January 20, 2022

Supply chain fraud up in health care, Energy Industries

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Close-up Of Doctor Hands With Stethoscope In Handcuffs

Close-up Of Doctor Hands With Stethoscope In Handcuffs

By Stephanie Forshee, From Corporate Counsel

Supply chain fraud has increased in the health care and life sciences industry, as well as in the energy industry, according to a new poll from Deloitte.

For the poll, Deloitte asked 2,660 professionals about supply chain fraud. About 31 percent of respondents said their companies experienced supply chain fraud, waste or abuse in the preceding year. That’s about the same as has been reported in the first two years of the annual poll.

But in the health care and life sciences industry, that figure was 35 percent, an increase from 31 percent of respondents in 2014. Likewise, 34 percent of respondents in the energy and resources industry reported supply chain fraud, waste or abuse, compared with 27 percent in 2014. Technology, media and telecommunications saw a decline in fraud, however, with 27 percent of respondents reporting supply chain issues in the last year, compared with 33 percent in 2014.

According to Mark Pearson, an advisory principal at Deloitte, one explanation for the rise in reported supply chain fraud in the energy sector is that, with the general volatility and downward trending of energy prices, people in charge of procurement “start thinking ‘Is my job in jeopardy here?’ For some people that might be on the fence ethically, that might be enough.”

As for which groups present the largest supply chain fraud risk for the organization, most reported project managers and invoice approvers (26 percent), while 24.7 percent said procurement and 10.3 percent said accounts payable.

And it doesn’t help that companies overall aren’t always confident in their employees. About 48 percent of respondents indicated they are somewhat confident that if an employee became aware of fraud in the next 12 months, they would report it. Only about 20 percent were highly confident and about 10 percent said they were not confident.

Pearson says GCs must recognize that they and their legal departments “are seen as the ethical compass of the company.” He says the strongest companies that express the most confidence in their employees “have a strong legal department that isn’t focused only on compliance, but more on ethics.” They pose questions like: “Let’s not get in the structure of the deal until we get past, ‘Is it right to be doing business in this country or is it right to do business with this vendor?’”

Pearson also recommends that companies set up and underscore a whistleblower hotline in order to keep supply chain fraud down. “A simple sort of refrain of ‘You have to do the right thing’ is oftentimes enough to make somebody on the fence of whether or not to report something do the right thing,” he says. 

IMAGE: Andrey Popov / iStock

For more on this story go to: http://www.corpcounsel.com/id=1202754740158/Supply-Chain-Fraud-Up-in-Health-Care-Energy-Industries#ixzz45iae2ry6

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