Firms Fail To Use Analytics To Detect Financial Fraud
Data analytics can play a big role in detecting and combating supply chain fraud. But a recent study shockingly reveals that executives are increasingly failing to detect financial fraud in supply chains. The new study by Deloitte Consulting, which polled over 2,600 executives, found that only one fourth of respondents were deploying data-analytics tools that can detect fraud by vendors. Thirteen percent of those surveyed had the necessary tools but are still learning how to use analytics software, while 22% had no data analytics system in place.
“Many market leading companies leverage advanced data analytics tools and forensic accounting to identify anomalies in their transactional data,” said Mark Pearson, principal, Deloitte Financial Advisory Services.
He added that using a forensic mindset when analyzing big data can provide value to an organization by adding context to suppliers and transactions, potentially adding to increasing profits and mitigating the risk of fraud, waste and abuse.
The study further showed that less than one fourth of respondents monitor their third party relationships at least once a year, 13% do it less than once in a year and 10% never monitor these relationships.
“Globalization, regulation and economic volatility are some of the top issues adding to the complexity of today’s supply chain,” said Larry Kivett, partner, Deloitte Financial Advisory Services LLP. “Failure to adequately and actively monitor supply chain relationships can substantially increase a company’s risk of significant financial losses, as well as exposure to legal and regulatory investigations, civil and criminal litigation, and reputational damage.”
Respondents said the biggest challenge to their organizations’ supply chain fraud detection capabilities was acquisition of a new entity. Analytics can go a long way toward smoking out the miscreants. Kivett says available tools for parsing the numbers are more sophisticated than ever. “There’s a proliferation of data that didn’t exist five to 10 years ago.” however, “as now there are readily available and smarter fraud schemes to tackle this menace.
This suggests that companies are willing to make use of the available tools and expertise that can help to wipe out fraud in supply-chain relationships. and in some cases, they’re just waking up.
Deloitte sees financial fraud as a “hot area,” Pearson said. ”It’s a regular topic of conversation that we’re having now with clients. There’s reason for optimism — a heightened awareness,” he said in the report.
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