Systemic Fraud and Error

Abstract

The procurement function is the key to success in most manufacturing businesses. It is the business process involved from recognising that something needs to be acquired, through to ordering and paying for it. At the same time, it is the highest risk process, and the area in which most frauds and corrupt payments occur, Despite the potential risks, businesses are increasingly reliant on automated controls and expert systems to spot and prevent frauds and unauthorised transactions. But it is very dangerous to think that these systems are infallible. We are seeing a worrying over-reliance on software: this leads to de-skilling of the finance and audit teams, who become less capable of spotting anomalies. Unfortunately, as businesses look to source goods from lower cost (and higher risk) countries, this reliance multiplies the risks, rather than reducing them. Instead, companies need expert input from seasoned fraud and corruption professionals both in designing controls, and in their review and audit. Periodic data analytical review – by expert humans leveraging software, rather than relying on it - is an effective way to mitigate these risks.