The impact of the coronavirus pandemic on global supply chains can be seen from shortages of normally abundant products at the local grocery to major delays in transnational shipments from China and elsewhere.
A recent survey by the Institute for Supply Chain Management (“ISM”) found that “nearly 75 percent of companies report supply chain disruptions in some capacity due to coronavirus related transportation restrictions, and more than 80 percent believe that their organization will experience some impact because of COVID-19 disruptions.”1 Companies across the globe are finding they can no longer depend on previously reliable vendors to deliver goods and services critical to meeting customer demand. Those that must locate new vendors quickly face a dire choice: adapt or close up shop. Unfortunately, sophisticated fraudsters are taking advantage of these desperate times through a myriad of criminal schemes, from selling counterfeit or non-existent goods, to complex market manipulation and price gouging, to old-fashioned, straightforward theft.
A flood of recent news stories provides disturbing examples of fraudsters profiting off the increased demand (and corresponding supply shortage) for Personal Protective Equipment and other medical supplies. At Aon’s Cyber Solutions, we have seen fraudsters – convincingly disguised as large multinational corporations – approach public and private procurement offices with contracts for the sale of badly needed medical equipment. In an “advance-fee scheme,” scammers ask for all or part of the payment prior to delivering the supplies, then abscond with the money, leaving the victim empty-handed, and with sometimes only a portion of what was promised, which itself is likely to be counterfeit or defective.
For organizations looking to diversify their supply chain rapidly, vendor due diligence is a critical step toward managing catastrophic legal, financial and reputational risks, even under historically “normal” circumstances. According to the ISM’s recent survey, “more than 44 percent of respondents do not have a plan in place to address supply disruption from China. Of those, a majority (23 percent of respondents) report current disruptions.”2 The opportunities for sophisticated criminals to perpetrate fraud schemes abound as those numbers rise.
Companies can prepare and respond to supply chain vendor disruptions and fraud through robust vendor evaluation. Aon’s Cyber Solutions’ sophisticated due diligence process can help clients reduce the risk of being the victim of vendor fraud:
- Our vendor due diligence starts with a comprehensive and multifaceted examination of the public record to develop a profile of the vendor’s key individuals’ personal and professional reputations and the legitimacy of their business proposition.
- We look for evidence of past deals gone bad, criminal and civil litigation, inclusion on watch lists and negative media, among other potentially revelatory areas.
- We verify physical addresses, corporate filings, insurance certificates, permits and licenses, as well as financial and banking information.
- We interview customers and business associates discretely or openly, depending on the client’s needs.
In most cases, results are provided within seven to ten business days, giving businesses the confidence they need to rapidly fill gaps in their supply chain.
Our robust investigation and intelligence services can complement the due diligence process by performing verification of the vendor background screening process to identify flaws in the vendor’s screening process that might have allowed unqualified or at-risk employees perform services.
In the supply chain ecosystem, one bad vendor can shutter an entire factory, or lead to reputational damage that lasts decades. Let Aon’s Cyber Solutions’ vendor due diligence help give your business the confidence it needs to weather this storm.
Author: Charles Cohen
References
1. https://www.instituteforsupplymanagement.org/news/NewsRoomDetail.cfm?ItemNumber=31171&SSO=1
2. Ibid.
