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Coca-Cola fraud scandal highlights lack of supply chain risk awareness, says CIPS CEO

Procurious
  • On May 18, 2015
  • https://www.procurious.com/home

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In one of the more high profile procurement scandals ever to hit Australia, police have charged the CEO of fleet management company Orix with making corrupt payments in excess of $500,000 AUD to a fleet manager at Coca-Cola Amatil in order to secure contracts for his firm estimated to be worth more than $30 million a year.

To their credit, the Coca-Cola Amatil management team was actually the first to raise the concerns – and they certainly aren’t the first set of top class management to be caught out by inappropriate activity buried deep within their organisation.

The challenge of eradicating fraudulent activities from procurement and supply chain operations forms one of the key topics, risk, to be debated by the profession’s top thought-leaders in front of a global digital audience at the Big Ideas Summit 2015 on April 30th.

Unfortunately, bribery and payment for securing contracts is not entirely uncommon within procurement operations. There are many former employees of blue-chip organisations that are currently serving jail time for leveraging corporate purchasing power to increase their own personal wealth. Even the British Royal Household came under fire when a property manager was accused of taking kickbacks to award contracts for works to be done within the royal residence.

Impact of Procurement Fraud
Aside from the reputational, financial and HR damage these events attract, fraud presents a number of key issues for organisations. After his speakership at The Big Ideas Summit 2015, CIPS CEO David Noble highlighted the destructive impact procurement fraud is having on businesses around the world:

“Fraud has very serious consequences for many businesses in different sectors of economies around the world,” Noble said. “Beyond business, it also can have a protracted impact on human lives. Those businesses that were caught out displayed a lack of good business sense and understanding of risk in their supply chains. This is more critical now than it has ever been as some businesses increasingly outsource functions to reduce costs.

“Fraud is a devastating example of the lack of due diligence and oversight, which occurs when businesses fail to impose and exact the same levels of scrutiny at every stage of the supply chain – all the way from tier one downwards. Abstention of responsibility leads to fraud at worst, confusion at best,” he said.

What can be done about it?
Noble also outlined the following steps that procurement and supply chain teams can take in order to reduce the risk of fraud and corruption:

“There needs to be greater professionalism, accountability and higher standards within the procurement profession as a whole,” Noble said.

“A prerequisite for procurement and supply chain teams is enhanced levels of skills and competencies to ensure that professionals are equipped to deal with the challenges they face through specialist training. Having the right skills and qualifications will have the greatest impact when it comes to prevention and should therefore be a priority for supply chain and procurement management. This all underpins our call for this profession to be licenced.

“In addition, it is vital for companies to focus their attention on the need to develop better relationships with all their suppliers, regardless of tier. Businesses must also map their suppliers and benchmark their individual risks to have more control and transparency in the supply chain.

“The controls on supply chain have been too lax for too long. It is clear that supply chain managers need to be accountable for their actions, to avoid fraud and to guarantee certain levels of conduct and behaviour.”

By Tania Seary, founder of three procurement related businesses including niche social network Procurious, which powered the The Big Ideas Summit 2015.

CIPS CEO David Noble presented with fellow thought leaders in technology, people, innovation and risk to debate fraud and other challenges facing the procurement profession on April 30th at The Big Ideas Summit – the world’s first digitally led think-tank for procurement and supply chain professionals, powered by Procurious.

To hear more from these cost-leaders on what was said at Big Ideas visit www.bigideassummit.com.

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