‘Make In India’ is the latest buzzword currently doing the rounds of many Government offices as well as corporate corridors in India. A major initiative, it refers to the new national program designed to facilitate investment, foster innovation, enhance skill development and protect intellectual property. But most of all, it is intended to build the best-in-class manufacturing infrastructure in India which would promote and encourage the growth of a global manufacturing hub.
It is no wonder that while the Government of India envisages a capital expenditure of over two lakh crores of rupees in the coming year as per the latest annual budget figures. The private sector too is gearing up to execute new projects, install new capacities and upgrade old technologies, for both market growth as well as efficiency. Most of the projects of the above nature involving significant capital expenditure can be classified as Capital Projects.
There is a strong pipeline of committed capital projects lined up for the next few fiscal years. But at the same time, there has been high delivery cost inflation and heightened macro-economic uncertainty.
This has been leading to threats and opportunities for fraud.
While some of these factors have been around for some time, there are also new challenges such as,
- Enormous amount of data for monitoring
- Commerce going increasingly global
- Aggressive costing and scoping
- Resource constraints
Fraud, waste and abuse are common issues in capital projects which is a growing risk area across all industries, and more so for the energy, chemicals and utilities sector. Companies are now reconsidering, revising and prioritizing or sequencing capital project plans to mitigate these factors.
There are advanced technologies to help companies meet these challenges individually. However, they need to take a methodic approach in adopting them to address risk areas through various combinations of these technologies.
Things don’t happen overnight.
It is important to have a deep understanding on the fraud scenarios of capital projects as well as possess cutting-edge technologies to handle data in the contracts, work orders, change orders to meet the new challenges with a cost-efficient approach. This needs to done while leveraging technological innovations and maximizing their benefits by connecting with traditional transactional data.
Example: Large construction projects could be susceptible to vendor fraud and contract fraud. Some typical fraud scenarios arising here could be,
(The above post is part one of the series on capital projects in India and how companies can leverage analytics to mitigate risks related to fraud)