The rise in companies facing financial hardship due to coronavirus has highlighted the importance of supplier vetting processes.
As companies switch suppliers to maintain the flow of supplies they are at increased risk of procurement fraud, through genuine companies manipulating their details to win contracts or the creation of “phantom” companies.
Andrew Fielder, product manager at Equifax UK, told SM: “There are other consequences resulting from procurement fraud than just financial loss, including the risk of reputational damage or operational impact from the loss of supply of goods and services.
“And even when procurement fraud is not the issue, suppliers facing financial difficulty can pose a significant risk to an organisation and its continued operation.”
In a blog for SM, Fielder outlined a list of checks firms should undertake in the onboarding process, including:
• How long a company has existed, is it actively trading and what is its financial status?
• Confirming its directors and shareholders and identifying adverse changes in circumstances, such as disqualification of a director
• Checking for evidence of suspicious activity such as CCJs at the same postcode
• Confirming banking details belong to a real account and not an individual.
“Performing supplier vetting can be time-consuming, resource-intensive and expensive,” said Fielder. “In order to ensure an optimal balance between operational efficiency, cost and the need for robust checks, a risk-based approach can be used that is proportionate to the size and duration of the contract.”
He emphasised the importance of checks being transparent, verified and audited and having the buy-in of all key stakeholders, as well as regular reviews to ensure they remained fit for purpose.
“As the UK deals with the widespread impact of Covid-19, it has never been more important for companies to apply robust processes to vet suppliers to assess the risk of them not fulfilling new and existing contracts – especially with so many companies facing financial hardship,” said Fielder.
☛ Want to stay up to date with the news? Sign up to our daily bulletin.