Even before the current economic slowdown, corporate investigations and risk consulting firm Kroll, reported in late 2015 that 22% of companies operating in Africa were falling prey to vendor, supplier or procurement fraud. And in 2014, professional services firm PWC found that procurement fraud was the single biggest type of crime among the 69% of companies affected by economic crimes in South Africa.
Now, with the decline in growth rates we are likely to see contraction across many sectors with the result that investments will be curtailed, budgets slashed and projects put on hold. The result being that companies and individuals will feel increased pressure to stay profitable. It is in exactly this kind of context that procurement fraud can thrive.
Did you know?
- 23% of companies experienced supply chain fraud in 2016
- 41% of companies experienced supply chain fraud in Africa in 2016
- Of that 41%, in 78% of the cases, the on-boarding process was targeted.
With the increasing complexities of the global business environment, procurement managers face enormous challenges in streamlining their supply chains. This is particularly true for companies with a footprint in developing world regions, where networks and relationships are less formalised and transparent. While traditional supply chain management is an effective model in a well regulated environment it has its shortcomings in emerging markets where the risk of fraud and abuse is far higher.
The benefits of vendor vetting include:
- Stay away from vendors in financial distress or trading illegally
- Know who really profits from the relationship and identify conflicts of interest
- Protect your brand and reputation
- Pick a winning team and identify strong partners in Africa