British businesses lost over £40mn last year due to fraud committed by their own employees, with London businesses accounting for 29% of those losses. Most organisations will do all they can to protect their networks and payment systems from hackers, but sometimes there is no stopping those internal stakeholders with malicious intentions and duping the systems for their own gain.
Businesses require a certain level of trust in anyone involved in financial transactions, including procurement; yet, clearly ‘trust’ isn’t enough in certain situations. Perhaps it’s time for more organisations to consider a completely different approach to reducing fraudulent behaviour.
Blockchain is one of the latest tech buzzwords. The technology is an incorruptible digital ledger of economic transactions that can be programmed to record financial transactions and other things of value and allows information to be distributed digitally but not copied. The tech community has been quick to uncover a number of potential uses for the technology but it is its ability to prevent fraud that I find particularly interesting.
From a procurement perspective, invoice management is one area that would benefit from Blockchain, as it can ensure that an invoice doesn’t change from the point that a supplier submits it to when a buyer processes it. Transactions would have to be verified by all participants (e.g. suppliers and buyers). No individual will be able to change the invoice for their own gain without all other users of the system validating it.
And as it’s a decentralised approach, people external to the organisation have no obvious place to target and carry out a cyber-attack, as the data is stored across the PCs of all network participants. They will know that it is valid due to an algorithm, taking the form of a set of rules.
As organisations grow and set up new offices overseas, the size of their network and payment systems might put them at greater risk of security breaches, particularly if they’re operating in territories where fraud is rife. For example, Operation Car Wash has seen Brazilian oil company, Petrobras face an ongoing investigation for alleged bribery for awarding contracts to construction firms at inflated prices.