Continuous monitoring for procurement

At KPMG we are working together with our Alliance Partner SAS Institute to optimize procure-to-pay, employee/third party integrity and retail chain processes. Together we are supporting our clients to reduce the complexity of data analysis. The following Use Case is an example of how companies can accomplish efficiency in their processes using actionable analytics.

On average, organizations lose five percent of revenue each year to fraud in the procure-to-pay cycle. The challenges in fraud, waste and abuse detection are increasing false positives rates, decreasing efficiency of investigations, and hindering proactivity.

 

Nearly every company is affected by financial crime. The complexity in detecting criminal activity and unnecessary waste usually increases with the size of the company, the number of suppliers, the volumes of transactions, the number of IT systems and the numbers of countries of operations. 

According to various studies, fraud remains undetected for an average of 18 months. This has a direct impact on company’s bottom line. A proactive instead of a reactive approach is needed to avoid the losses in the first place. Moreover, the outdated methods of fraud detection tie up considerable organizational resources adding to the overall cost.

The conflict between the generally high level of concern and the low level of risk assessment in the company points out that fraud risks are perceived but not specifically managed. Economic crime is on the rise and the potential impact can be catastrophic. This impact can be either direct – through financial loss – or indirectly incurred (costly investigations, reputational damage, operational disruption, legal repercussions). Transitioning from reactive to proactive detection and prevention approaches has significant impact on bottom line. 

KPMG together with our Alliance Partner SAS Institute offer new approaches to challenges of today’s fast-paced world, leveraging connected strategy powered by leading technology to meet the needs of clients’ new reality of digital transformation. By bringing the best of our firms to our clients’, we help businesses redefine resilience, inspire trust and grow with confidence. KPMG’s alliance with SAS Institute combines the financial and risk management experience of KPMG professionals with SAS’s analytic software platform to address fraud detection & prevention challenges for both internal and external fraud in procure-to-pay cycle. SAS Continuous Monitoring offers fraud, waste and abuse detection through hybrid detection models, using artificial intelligence and machine learning. This solution enables customer to gain control over the process control deficiencies and fraud vulnerabilities across wide array of processes, which in turn reduces losses, enhances operational efficiency, decreases potential reputation damage, and increases productivity.

The KPMG and SAS Procurement Integrity solution empowers businesses to detect and mitigate fraud in the procure-to-pay area through a powerful combination of artificial intelligence and investigation capabilities. The solution includes pre-configured out of the box analytical scenarios. The objective is to uncover procurement risks earlier than ever, prevent financial losses and protect your reputation. Spot early-warning signs that could indicate procurement risks and improve your investigative processes with advanced tools for forensic analysis. We are providing the capabilities to continuously monitor staff and supplier activity to spot early-warning signs, quickly distinguish high-risk procurement activities from low-risk ones, improve analyst and investigator productivity and make faster decisions with automated analysis and reporting. On average, we are seeing 15% of reduction in fraud losses within the first year after the solution implementation.

Various studies indicate, that 10 % of procurement spend can be saved through item categorization. To take better advantage of the Data Driven Transformation, it’s essential to have trusted, governed, relevant and authoritative data. KPMG and SAS Institute jointly offer a solution for smart and effective usage of spend data to automatically improve the quality of items and their categorization. This solution will assist in identifying potential savings, keep costs under control, track tail spend, monitor contract compliance and identify maverick buying. 

According to Ethisphere: Performance of the listed 2020 Honorees report, companies which have suffered a supplier related scandal are facing on average 13.5% loss of stock valuation and 2-5 years of business focus loss. Every organization should know its suppliers. Beyond meeting policy requirements from legal, compliance, procurement, and finance, knowing which suppliers you should or should not do business with is key to sound business operations. Lacking a fast, effective, and consistent way to onboard and routinely monitor suppliers can present a high level of risk. This is a must considering potential disruptions of the supply chain and customer service, the likelihood of reputational damages and the ramifications of regulatory actions. Today many companies are over dependent on manual controls and basic rules-detection software, which are easily circumvented by fraudsters. 

The 2020 National Retail Security Survey finds shrink at an all-time high, accounting for 1.62% of a retailer’s bottom line. Retail Merchandise returns are estimated to cost 11 - 12% of annual revenue, with 8% of returns as the result of fraudulent activity. These are worrying numbers and effective and proactive system of detection and prevention is a vital part of protecting bottom line in today’s world of increasing retail fraud trends, such as returns fraud, discount fraud and employee fraud threatening your organization from within. Safeguard your organization’s reputation, prevent losses, and get ahead of the curve with proactive fraud detection and prevention throughout the retail supply chain.