Deloitte: supply chain fraud unchanged for third consecutive year

By Nye Longman
For the third consecutive year, about 30 percent of Deloitte poll respondents say their companies experienced supply chain fraud, waste or abuse in the...

For the third consecutive year, about 30 percent of Deloitte poll respondents say their companies experienced supply chain fraud, waste or abuse in the preceding year. Yet, just 29.3 percent of the same respondents use analytics to mitigate supply chain fraud and financial risks. Two-thirds (67.1 percent) are confident employees will report any schemes they see in the coming year.

“In my 20 years conducting forensic investigations, trust in employees and third parties is often misplaced,” said Mark Pearson, Deloitte Advisory principal, Deloitte Financial Advisory Services LLP.  “As a result, many organisations are trapped in a pay-and-chase model for fighting supply chain fraud —invoices are paid first, then retribution is sought much later when fraud is found, if it’s found at all. But, the supply chain forensics leading practice is a comprehensive and proactive, predictive approach tailored to organisational structure and industry sector.”

Two industries saw supply chain fraud rise between 2014 and 2016: life sciences and healthcare respondents report an increase to 35 percent in 2016 (31 percent in 2014); and energy and resources was 34 percent in 2016, compared to 27 percent in 2014. Conversely, technology, media and telecommunications reported a drop to 27 percent in 2016, from 2014’s 33 percent. 

Larry Kivett, Deloitte Advisory partner, Deloitte Financial Advisory Services LLP, added: “As distress from falling oil and gas prices puts pressure on the energy and resources industry, many leaders are working hard to avoid leaving any cash on the table. Using supply chain analytics to identify and investigate supply chain financial risks can help stem fraud schemes that we increasingly see in today’s challenging, complex and global environment.”

Pearson continued: “From a life sciences and health care perspective, regulatory and legislative pressure is expected to heighten around pricing and transparency for plans, providers, and pharma and devices makers. It’s a good time to verify that your supply chain is not hiding any unsavory vendors or other fraud, waste and abuse that could cause reputational harm and costly remediation later.”

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