Fraud another symptom of the downturn

4 March 2009
Since the start of the economic downturn – even in the early days when we weren’t yet ready to say “recession” – two major issues have dominated; job security and developing supplier relationships. The former affects everybody personally and the threat of redundancies persists. The latter will play a huge part in how well procurement can continue to perform its function and maintain its reputation. Guaranteeing supplies and treating vendors so they remain viable businesses for the post-recession period will be vital. But there is also a third element to the recession. One which never totally leaves us, but always gains prominence when times are tough. I am, of course, talking about fraud, and particularly procurement fraud. According to research from BDO Stoy Hayward, the rate of fraud in our profession rose a staggering 347 per cent last year. And that isn’t a typing error. Embezzlement to the value of £78.7 million was reported in 2007. This jumped to £273 million last year. What’s even less comforting is that the longer the downturn lasts, the worse it is going to get. And what’s more, whistle-blowing trails off when people fear for their job security, so those who may have been tempted to report their suspicions are now less likely to. A problem, yes, but what may be the answer? Most organisations will be using the downturn to assess their expenditure. Perhaps part of that process could include an audit of current relationships, deals and supplier behaviour. Aside from its effectiveness, this action sends a message that you are aware of the possibility. As one correspondent reported to us in 2007: “Five per cent of people are incorruptible, 5 per cent are ‘dodgy’ and the other 90 per cent are just waiting for the right opportunity.” It might be time for a reminder that, despite the financial uncertainty, there will be no let-up in efforts to prevent fraud.
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