Friday Rant: A Pragmatic Suggestion for Combating Procurement Fraud

This post is authored by Spend Matters contributor William Busch. He wrote it in response to a recent story surrounding procurement fraud in the food/CPG markets that appeared in Spend Matters last week.

Since fraud seems to be ubiquitous cross culturally, it's fairly safe to say that its inevitable commission represents a dark side of human nature. Fraud's perpetrators run the gamut from incredibly stupid to very bright. What they have in common is that they're all narcissistic. Narcissists are over the top needy, self-absorbed and -- here's the important part -- self-concerned and self-protective.

As a society, there are many things we can do to prevent personality disorders like this from evolving and even treat these conditions once they take hold -- but that's a separate topic. Let's be clear that technology cannot prevent deviant behavior. And while these people can be clever and difficult to spot, what we can do is clearly spell out the personal consequences of committing fraud within organizations.

Since procurement professionals wield tremendous power over their vendors, it's a realm to which narcissist's are likely to be attracted -- or at least see tremendous opportunity in, once involved. And since the behavior of those in procurement has a potentially huge effect upon an organization's external image and value, it is perfectly reasonable for CPO's to periodically conduct in-house seminars that elucidate the standards to which everyone will be held personally accountable.

Participants will have heard most of the content before, but the seminars could be presented in a lively role-playing format to insure that ethical behavior remains top-of-mind – the "carrot", if you will. And the stick is a contract that all participants must sign at the close of the session that stipulates the certain consequences of fraud: Anyone found to be knowingly complicit in a fraudulent scheme in conjunction with executing the responsibilities of their position within the company, including but not limited to monetary or material kickbacks, will not only be subject to criminal prosecution but will also be held personally liable for the financial consequences of their actions including, but not limited to, the legal seizure of their personal assets and property to the fullest extent of the law.

Now of course such a statement will have to pass legal muster, but advance notification that an active anti-fraud campaign is in place, along with the consequences of loss from complicity, might go a long way to prevent those who are pre-disposed to illicit personal gain from engagement. It might also be prudent to point out that there is 'no honor among thieves' -- anyone who engages in fraudulent behavior involving other individuals is exponentially more certain to be caught and convicted.

William Busch

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