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									risk management

                                        As the global economy slides further into
                                        recession and new fraud cases break
                                        in the news every week, cross-border
                                        supply chains face their greatest threat
                                        from fraud and corruption. Charles Carr
                                        discusses the red flags to watch out
                                        for and how putting thorough controls
                                        in place can give companies better
                                        protection from fraudsters.

                                                          e live in a global marketplace. Many of the
                                                          everyday products that we buy — including
                                                          furniture, clothing and groceries — come from
                                                          the other side of the world. More often than
                                        not, they come from emerging economies such as China and
                                        India. The complexity of the supply chains that allow us to order
                                        and receive products online, in the space of a few days, exposes
                                        many manufacturers and retailers to a host of corrupt practices.

                                        Recognizing the Threat
                                        Fraud and corruption proliferate in financial downturns.
                                        Individuals can take advantage of new opportunities for fraud
                                        whilst all the attention is focused on righting the economy.
                                        Often, it is employees who may feel concerned about their
                                        jobs, disgruntled at their remuneration or fearing redundancy.
                                        We refer to these types of fraudsters as seekers of personal
                                        gain — individuals who line their own pockets and believe that
                                        a company employing tens or hundreds of thousands won’t
                                        miss the relatively small amount of stock or revenue that they are
                                        siphoning off. By contrast, there are corporate “saviours” who are
                                        often the hardest to predict. They may be ‘cooking the books,’
                                        believing that they are acting in the best interests of the company
                                        or its employees.
                                           Increased business with emerging markets is positive for the
                                        world economy; however, there is a downside: transactions
                                        and operations with organizations in foreign markets can pose
                                        a greater risk of fraud. The kind of advice that businesses
                                        are seeking when entering foreign markets typically relates
                                        to fictitious transactions by local vendors, embezzlement by
                                        expatriate employees and the fraudulent use of confidential
                                        information and intellectual property. The type of corruption that
                                        we are seeing in this market includes bribes, bid-rigging, slush
                                        funds and kick-backs. Rather than companies becoming too
                                        cautious to take advantage of foreign opportunities, they should
                                        ensure that appropriate risk mitigation strategies are in place.
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