Avoid procurement pitfalls with the right vetting tools
06 March 2019 | Web Article Number: ME201913851
VETTING in the supply chain function enables businesses to review their suppliers and vendors, mitigating risk before entering into business relationships. It is an important step in the supply chain, as businesses are vulnerable to a host of potential threats that can emerge from their relationship with suppliers.
That’s according to Rudi Kruger (pictured), General Manager of LexisNexis Data Services, who warned that unscrupulous business practices pose great risk and, if left undetected, could have severe consequences on the business as a whole.
Some of the more prominent threats include:
- Conflict of interest, which occurs when an individual or organisation is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other.
- BEE fronting, where a company deliberately circumvents or attempts to circumvention B-BBEE acts and codes.
- Shell company schemes, where an entity with no active business exists only in name as a vehicle for another company’s business operations.
- Tender fraud, which involves the manipulation of the bidding/tendering process between employees of the issuer of the bid and the bidding company, and may include bribes and kickbacks.
- Pass-through schemes, where an employee or contractor sets up a business which supplies goods or services to client.
- Reputational damage, following association with the above-mentioned transgressions.
However, said Kruger, with the right information obtained via in-depth vetting, procurement professionals can arm themselves with everything they need to make informed decisions and subsequently, protect the business.
While in-depth vetting can seem like a daunting task, third-party providers of vetting tools have strong databases on verified content, making them reliable and efficient, he added. “Making use of them greatly benefits the supplier vetting process time and time again.”
He cited the example of his own company’s online vetting tool, Lexis ProcureCheck, which uses advanced technology and multiple databases to highlight the conflicts of interest that exist in both a company’s human resource and procurement environments.
“It is also useful in ensuring compliance with the Public Finance Management Act, Municipal Finance Management Act and King IV.
“With Lexis ProcureCheck, you can create your own restricted vendor list and match suppliers against published external lists, as well as highlight external business interests of employees within your organisation.”
The system provides automated irregularity alert reports, as well as reports on vendors and staff. It also assists with procurement vetting and vendor management, and facilitates the verification of various data sets, providing linkage to identify possible conflicts of interest, pass-through schemes and shell companies.