During the last four years, the number of companies using analytics to mitigate third-party supply chain fraud, waste and abuse risk has grown to 35 percent in 2017, from 25 percent in 2014, according to a Deloitte poll.


“It’s encouraging to see more organizations using analytics to help prevent and detect financial abuses within supply chains each year,” says Mark Pearson, Risk and Financial Advisory forensic principal, Deloitte Financial Advisory Services LLP. “Unfortunately, increased vigilance doesn’t translate into lower instances of fraudsters trying to perpetrate their schemes. Even the most advanced analytics users should work to constantly evolve their efforts to stem supply chain fraud, waste and abuse.”


Deloitte polled more than 3,220 professionals about their organization’s use of supply chain forensics and analytics. Respondents work in industries including consumer and industrial products; technology, media and telecommunications; life sciences and health care; and energy and resources.


Between 2014 and 2017, an average of 31 percent of poll respondents reported at least one instance of supply chain fraud, waste and abuse in the preceding year. However, some industries saw higher and lower rates of financial abuse. For example, for the third time in four years, consumer and industrial products professionals reported the highest level of supply chain abuse for the past 12 months (39 percent), a slight decline from 2016 (40 percent). Energy and resources (35 percent) respondents also reported a higher than average rate of financial abuse in 2017, dropping a bit from 2016 (36 percent). Finally, life sciences and health care professionals noted a marked decline in 2017 (26 percent) from 37 percent in 2016.


“In the energy and resources industry, I’ve seen complex capital projects rife with bribery, bid rigging, collusion, fraud and other schemes,” says Larry Kivett, Deloitte Risk and Financial Advisory forensic partner. “Beyond reducing sole-sourced procurement to manage risk, supply chain executives can also prevent financial abuses by working to improve supplier invoicing timeliness, accuracy and approval processes.


From a life sciences and health care perspective, Pearson says he is surprised to see such a big drop-off in reports of financial abuse from 2016 to 2017, but he wouldn’t take that slowdown as a reason for supply chain executives to get comfortable. Even in highly regulated industries, there are still motives for bad actors to commit supply chain abuses, he says, noting that managing supply chain risk is a constant effort.


Indeed, Pearson has previously explained that it’s critical for companies to proactively identify and examine anomalies using data analytics so they may be more likely to increase overall profits and mitigate the risk of fraud, waste and abuse with their third-party relationships. Companies not already doing so should balance forensic accounting processes with advanced data analytics methods to home in on any inconsistencies in their third-party transactions, he believes. What’s more, companies should maintain a “forensic mindset” in examining any big data they collect on their supply chains to “provide a clearer context to suppliers and transactions,” he says.


“Many financial execs forget that fraud goes directly to the bottom line: For every dollar of fraud, there’s one less dollar of net income and value that can be returned to shareholders,” Pearson has previously explained. “Supply chains tend to be the single largest source of cash outflow in an organization … so it’s increasingly important to use electronic data to identify, mitigate and reduce fraud, waste or abuse.”


What are your thoughts on the use of analytics to help prevent and detect financial abuses within supply chains? Is your company working to mitigate the risk of supply chain fraud, waste and abuse?