Jordan Strauss, managing director in the Forensic Investigations & Intelligence Practice of Kroll, LLC, details the major risks of corruption existing in supply chains today, and offers tips on addressing them.
Kroll’s recently issued Global Fraud and Risk Report finds that corruption and risk, long a concern in global supply chains, are on the rise. Whether companies are doing a good job controlling and mitigating those risks is another question. Both private enforcers and governments are having a more difficult time monitoring corrupt practices because of an inability to travel and conduct onsite meetings during the COVID-19 pandemic.
The Kroll report finds 46% of suppliers, customers, agents and distributors citing a lack of visibility over third parties as the leading source of bribery and corruption today. In an increasingly competitive business environment, where components and raw materials are in short supply, buyers are reluctant to give up critical suppliers. At the same time, Strauss says, it has become harder for consumers, manufacturers, resellers and suppliers to verify whether they’re participating in illicit supply chains, or those that are in violation of labor laws.
The multi-tier nature of global supply chains makes it all the harder to gain visibility into supplier practices. “It does get harder and harder to confirm sources the deeper into a supply chain you go,” says Strauss. Desk-side research is one option, but often it must be supplemented by personal visits, materials testing and more extensive queries into sourcing, often with the help of an independent expert.
All types of corruption, including bribery, counterfeiting, payoffs and kickbacks, are of equal concern to supply chain managers today. As the price of goods rises, so do the rewards for corrupt activity. At such a time, says Strauss, proper data governance becomes crucial.
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