Peter Hackshaw, erstwhile maritime CPO, talks shipping, financial procurement and why he’s on a crusade to combat fraud in the profession
Good procurement matters to Peter Hackshaw. “I love the profession,” he says, “and I hate to see it done badly.” And well, he might. He began his career aged 17 at Zodiac Maritime, and in his 20 years in the industry had many notable achievements. Chief among those was representing the maritime sector as a Contributor to a British Standard on Procurement Fraud controls, which became the baseline for the Anti-Bribery Management standard ISO 137001:2016. It is something he is rightly proud of.
Peter has since left the industry, having assumed the role of Vice President of Functions Procurement in an investment bank. Fraud too remains on his agenda, having recently become a partner in Forensic Procurement Partnership – a new collaboration between the Chartered and Fellowship status procurement professionals, accredited counter-fraud professionals and experienced fraud investigators from both the public and private sectors.
We caught up with Peter to see how his experience in different sectors compares, and to get his thoughts on where the industry needs to shape up and what can be done about procurement fraud in the maritime supply chain.
You’ve worked in various sectors. How do the approaches to procurement differ?
The financial world is under the microscope more so today from regulators, investors and tax-payers. Technology is key to everything. You only have to look at the digital-only banks being set up to see that. So, despite not hitting a moving target, it’s a faster pace in procurement, whilst having very, very tight controls. Email data to third parties is encrypted as routine. There is deep rigour on the management of material outsource contracts especially, beyond anything I’ve experienced before and huge focus on exceptions to policy, zero downtime on digital platforms, data breaches and managing risk in its many forms.
It is clear which team owns which part of a process. It’s not disputed, because the culture is used to compliance. Procurement is recognised to add value and is respected in the expert advice it gives.
The department’s function is understood and is present in the leadership of the banks, helping set a clear vision. There is no reason why a CPO could not be CEO. It’s less likely in the shipping world.
Where I operate today, everyone must undertake and pass quarterly e-learning training on risk, ABC, banking regulations and various other company policies. There is no excuse for breaking the rules or claiming you weren’t aware of something. You are aware. If you breach something, or risk your company’s reputation, you’re out and if you do something illegal, you face the consequences.
“Technology is key to everything. Despite not hitting a moving target, it’s a faster pace in procurement, whilst having very, very tight controls”
Procurement in shipping remains far more transactional, less formal, less auditable and not as clear-cut regarding ownership. The function isn’t always involved in the budgeting process, and it should be. I believe there is generally a lower awareness of the basics of contract law, ABC, strategic tendering, SRM and contract management that the selling world can naturally take advantage of.
There are a few procurement champions out there and they tend to be on the MCIPS journey. I fear Shipping will lose them to other industries due to salary, progression opportunities and ultimately, frustration.
Shipping is accused of lagging behind the times, especially with procurement. Is that a fair assessment? How much catching up does it have to do?
When I started my career, our team wasn’t Procurement. It wasn’t even called Purchasing. It was called Supplies. It was ‘place order, chase order’. Twenty years later, I don’t think ‘procurement’ across the bulk of the shipping industry is much different in that respect. With few exceptions, many purchasing managers do the same job as the rest of the team that reports to them. They’re senior buyers, making the same decisions and taking the same approach as the person that sat in the chair before them. In terms of structure, many shipping companies view procurement as an admin or service function and give it no decision-making authority. If procurement has no authority and is not challenging everything around it, it’s still that supplies team from 20 years ago. So yes, it needs to catch up.
Start being honest. To Technical Managers, GMs and CEOs; assess your procurement team; look at its strengths and its flaws. What do you want it to look like? Do you know how it is actually performing? Do you want to be proud of it? Does it pose a risk to you? Does any other team pose a risk to you that touches the procurement process? Do you raise POs on receipt of invoices, way after services or goods have been provided? Can your processes easily be circumvented? Elevate and train your team, hire adaptable MCIPS professionals from other industries to shake it up and look after your procurement champions.
“Start being honest. To Technical Managers, GMs and CEOs; assess your procurement team; look at its strengths and its flaws”
IMPA is in the best position to influence and drive change. They should partner with the right people and raise the profile of what it means to be a procurement professional.
When we spoke before, you said that fraud and corruption were an issue in the industry. How much is really going and how much did you see in your shipping career?
On three occasions in my career I have been offered bribes. On another occasion, a supplier asked me during a tender bid to meet them at ‘an airport of my choice’ for an hour, days before the RFP submission deadline.
In every instance I reported these approaches to my employer in the right way. Just let that thought settle in. Am I the only person to have been approached in recent years? No. Has everyone approached rejected these advances? No. Have the old school, dark age ways been eradicated? Not at all.
And in-port? How many captains are over-interested in dealing with ship chandlers, or dealing in cash, when they should be concentrating on the safe handling of a multi-million-dollar asset and its cargo? People in the office do not like to offend influential, noisy captains and some things are tolerated, or not looked at closely enough.
People will take massive offence to my honesty here, but fraud and corruption are a real issue; the global cross-industry elephant in the room. If you let it continue, you’re part of the problem.
Is enough being done to prevent procurement fraud?
The Annual Fraud Indicator estimates that 4.76% of a company’s spend is lost to procurement fraud each year. If a CEO is reading this, a GM, or a technical manager, have a think about your own company and what that money would mean to you in the economic climate today. That’s investment, people, growth. That critical 4.76% off your spend is theft. Look at your org and your teams and ask yourself “Are we that good that we’re not exposed to this? Was my loss to procurement fraud in 2018 a total of zero?” I don’t think anyone in shipping could truly answer yes to those questions. Don’t tolerate it.
What can be done? It’s about everyone in the industry stepping up. In other industries, people are looking at methods to combat procurement fraud like social engineering and they’re looking at patterns and trends not only in the organisation, but even at the point of hiring potential candidates.
You need to question if they’ve ever been convicted of or lost a job as a result of procurement fraud. Has the SFO tried to take them down before? Dig into it. Ask around, even perform a negative news search.
The industry has MACN and TRACE, but they are not looking at the shoreside elements at all. Forensic Procurement Partnership (FPP) is.
The game-changer? FPP have set up an Amnesty Portal on http://www.forensicprocurement.com for suppliers, buyers or colleagues to report information across the industry on suspected procurement fraud activity. This is a first.
I would love people reading this, who may not like half of what I’ve said, to have something in this article at least resonate, so they don’t just turn a page. If you have had enough of double standards and unethical behaviours, use the Amnesty Portal and challenge the as-is in Shipping. Imagine being a supplier, that has lost out on a contract, because you do not operate in an unethical way. Business is tough enough as it is, on an even playing field. Why make it harder and why risk your company’s reputation?
Don’t rely on a generic annual all-company audit to tell you that you’re not exposed to procurement fraud; FPP can also offer training, a Procurement Healthcheck, or full forensic investigation.