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By 16 May 2022 | Categories: feature articles

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By Leon Steyn, CEO at Dante Deo

In sourcing and procurement, we are often faced with many challenges from stakeholders, suppliers, governments, and even our own aspirations and ambitions. Dealing with enormous sums of money and being dealmakers, we are expected to have integrity that is unwavering.

But there are practices in almost all corporates and governments that serve as incubators for greed and corruption that could trap even the most ethical procurement professionals among us. More often than not, these practices are forced upon us by CEOs, CPOs, CFOs, heads of department, senior management, and government officials – ironically, the exact leaders we look up to for guidance.

However, corruption is a process, not an event. It’s like a virus that takes time to incubate and move all the players into position for it to be triggered. That’s why it’s critical for procurement professionals, business leaders, contractors, and people in authority to understand how to spot potential corruption and prevent it from happening in the first place.

We’ve identified six leading indicators of corruption to serve as a checklist of red flags. Individually, these indicators don’t constitute potential corruption, and even if all six are present, it doesn’t mean corruption is taking place. Instead, these leading indicators act as a guide to help spot the potential of corruption and then get relevant experts involved to investigate further.  So, what are those red flags to watch?

Direct instruction from an authorised person

Unlike your everyday business instructions, these directives would come from the left-field and are considered unusual. For example, an out-of-the-blue request from a senior executive you normally wouldn’t speak to or get direction from. A political power play if you will. In my own experience, I have been told to “just do it because the CEO said so, the CPO said so, and therefore thou shall do so”.

Bypassing of procedures and best practices

The second indicator usually follows an unusual instruction that is given. The individual is typically asked to bypass normal business procedures, agreed-on processes, or practices that are in place for a reason. For example, you could be told not to contact the designated person or department for consulting, not to source quotes for comparison, or ignore the usual procurement process. This can involve bypassing specific governance steps and the accountability framework too.

Of course, there are times when sidestepping processes is justified, such as during the COVID-19 crisis or the factory riots last year, where businesses needed to act quickly to stay afloat – but in this case, the bypassing wouldn’t make commercial or logical sense.

Creation of a crisis

A crisis in the supply chain is usually well-known, well-documented, and well-published. However, in the case of potential corruption, the crisis will come out of nowhere and will quickly turn into an 'emergency'. Another nuance of these kinds of crises is that they are usually self-inflicted or self-made – if they were managed better or dealt with earlier, they could’ve been avoided altogether.

Personally, I believe that this indicator is one of the more suspicious ones that should raise eyebrows immediately.  A common tactic is to use time for the crisis.  The instruction/initiative often arise just before some or other deadline that cannot be “missed”.

Specific suppliers that are pre-selected

There’s nothing wrong with a shortlist of preferred suppliers or vendors – this happens often in procurement and supply chains. However, if this pre-selected list comes with a host of other corruption red flags, that’s worrying. When a specific supplier is hand-picked for you and you are told not to research alternative options or compare quotes, corruption could be at play.

A key function of supply chain is to provide options to the business and stakeholders.  Options drive competition and result in value for money, but if this is removed from your playbook, there must be a very good reason, else, it’s a huge red flag too.

Ready-made, non-negotiable terms and conditions

Commercial terms and conditions are part and parcel of the procurement process, but when they’re in favour of the vendor rather than the individual procuring the supplier, there’s a problem. If the terms can’t be negotiated and border on being unreasonable or ridiculous, your intuition should tell you that something is wrong. Typically, they are all packaged for you to simply tick the boxes and not ask questions.

Benchmarks is the supply chain ticket to the value for money deal.  Knowing what the market price commodities and services and how those commodities and services are priced is a principle value driver.  Take that away, and the deal is suspicious.

Pressure, pressure, pressure 

Supply chains and procurement come with deadlines to meet and the need to get things done urgently. This is normal; however, potential corruption feels like a pressure cooker about to explode. This indicator translates to perpetual pressure from all angles until you finally crack.

Pressure can come in many forms – from being threatened with insubordination and disciplinary action to suspension and even death threats. The purpose of this pressure is to create fear to coerce sourcing and procurement professionals to “just do it”. Slowly, just like the frog in boiling water, you become too afraid to think for yourself, becoming unable to follow your intuition and apply your integrity.

Connecting the dots, corruption training, and more accountability

The more of these indicators you see, the higher the probability that corruption is taking place. If all six red flags go up, you need to “connect the dots”, as Pravin Gordhan would say. In the source to contract process, you should have checkpoints where you can flag these six indicators, question them, document them, and, if necessary, report them for a deeper investigation.

Most businesses don’t know how to spot corruption. Therefore, it's essential that procurement professionals, managers, and executives are well-versed in pinpointing it through leading indicators like these. The more people that know how to identify corruption and expose it, the more difficult it will be to hide it and the less it will occur.

If we really want to reduce corruption, we need more accountability in the public and private sectors. Chief architects of corruption aren’t being prosecuted to the fullest extent of the law, which makes people think they can get away with it. If people knew these things will become known and that they would be held accountable for corruption, they would think twice.

The importance of anonymity and fighting corruption together

Before you report it, I would recommend looking into the whistle-blowing facilities available and if they can offer you anonymity. Unfortunately, in South Africa, whistle-blowers often get more backlash than the criminals themselves, so you need to find a way to bring the corruption to light while still covering your flanks. Fighting corruption as an individual is almost impossible, but fighting it in a collective makes it easier, especially if you can remain anonymous.

In conclusion, be on high alert for these six corruption indicators and don’t let anyone or anything dull your sense of judgement. No matter what industry you’re in, you have to apply your own judgement, ask and even insist on more information, and stick to your principles.

As a consultant, my motto is that I would rather get fired for doing the right thing than get paid for doing the wrong thing. You have to be willing to lose your job for doing the right thing – otherwise, corruption will continue to prevail.

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