THE RETAIL BULLETIN - The home of retail news
Department Stores
Shopping Centres & Retail Parks
Home & DIY
Health & Beauty
General Merchandise
Sports & Leisure
The Papers
Retail Solutions
Food & Drink
Retailers taking more of an interest in their procurement fraud risk

Being a victim of fraud can be devastating for any company, but even more so in the current economic climate where no organisation can afford to lose valuable revenue. By Helen Dickinson


Retailers taking more of an interest in their procurement fraud risk

Being a victim of fraud can be devastating for any company, but even more so in the current economic climate where no organisation can afford to lose valuable revenue. By Helen Dickinson

However, it seems that management teams within retail and consumer goods businesses are now taking more of an interest in their procurement fraud risk.
Given the nature of how companies in the sector operate, with a large number of complex supplier relationships in place, it will come as no surprise that they are particularly susceptible to this type of fraud.

And there has been a massive increase in “big ticket” procurement fraud in the UK, with more cases coming to light over the past two years than in the previous eighteen years combined.

In addition, a study by the Association of Certified Fraud Examiners (ACFE) found that procurement fraud accounts for half of all fraud losses, while estimating that a typical organisation loses a staggering 7% of annual revenue due to fraud and abuse.

Of course, the reason for such alarming figures could be, at least in part, down to better detection being in place and more cases being uncovered.  However, they certainly help to underline the message that having the right systems and processes in place to tackle this is absolutely essential for businesses.

There are basic systems and controls that all businesses need to have in place to protect themselves, as well as telltale warning signs to be aware of.  

Having proper procedures in place, such as ensuring purchases over a certain amount are jointly signed off, receiving a minimum of three quotes, having a formal tender process in place and a separate procurement function from the budget holder are essential.

Rotation of team members around different areas of the purchasing function is also a sensible precaution and if suppliers which provide a completely different type of product then follow for no apparent reason this can be a sign that something is amiss.

A common systems failure includes a lack of segregation of duties within purchasing teams, and if budget approval, supplier selection, contract negotiation, receipt of goods and services, and invoice approval are all being carried out by the same group of employees, a business can be open to payments being made where goods have not been received.

And while non-compliant or “maverick” buying might simply seem to be a shortcut round the system, it can also be a symptom of a serious problem such as phantom buying or hiding false suppliers.

The bottom line is that organisations need to know exactly who they are working with through well-defined procurement processes.  A recent poll of organisations in consumer markets companies, carried out by KPMG, looked at prevention and detection of fraud and the overwhelming majority of respondents (82%) have enabled audit trails and a well-defined system access control policy to ensure they know which employees are processing transactions.

However, 30% of those surveyed admitted that their processes need improvement, while 33% stated that the procurement function itself is primarily responsible for the management of fraud and misconduct risk within procurement processes.

So, while awareness of the problem might be half the solution, there’s still plenty more to be done in the fight against procurement fraud.

Helen Dickinson is head of retail at KPMG

Email this article to a friend

You need to be logged in to use this feature.

Please log in here

Subscribe For Retail News


Customer Engagement Conference 2019
Customer Engagement Conference 2019
5 June 2019
Cavendish Conference Centre, London W1
The 10th Annual Retail Customer Engagement Conference
The HR Summit 2019
The HR Summit 2019
8 October 2019
Hallam Conference Centre, London W1W 6JJ
The 11th HR Summit 2019, Hallam Conference Centre, 44 Hallam St, Marylebone, London W1W 6JJ
AI in Retail Conference 2019
AI in Retail Conference 2019
16 October 2019
Cavendish Conference Center, London W1G 9DT
Digitally native competitors and demanding customers are forcing a new perspective in retail. AI and machine learning can help you step up to the challenges; and some ‘small and beautiful’ solutions can increase your conversion rates within just a few weeks.
Omnichannel Futures Conference 2020
Omnichannel Futures Conference 2020
5 February 2020
Cavendish Conference Centre, London WG1 9DT
A truly omnichannel offering requires an understanding of customer behaviour across all shopping channels and how this should impact your overall business strategy