Cybersecurity and the Supply Chain: Identifying and Mitigating Third-Party Risk

In this ten-part blog series, we will unroll how businesses can navigate through the cybersecurity challenges. The seventh segment in this series emphasises the importance of supply chain security.

Cybersecurity is the top priority for Digital business leaders in the evolving multi-facia threat landscape. To mitigate cybersecurity challenges, the focus often leans heavily on internal security measures, but an important link is neglected—the supply chain network.

In the globally interconnected economic structure, where businesses operate with a high dependency on various suppliers, sellers, and partners, a security breach at any link of the chain may have devastating effects on other connected businesses. This blog post will explore the importance of Supply Chain network security, evolving threats, and third-party risk mitigation strategies for Digital business leaders.

The Importance of Supply Chain Security

Supply Chain security is a practice to safeguard an organization’s entire supply chain network from cyberattacks. This includes end to end supply chain activities- Production, Storage, Transportation and distribution of a product or service from the raw materials stage to the end customer delivery.

Why is Supply Chain Security Important?

In today’s digital age, there are various reasons why supply chain security is critical for organization’s-

• Increased Reliance on Third-Party Vendors: Organizations rely more on third-party vendors to outsource critical business functions to achieve operational efficiency and flexibility. These may include all ranges of critical and non-critical business operations, from manufacturing to logistics. Although outsourcing offers diverse benefits, it adds to the system’s vulnerability to cyberattacks. If a third-party vendor is compromised, cybercriminals can access your systems and data through them.
• Evolving Cyber Threats: Cybercriminals are constantly developing new and sophisticated attack techniques. Supply chain networks are becoming a primary cyberattack target due to their hidden, unattended system vulnerabilities.
• Regulatory Compliance: Several Industries have adopted regulations that require businesses to implement security controls to ensure supply chain network protection. For example, the US Department of Defence mandates defense contractors to comply with the Cybersecurity Maturity Model Certification (CMMC) standards.

The Impact of a Supply Chain Cyber Attack

A supply chain vulnerability can lead to devastating impacts on a business; a few of the potential consequences are-

• Financial Losses: A supply attack can disrupt business operations, resulting in productivity and revenue loss. Businesses incur costs associated with investigation, legal fees, and remediation.
• Reputational Damage: A cyberattack can damage market reputation and erode consumer trust.
• Data Breaches: Risks from sensitive information exposure, such as Intellectual property or customer information.
• Operational Disruptions: A cyberattack can expose risks in the supply chain and affect the delivery of goods and services across the network.

Identifying Third-Party Risk

The first step to developing robust supply chain security is identifying third-party vulnerabilities. Here are some factors to consider while assessing third-party risks-

• The Security Posture of the Vendor: Assess the security controls the vendor has in place and how the vendor protects its own system and data.
• The Nature of Relationship: What type of data does the business share with the vendor, and what access do vendors have to the organisation’s system?
• The Vendor’s Industry: Some industries are more prone to cyberattack risks than others. Such as Financial Services– Banks, insurance companies, and investment firms are prime targets due to the high volume of sensitive financial data they handle; Government Agencies– at all levels often hold sensitive citizen data and may be targeted for espionage or disruption purposes; Healthcare– Hospitals, clinics, and health insurance providers store vast amounts of valuable personal and medical information, making them lucrative targets for cybercriminals; Retail-E-commerce platforms and retailers store large amounts of customer financial and personal data, making them targets for theft and fraud.
• The Vendor’s Track Record: Has the vendor been the victim of a cyberattack in the past?

Mitigating Third-Party Risk

Once the third-party vulnerabilities are identified, you can take suitable steps to mitigate the third-party risks; here are some best practices-

• Conduct a supply chain risk assessment: Understand the components of the supply chain, identify the vulnerabilities, priorities the cyber risks and evaluate the cyber security capability of your suppliers. Reassess these risks as a routine practice.
• Establish a formal C-SCRM program: To ensure a coordinated risk management network, create a standard binding document highlighting cybersecurity responsibilities, accountabilities, policies and procedures within your supply chain network.
• Work with your suppliers on improving security: Collaborate with the suppliers to strengthen the security measures. Provide training, share resources and standardise the security standards throughout the network.
• Strengthen your data management: To safeguard sensitive data, develop resilient network security, encryption, tokenisation, secure data backups, and control data exchange through managed file transfer platforms.
• Limit suppliers’ access to critical assets: Practise the principle of Least privilege, apply a zero-trust approach to restrict sensitive data and system access. Implement privileged access management (PAM) for further control.
• Monitor your suppliers’ activity: Track external users’ activities within your network to enable fast incident response and improve accountability. Develop instruments to record activities, facilitate searches, and generate reports.
• Develop an incident response plan: Create a detailed plan outlining standard procedures and roles to be followed in the event of a security incident. Include processes for threat detection, automated response, and assistance to the compromised systems and partners.

Market Trends and Key Statistics

• With the faster adoption of digital infrastructure, businesses are able to leverage the benefits of vast and diverse Global supply chains. In line with this, the global supply chain security market is expected to reach $ 1.5 billion by 2024. This growth is driven by increasing awareness of supply chain cyber threats, growing regulatory requirements and push for building resilient digital infrastructure. As per recent IBM research, 60% of businesses have experienced cyberattacks in the past year. The research also established that the average cost of a supply chain cyber attack is $ 4.2 million.
• These statistics highlight the importance of strengthening supply chain security for businesses in today’s digital age. A supply chain network is a key integral part of any business’s function, so supply chain security becomes a critical issue for businesses of all types and sizes across Industries. By following the best practices outlined in this blog post, you can help identify and mitigate supply chain risks and build resilience to cyberattacks.

Additional Considerations

• Industry-Specific Regulations: Stay updated on any Industry-specific regulations that are applicable to your business and its supply chain network. Ensure supply chain security practices are regularly evaluated and updated for regulatory changes.
• Cyber Insurance: Consider Cyber Insurance options to help offset the financial losses resulting from any potential supply chain cyber attack.
• Invest in Security Technologies: Upgrade cybersecurity tools and technologies that might help monitor and manage third-party risks, such as Security Information and Event Management (SIEM) systems and Vendor Risk Management (VRM) tools.