In the 24 months leading up to 2020, 22% of Australian organisations lost over $7.1m to fraud. An additional 40% lost over $1.4m. Where there’s money, there’s temptation and, with large sums of money and many stakeholders involved, procurement is particularly vulnerable to corruption. We’re all aware of this. Awareness, however, doesn’t overcome limited oversight, and with more expected from procurement officers than ever before, expecting colleagues to keep an eye on each other can stretch limited resources to breaking point.
The solution is artificial intelligence and machine learning. Software like ProcureTRAK has suites specifically designed to track purchase order and contract compliance. Red flags are picked up automatically and brought to the attention of staff quickly and efficiently, nipping fraudulent behaviour in the bud before it starts doing serious damage to the organisation.
What is probity?
Probity is about integrity and honesty and the ability to demonstrate it. In terms of procurement, it involves ethical conduct at every stage of the procurement lifecycle, easily demonstrable with clear record-keeping. It’s fundamental to every procurement project and ensures that the correct processes were followed if any concerns are raised. Probity in procurement is concerned with:
- processes that are fair and transparent;
- clear and honest communication;
- proper record keeping;
- independent check to identify potential probity issues;
- appropriate safeguarding of information; and
- the proper management of potential conflicts of interest.
Good probity protects an organisation from the damage fraudulent activity can do.
The damage of non-compliance
The bottom line
The manner in which procurement projects are carried out varies. Projects with a higher monetary value must approach the market in particular ways and contain more oversight and checks. Not only does this ensure fairness to suppliers, but it also ensures large sums of money are being spent appropriately and the best deals are being secured. Non-compliance leads to huge financial losses for organisations the world over.
Reputation
This is potentially where the greatest damage can be done. If probity issues aren’t picked up early, public fallout becomes a risk and the consequences can be catastrophic. Think about it from a supplier’s point of view. If an organisation has been known to award contracts based on unethical reasons, why bother putting in a bid? Applying for a contract takes time and money. Suppliers won’t bother if they believe their chances of winning (or being treated fairly) are zero.
Fraud and non-compliance can hurt a team. Even if only a single staff member is responsible and they are subsequently removed, distrust can remain. Relationships can be damaged to such an extent that it’s not uncommon for organisations to invest heavily in counselling even after the non-compliance issues have been resolved.
ProcureTRAK can help with your probity concerns
Purchase order splitting is a big concern for organisations. Many businesses simply can’t afford enough oversight to stay on top of increasing PO spend, split orders and maverick behaviour. ProcureTRAK has an entire suite dedicated to PO compliance, using KPI-tracking to identify potentially fraudulent behaviour. With the right data, this suite can identify the region, entity, division and even originator of specific purchase orders. It’s an automated process, immune to fatigue and bias.
Contract tracking and compliance
Managing contracts is a time consuming affair. Terms and validity, counts and volume, sorting and analysing by supplier and spend bracket, keeping an eye on overspend… it’s a vortex into which all work hours can be sucked. ProcureTRAK’s Contract Tracking and Compliance suite can do the heavy lifting for you, providing an overview of the current status of all contracts, segregated by category, account or business unit.
Most importantly in terms of probity, this dashboard can also provide analyses based on key compliance metrics.
Take advantage of the latest in AI to manage your probity
Automation and objectivity are the keys to staying on top of probity concerns. Talk with the team at Purchasing Index today to discover how ProcureTRAK can transform your procurement function and ensure non-compliance issues – if they arise – are picked up early, before any damage is done.
