News & Views

Manufacturing Fraud

The manufacturing industry is susceptible to the risk of fraud. The sector lends itself to the insider threat, those who work for you and insist on stealing goods and materials, as well as intellectual property thefts.

Technology plays a huge part in this as manufacturers have become more robotic in their processes, so have the employees and systems controlling them. From inventory management to GPS tracking on delivery vehicles, there are copious types of fraudulent activity in the manufacturing industry & the Bathroom sector is not immune

Product Quality Frauds owing to substandard product quality usually involves the use of inferior materials in the production of the finished goods. These can also include masking of records to meet specific tests or regulatory requirements, purchasing poor quality materials from vendors.

Fraud Warranty claims amount to huge costs for manufacturers and can have a direct effect on product quality and customer pleasure. It is simple to identify whether a product is filed for a basic product warranty or extended warranty period, therefore easier to identify questionable or suspicious patterns & trends and they are becoming the norm.

IP Infringement Intellectual Property has now become vital, while also becoming more difficult to protect over time. The theft of Intellectual Property including trade secrets, patents, drawings & designs, trademark or technology are common in the manufacturing sector. This infringement results in the company’s products finding their way into the counterfeit/grey market. Inventory Frauds usually involve the theft of goods or materials from a company. The perpetrator may try to cover up the theft by misrepresenting computer records related to stock or may knowingly collude to allow losses to occur.

Detection measures and prevention of fraud in the manufacturing industry can be cost-effective, manufacturers insurance, data mining and analysis on a consistent basis, reviewing management, and setting up reporting hotlines. Results from implementing such measures have highlighted a significant decrease in fraud and risks. While fraud may not be a focal point of your organisations, having awareness can go a long way, something as minimal as keeping an eye on performance and implementing restrictions on internal spend will greatly increase the Fraud Risk Management process, leading to much-improved culture & behaviours of all employees, that is reinforced by the Senior Leadership Team who set the  ‘Tone from the Top’.

Should some staff fall foul of the expectations, there will be consistent consequences for such behaviours as opposed to sweeping it under the carpet!

This guest blog was provided by Robert Brooker, PFK GM

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