also decrease the ability for procurement managers to have a clear line of sight and catch wrongdoing before it is too late.
It is recognised that 20% of all spending by organisations is unmanned and often un-contracted, and so at risk of procurement fraud, the second most frequently reported economic crime.
The financial impact of fraud is significant, with many estimates pointing out that fraud costs organisations 5% (median estimate) of revenue each year. Further to this, the Association of Certified Fraud Examiners have recently reported, as part of their regular Report to Nations on Occupational Fraud and Abuse (2016), that the median loss from fraud they have studied was $150,000. Furthermore, it illustrated that the median loss increased rapidly the longer the fraud was allowed to continue, with the median duration of frauds lasting for 18 months.
According to the Report to Nations on Occupational Fraud and Abuse, in approximately 40% of cases organisations were not aware of fraudulent crimes being committed against them until it was reported by another employee. Internal audits and managerial reviews were the next most effective methods, which used to successfully detect fraud in 16.5% and 13.4% of cases respectively.
Other lesser successful detection methods include:
- IT controls,
- Account reconciliation,
- External audits,
- Document examination, and
- Police notification.
Whistleblowers need to be protected and championed by organisations if we are to see an increased likelihood of them coming forward. These people are being guided by their ethics to report crimes against the entire organisation.
Whispli provides procurement managers with a secure method of receiving information anonymously from their team about potential wrongdoing. This method allows the whistleblower to come forward in a safe manner without having to identify themselves. The procurement manager, or registered 3rd party, can run an investigation through a secure case management system with full transparency of procedure.