Monday 16 November 2015

Evade Procurement Corruption

Authored by Khizar Farooq

For an ethical company procurement corruption is a nightmare. At times corruption is evident, but sometimes it is delicately complex and appears harmless such as when procurement division receives small gifts from suppliers. Even though it seems insignificant, procurement corruption can affect a company`s financial well being and its repute. However, there are ways to avert it.

Ethical culture is one the best things which can be established in a company to avoid procurement consultancy. This will eliminate people who might be susceptible to act unethically while encouraging appropriate conduct. Ethical culture must be adopted first by top level. Every employee in a company from CEO down must be seen virtuous and accountable in all facets of their day-to-day.

Establishing ethical policies and procedures through a code of conduct is a good place to start. This helps employees make good decisions and provides a framework for dealing with situations that may be questionable. Hiring individuals who are known for ethical behavior and training employees to spot red flags encourages workers to conduct themselves appropriately. It also sends a message that your organization takes unethical behavior seriously.

Working with ethical people extends well beyond your organization. Conduct thorough background checks on all suppliers to ensure they conduct themselves legally and ethically. Get references and check for potential conflicts of interest between your organization and suppliers. If you can, learn about their business culture. Do they focus on ethical practices? Do their values align with your company’s?

Suppliers may be subcontracting out. If you don’t want this, make it clear in your contract and ensure that your supplier has the capacity to fulfill its obligations without subcontractors.

If you are okay with subcontracting, obtain a list of the companies your suppliers subcontract to and look into them. Just because you aren’t dealing with the subcontractors directly doesn’t mean their (potentially) bad behavior won’t affect you.

If possible, segment the procurement process so no individual is responsible for an entire transaction. This keeps at least two sets of eyes on every step, increasing the possibility that someone will notice anything that seems ‘off’ and take action.

Among the warning signs to watch for, according to Deloitte, are poor record-keeping, personal messages between your staff and suppliers (such as communications via personal phones), conflicts of interests, excessive gifts from suppliers, overriding of internal controls and resistance from your staff to last-minute audits.

If your code of conduct is violated, make sure there are consequences for these types of less-than-favorable actions-regardless of who violates them. Having policies and practices in place to discourage unethical behavior goes a long way to preventing procurement corruption and protects your company’s reputation.