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Companies Are Using Analytics to Mitigate Supply Chain Fraud

It seems the more complicated and sophisticated supply chains get, the more they remain subject to abuse that can impact decision making and the bottom line.

A new poll from Deloitte shows that during the past four years, use of analytics to mitigate third-party fraud, waste and abuse risks in supply chains has jumped to 35 percent in 2017 from 25.2% in 2014.

“It’s encouraging to see more organizations using analytics to help prevent and detect financial abuses within supply chains each year,” said Mark Pearson, Deloitte Risk and Financial Advisory forensic principal at Deloitte Financial Advisory Services LLP. “Unfortunately, increased vigilance doesn’t translate into lower instances of fraudsters trying to perpetrate their schemes. Even the most advanced analytics users should work to constantly evolve their efforts to stem fraud, waste and abuse in supply chains.”

Between 2014 and 2017, an average of 30.8% of poll respondents reported at least one instance of fraud, waste and abuse in supply chains in the preceding year. However, some industries saw higher and lower rates of financial abuse.

[Read more about supply chains: Next Step for Sourcing? Go Where No Supply Chain Has Gone Before]

For the third time in four years, consumer and industrial products professionals reported the highest level of supply chain abuse for the past 12 months at 39.1%, a slight decline from 2016. Energy and resources respondents also reported a higher than average rate of financial abuse in 2017 at 34.7%, also dropping a bit from 2016. Life sciences and health care professionals noted a marked decline in 2017 at 26.3% from 36.9% in 2016.

The online poll surveyed about 3,220 professionals about their use of supply chain forensics and analytics. Respondents work in industries including consumer and industrial products; financial services; technology, media and telecommunications; life sciences and health care, and energy and resources.

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Asked which employee group presents the largest supply chain risks in their organizations, 31.6% of respondents said project managers and invoice approvers compared to 26 percent in a similar poll last year, while 27.5% chose procurement compared to  24.7% last year and 13.1% said accounts payable compared to 10.3% a year earlier.

“In the energy and resources industry, I’ve seen complex capital projects rife with bribery, bid rigging, collusion, fraud and other schemes,” said Larry Kivett, Deloitte Risk and Financial Advisory forensic partner at Deloitte Financial Advisory Services. “Beyond reducing sole-sourced procurement to manage risk, supply chain executives can also prevent financial abuses by working to improve supplier invoicing timeliness, accuracy, and approval processes.”

Pearson concluded, “Even in highly regulated industries, there are still motives for bad actors to commit supply chain abuses. Managing supply chain risk is a constant effort.”

Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s top brands in more than 85 percent of the Fortune 500 and more than 6,000 private and middle market companies in more than 20 industry sectors.