1 Copyright © 2013 Tata Consultancy Services Limited

Procurement Fraud: Are you vulnerable?

Dr Gordon Murray

GCP Business Change

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Procurement Fraud, Bribery & Corruption is a BIG ISSUE

Bribery Act 2010 – Covers giving & receiving with potential of 10 years’ imprisonment– Places obligations on organisations to put in place effective systems– Act applies to Global operations

Knolls 2013/14 Global Fraud Reporto 19% of companies globally have suffered vendor, supplier or procurement

fraud in last yearo Increase of 7% on previous year

White collar procurement fraud has resulted in custodial sentences and damaged reputation

o 6 years for local government energy buyer who diverted client management fee to his own private account

o 5 years for Lloyds Head of Fraud & Security for submitting false invoiceso 4 years for a Sainsbury’s buyer who accepted bribeso 2.5 years for an NHS engineer who raised bogus orderso 18 months for NHS technology manager who set up his own company and

then bought from it.

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Costs of perpetration of Fraud, Bribery & Corruption

Higher prices

Reduced quality

Reduced safety

Negative profile

Reduced market

confidence

Share price impact

Increase in PR and Marketing

costs to salvage/rebuild

reputation

£

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Reducing Vulnerability: Approach

Document analysis

Process mapping

Interviews Workshops

TARGET OPERATING MODELGovernance

Policy & StrategyStructure

ProcessesSystems

SkillsBenefits

VULNERABILITYASSESSMENT

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A case study

LACK OF CONSISTENT POLICY & PROCESSESLACK OF STRATEGIC MANAGEMENT OF RISK OF FRAUD, etc

LACK OF ROLE CLARITYLACK OF AWARENESS OF CORPORATE CORRUPTION PREVENTATIVE MEASURES

LACK OF ADHERENCE TO TRAINING REQUIREMENTSLACK OF SEGREGATION OF ROLES

NO eSourcing, eAuctions or Benchmarking

6 week review13 interviews

41 areas of Vulnerability identified27 areas of Significant Risk identified

20 Recommendations£8m potential savings identified through process improvement

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Example of Risk Register addition

Procurement fraud, bribery and/or corruption

Probability Medium

Impact: Reputational damage to organisation; loss of income; service failure, potential penalties under UK Bribery Act.

Proximity High

Owner: Procurement SPOC

Mitigation: 1. Independent due diligence review of procurement processes to access vulnerability;

2. Prioritised implementation of recommendations.

3. Segregation of duties. 4. New progammes required to address risk at

‘Start Up’5. All staff to complete Anti Bribery and

Corruption Training once a year.6. Suppliers commit to Group Supplier Code7. Review at least every two years

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Whitepaper, Cheatsheet, Journal article & BPS Blog

Whitepaper accessible at: http://www.tcs.com/SiteCollectionDocuments/White%20Papers/Procurement-Fraud-0614-1.pdf

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How can you help?

• Those organisations you are engaged with think Fraud, Bribery & Corruption is something ‘happens to others’Suspect

• Risks & vulnerability to procurement fraud, bribery & corruption• Legal need to proactively ‘take steps to Prevent’Signal • Whitepaper• BlogShare• TCS can help reduce vulnerability with due diligence &

improvement planSuggest• Interest to jg.murray@tcs.com Signpost