How Blockchain can tackle fraud in procurement
British businesses lost over £40mn last year due to fraud committed by their own employees, with London businesses accounting for 29% of those losses. Most organisations will do all they can to protect their networks and payment systems from hackers, but sometimes there is no stopping those internal stakeholders with malicious intentions and duping the systems for their own gain.
Businesses require a certain level of trust in anyone involved in financial transactions, including procurement; yet, clearly ‘trust’ isn’t enough in certain situations. Perhaps it’s time for more organisations to consider a completely different approach to reducing fraudulent behaviour.
Blockchain is one of the latest tech buzzwords. The technology is an incorruptible digital ledger of economic transactions that can be programmed to record financial transactions and other things of value and allows information to be distributed digitally but not copied. The tech community has been quick to uncover a number of potential uses for the technology but it is its ability to prevent fraud that I find particularly interesting.
From a procurement perspective, invoice management is one area that would benefit from Blockchain, as it can ensure that an invoice doesn’t change from the point that a supplier submits it to when a buyer processes it. Transactions would have to be verified by all participants (e.g. suppliers and buyers). No individual will be able to change the invoice for their own gain without all other users of the system validating it.
And as it’s a decentralised approach, people external to the organisation have no obvious place to target and carry out a cyber-attack, as the data is stored across the PCs of all network participants. They will know that it is valid due to an algorithm, taking the form of a set of rules.
As organisations grow and set up new offices overseas, the size of their network and payment systems might put them at greater risk of security breaches, particularly if they’re operating in territories where fraud is rife. For example, Operation Car Wash has seen Brazilian oil company, Petrobras face an ongoing investigation for alleged bribery for awarding contracts to construction firms at inflated prices.
Any business that has transactions take place in regions where business corruption is common might be particularly concerned about invoices being changed, or wrongful updates to supplier bank details. Blockchain can help here by ensuring that only valid changes are made, which are then verified by all network participants.
Double spending is another fraudulent activity that Blockchain has the potential to eliminate. As cryptocurrencies such as Bitcoin are digital payment systems, there is the risk that network users can pay with the currency more than once if executed cunningly. But if the transaction is stored in the Blockchain, another transaction using the same cryptocurrency cannot be carried out. This stops an employee from making a legal payment, while using the same token to pocket that amount of money for themselves.
With the rise of activities such as mobile working and the Internet of Things, businesses are more connected now than ever, potentially putting their data at greater risk of unlawful access. Now is the time for organisations to take a new approach to how transactions are made to ensure greater protection. Some experts expect Blockchain to go mainstream in the next three to five years.
Some also refer to it as the new Internet, likening the conversations we have about Blockchain to how we spoke about the Internet 25 years ago. Organisations especially keen to tackle fraud and security issues in their procurement systems should establish what Blockchain can do for them.
New speakers announced for Procurement & Supply Chain Live
Two leading executives in supply chain transformation have been confirmed for this year's Procurement & Supply Chain Live event.
Procurement & Supply Chain Live is the perfect opportunity to hear from prominent executives at the world’s leading procurement and supply chain businesses. The event will be streamed live from Tobacco Dock, London via the leading networking platform Brella.
The three-day show, running 28-30 September 2021, is an essential deep dive into the industry, with influential speakers sharing insights and strategies from their organisations, group roundtable discussions, and fireside chats.
We take a look at the latest additions to the already amazing lineup of speakers announced so far, and what they will bring to the flagship event.
VP Global Supply Chain at Macmillan Education Ltd
Shaun Plunkett has over 30 years of supply chain leadership experience in FMCG, entertainment and media sectors, supporting multi-billion euro businesses including Universal Music, EMI, Sony Music, Harper Collins and Associated British Foods. He has a track record of successfully delivering transformational change coupled with award winning operating models and developing and coaching global teams. Plunkett says that challenging the status quo is at the heart of what drives him on a daily basis - and encouraging others to continuously push the boundaries.
Read more about Plunkett’s involvement in Macmillan Education’s supply chain transformation HERE
Digital Transformation Lead, Oracle UK and Board Member, CILT at Macmillan Education Ltd
Vikram Singla is digital transformation director at Oracle, UK. He helps supply chain and finance business leaders leverage technology to deliver meaningful business outcomes for their organisations. He also serves on the board if CILT (Chartered Institute of Logistics and Transport) – UK and is an Honorary Visiting Fellow at Anglian Ruskin University. Singla has more than 25 years’ experience in the technology sector, and in global supply chain transformation, including deploying business transformation programmes for Fortune 500 firms. In his spare time, Singla is a passionate brand ambassador for Cancer Research.
Plunkett and Singla join a growing line-up of speakers, including: Sheri R. Hinish, IBM; Robert Copeland, G4S; Daniel Weise, BCG; Mark Bromley, Mastercard; David Loseby, Rolls Royce; and Ninian Wilson, Vodafone Procurement Company.