Managers may engage in fraudulent activities by selling company information or details of customers. The manager improperly accesses the companys it system to alter values for citation issued. Fraud is an illegal activity, and the manager that is choosing the bribing vendor over the other vendors is just very wrong. “Most commonly used types of bribes are cash, travel and entertainment rewards,” as noted by Dillon (2008, p. 37). Once the it managers are affiliated with the unscrupulous vendors, the vendors do not need to be concerned about remaining competitive because they will be almost certain to be awarded new contracts or continuations of existing contracts, and they may even raise the prices that are charged to the organization in order to cover the costs of paying off the managers, a practice that is particularly commonplace in larger organizations. In this regard, Dillon (2008) adds that, “In very large firm especially, fraud will be found in bid-rigging and contract giving. Bribery can also work in reverse, that is, instead of a vendor giving up cash, the manager or employee asks for payment from the vendor to assure selection as a preferred provider, this is called extortion” (p. 37). Taken together, it is clear that the opportunity for a wide range of corporate shenanigans and double-dealings to take place within it firms, and such practices can have an enormous financial impact on the affected organizations and these issues are discussed further below.
Financial crisis pertaining outsourcing it projects
Fraud can affect organizations in a number of negative ways, including diminished bottom-line profits, negative publicity and the erosion of customer goodwill and shareholder confidence (Neural Technologies- the Home of Risk Management, 2010).
An increasingly prevalent practice involves so-called “phantom vendors” that persuade purchasing managers that they offer they most competitive prices for superior products and services. Phantom vendors may even convince purchasing managers that they are already working with other large it firms and have a proven track record of reliability and trustworthiness. Without exercising due diligence early on, purchasing managers may be swayed by such presentations and award a bid (Podgor & Ellen, 1999). Once the bid is approved, the phantom vendors demand a hefty down payment and then simply disappear with their profits. Another version of phantom vendor fraud that can have enormous financial implications for it firms involves the purchasing managers themselves. In some cases, purchasing managers have fabricated vendors on paper and awarded contracts to these firms. Thereafter, invoices are processed as normal but the purchasing manager pockets the profits and the organization never receives the contracted goods or services (Podgor & Ellen, 1999).
Yet another way purchase managers can become involved in fraudulent practices involved product substitution. In those cases where vendors have paid bribes to purchasing managers to secure a contract, they may attempt to cover their costs by providing organizations with inferior goods or services that do not meet the contract specifications. In the case of software vendors, they may provide software that is replete with errors and technical difficulties to the extent that it is unusable. A vendor that involves in fraudulent activity means his business is also not in.