5 Procurement risks that need to be made visible

Risk Grid.jpgEconomic uncertainty and slow growth in many sectors of the South African economy has focused senior management’s attention on improving efficiencies in their businesses. Measuring risk is integral to managing how efficiently organisations expend their money: ‘risk’ covers the management of internal processes around expenditure and the behaviour of management and staff, Alan Low of Purchasing Index (PI) tells SmartProcurement.

With growth in Europe at all-time lows and signs that demand for imports in China and India is slowing, the value of South African exports is likely to fall. Similarly, domestic demand is still weak and, therefore, businesses are turning their attention to the management of their expenditure to improve profits; including management of the risk of "inefficient expenditure."

At one end of the scale this means managing innocent behaviour resulting in inefficient expenditure and at the other it includes proactively detecting areas of fraud and corruption.

Local legislation (The Prevention & Combating of Corrupt Activities Act – 2004) makes the failure to report corruption exceeding R100 000 in value a criminal act; and while admitting that your company has been defrauded is never good publicity, coming to an arrangement with anyone who has defrauded your company could result in senior managers being criminally charged!

The recently enacted UK legislation (UK Bribery Act – 2011) has jurisdiction outside that country’s borders and provides for prosecutions to be brought before UK courts where non-UK companies that do business in the UK (i.e. supplying UK customers, etc.) fail to prevent bribery. A company can invoke in its defence that it ‘had in place adequate procedures designed to prevent persons associated (with the company) from undertaking such conduct’.

Whilst many organisations have such procedures in place and investigate corruption when it is uncovered, most have few or no systems that can detect areas where it has occurred or is likely to occur.

Therefore, for legislative and commercial reasons PI is working with its clients to build relevant, proactive analysis services to manage and measure risk and to uncover areas where spend may be fraudulent. These include the mundane to the exotic, but here a 5 areas that need attention:

  • Uncovering staff who are also suppliers to an organization.
  • Reviewing undisclosed family interests in suppliers.
  • Monitoring non-contract and unapproved spend.
  • Highlighting processes that may allow staff to make unauthorised spend.
  • Reviewing delegated spending limits and spend patterns.

Furthermore, using probability analysis and other algorithms can highlight areas for further investigation.

PI’s experience is that monitoring systems often change organisational behaviour. Our aim is to assist organisations to improve corporate governance and help them prevent inefficient expenditure of company funds before it happens.

For more information contact Alan Low at Alan@pibenchmark.co.za

Leave a comment

SmartProcurement Newsletter

Please enter your details below to receive the SmartProcurement Newsletter for FREE on a regular basis.

As part of the SmartProcurement Newsletter you will be receiving World Class Procurement News, Tools, Tips, Tactics, Procurement Training updates, Upcoming Events, and the latest Procurement Career Openings.

* Email Address:
* Title:
* First Name:
* Surname:
* Company:
* Country:
* Public / Private:


Career opportunites

Trade Compliance Senior Analyst

  • <500 000 >500 000 Analyst Buyer Gauteng Permanent
Trade Compliance Senior AnalystLocation – Rosslyn, South AfricaThe ...More

Logistics Controller

  • >500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
Based in Stellenbosch, South Africa’s leading fruit exporter ...More


  • >500 000 Gauteng Permanent Procurement Management Strategic Sourcing
(Total Cost to Company R900k – R1.2mil) includes ...More

Category Manager Logistics

  • >500 000 Gauteng Logistics & Warehousing Permanent Projects / Category Management
(Total Cost to Company R900k – R1mil) includes ...More

Group Procurement Manager

  • >500 000 Gauteng Permanent Procurement Management
Location: Johannesburg .Cost to Company R1.2mil – R1.4mil excluding ...More

Procurement Analyst

  • <500 000 Analyst Gauteng Permanent Procurement Officer / Specialist
(Total Cost to Company R200K – R400K)We are ...More

Industrial Engineers

  • <500 000 >500 000 Gauteng Industrial Engineer Permanent Strategic Sourcing
(Total Cost to Company R400K – R550K)We are ...More

Category Manager Packaging

  • >500 000 Gauteng Permanent
Location: Johannesburg Cost to Company R1mil – R1.4mil ...More

Category Manager Packaging

  • >500 000 Gauteng Permanent
Location: Johannesburg Cost to Company R1mil – R1.4mil ...More

Category Manager Packaging

  • >500 000 Gauteng Permanent
Location: Johannesburg Cost to Company R1mil – R1.4mil ...More

Category Manager Packaging

  • >500 000 Gauteng Permanent
Role: The Category Manager will be responsible for ...More
Location: Johannesburg Description: To develop and manage relationships ...More
Location: Johannesburg Description: To develop and manage relationships ...More

Global Commodity Manager: Mining Commodities

  • Commodities Gauteng Permanent
Location: Johannesburg Description: Ensuring continuity of supply ...More

Global Commodity Manager: Mining Equipment

  • Commodities Gauteng Permanent
Location: JohannesburgDescription: The commodity manager is accountable for ...More

Mining Project Manager

  • Gauteng Permanent Projects / Category Management
Location: Johannesburg.Description : Responsible for successful implementation and ...More

Mining Project Manager

  • Gauteng Permanent Projects / Category Management
Examples of high impact initiatives are Equipment Automation, ...More

Supply Chain Manager

  • <500 000 Gauteng Permanent Projects / Category Management Supply Chain
R 650 000 –R 800 000 CTC pa GautengA ...More

Operations Manager

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Procurement Management
R 600 000 – R 700 000 CTC ...More

Procurement Specialist

  • <500 000 Gauteng Permanent Procurement Consultant Procurement Officer / Specialist
R 500 000 – R 550 000 CTC ...More