Procurement Fraud is a Big Challenge in Businesses

In today’s volatile business environment, Indian organisations are increasingly vulnerable to economic crimes, with procurement fraud emerging as a major threat.

According to PwC’s Global Economic Crime Survey 2024- India Outlook, 59 per cent of companies in the country have faced financial scams in the last 24 months, far exceeding the global average of 41 per cent. This surge underscores weaknesses in corporate governance and the urgent need for stronger risk mitigation strategies.

Procurement fraud involves unethical practices in the supply chain, such as inflated invoicing, kickbacks, and collusion among vendors and employees. “This isn’t just an operational problem but a strategic risk. It can undermine trust and disrupt entire ecosystems,” says a corporate risk consultant.

Until 2022, Indian businesses were primarily concerned with customer fraud but procurement fraud has now taken centre stage. “Weak vendor selection processes and inadequate monitoring mechanisms have created fertile ground for such practice. Globally, cybercrime remains the leading threat, but India, structural challenges in supply chain management have reshaped priorities,” explains a cybersecurity specialist.

 The impact is grave Economic crimes go beyond financial losses. They impact employee morale, customers trust, and shareholder confidence.

According to the PwC survey, 34 per cent of companies have never conducted anticorruption audits on third-party vendors, leaving them vulnerable to regulatory penalties and reputational damage. Alarmingly, 13 per cent of Indian companies lack third-party risk management programmes, despite increasing scrutiny from regulatory bodies.

Identify and prevent

Recognising procurement fraud begins with understanding its warning signs. These include unusually high bids, repetitive awards to the same vendor, discrepancies in invoicing and employees maintaining undisclosed relationships with suppliers.

Businesses can prevent such scams by implementing stringent vendor onboarding processes, conducting regular audits, and using conflict-of-interest declarations.

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