Keeping the bad apples out of your supply chain

Keeping the bad apples out of your supply chain

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Why vendor verification is critical to fraud prevention

Those that seek to defraud your company are unscrupulous, ruthless and determined. So don’t be shy when it comes to making sure you know all you can about those people you do business with.

Recently iFacts was informed of a case involving a fast-food restaurant chain where collusion between unethical employees and unscrupulous suppliers resulted in losses for the company amounting to hundreds of thousands of rands.

The critical importance of selecting and hiring the most suitable employee candidates can never be underestimated in an industry where the success of the business is based on customer satisfaction. In addition, the importance of selecting high-quality and reputable third party vendors and suppliers, should be held in equally high esteem, in an industry where significant financial and reputational aspects are at stake.
South Africa has seen its fair share of fraud, bribery and corruption cases by suppliers to companies in almost every sector. Procuring the services of wide range of suppliers and vendors for some of an establishment’s most critical operations does offer some significant opportunities, but also introduces a plethora of additional risks that may not only impact on the businesses’ bottom-line but on its reputation in the marketplace as well.

Companies are responsible for managing the risks involved in supplier relationships and must make provision for a standard policy to remove the risk of theft, fraud, bribery, corruption and poor quality products and services.


Vendor Verification has become standard business practice across the globe. This mechanism manages the way in which businesses procure outsourced products and services. This can include anything from food supplies to stationary, bedding and kitchen equipment. This screening and monitoring process ensures that supplier individuals and companies meet the guidelines of vendor risk management through the collection, auditing and verifying of key information about the supplier, including: Contractor Screening, Vendor Verification, Non-Financial due diligence and Procurement Screening.


According to a study by Deloitte Financial Advisory Services, published in Forbes Magazine in April 2014 there are still a surprising number of company managers who are leaving their supply chains vulnerable to fraud. In the study that polled more than 2600 executives, it was found that less than a third of respondents were deploying the kind of tools that would detect fraud and waste by vendors.


According to the study by Deloitte, vendor fraud takes a number of forms, including collusion between company employees in a procurement role and third party suppliers. It can also include misconduct by the vendor, in the form of falsified labour, inflated invoices and pumped-up expense accounts.


However when it comes to supplier fraud, the key word here is prevention, and prevention is always better than cure. Unscrupulous vendors are far less likely to engage in any misconduct with customers who have a well-known verification policy already implemented.


Company leaders in the sector need to ensure that they are keeping the bad apples out of their hotels and restaurants by managing their supplier relationships more proactively from the very start of the procurement process.

Note to Suppliers

Remember that RosaCheck can offer your company a compliance certificate to submit along with your tender documentation. This compliance certificate not only show’s your organisation’s commitment to ethics and integrity, but will prove that your company and all of its documentation have been independently verified.