Cyberattacks against global supply chains can cause irreparable damage to an organization’s operational, financial and reputation. These incidents can occur even if your organization applies proper cyber security practices. Instead of attacking your organization directly, these cybercriminals exploit vulnerable vendors or suppliers in your organization’s supply chain to wreak havoc on key operations and jeopardize important data. Understanding your cyber risks in the supply chain is of utmost importance.
The cyber risk in the supply chain has increased dramatically in the last decade, as the internet has become a necessary part of various businesses. In addition, third-party hacking can be costly, increasing the average cost of a data breach by $ 207,411. Nevertheless, research shows that this risk is largely overlooked.
While it is not possible to completely eliminate the risk in the supply chain, there are several steps your organization can take to reduce your supply chain exposure. Read the following guide to understand the factors that increase your organization’s risk to the supply chain, how you can reduce them, and what to do if your supply chain is compromised.
Where does Supply Chain risk come from?
Risks in the supply chain can arise from a variety of parties and methods within your organization, such as:
- Third party services or providers with access to information systems
- Poor information security among suppliers
- Compromised organizational software or hardware
- Security vulnerabilities for software in supply chain management or third-party vendors
- Insufficient third-party data storage measures
Each organization has at least two levels of suppliers. This includes directly contracted suppliers (Tier 1) and the companies that supply them (Tier 2). Very few organizations review the risk to their Tier 2 suppliers, making them vulnerable to cyberattacks in the supply chain.
What’s worse, the supply chain risk can increase dramatically a few months after the suppliers’ contract terms and can only continue to increase under these contracts if such Tier 2 suppliers are not properly investigated for potential cyber exposure problems.
What factors increase cyber risks in the supply chain?
A wide range of factors have the potential to increase your organization’s risks in the supply chain, including:
- Complacency or inability of your organization or its suppliers to monitor and assess cyber risk
- Any changes in your organization’s cyber risk tolerance
- The increasing severity and frequency of cyber attacks
- The increasing sophistication and boldness of cybercriminals
In the event of a cyber attack in the supply chain, cybercriminals can try to overwhelm your organization’s networks and servers to disrupt normal business activities. They may also try to copy, rearrange or destroy important business data. Whatever the intent, a cyberattack on your organization’s supply chain can be costly and time consuming.
Understand your exposure to the supply chain
There are several ways in which your organization can review its cyber exposure for the supply chain. Consider the following best practices:
- Create a vendor inventory of all third parties and consultants with access to your organization’s IT network or sensitive data.
- Use a cross-functional, legal, compliance and integrity team to help your organization assess the supply chain risk.
- Communicate with your organization’s providers about their specific cyber risks and what measures they have taken to reduce those exposures.
- Review the cybersecurity policies and procedures that exist within your organization and its suppliers for effectiveness.
- Assess your organization’s physical and online processes to identify potential cybersecurity gaps.
- Identify critical systems, networks and information within your organization to better understand how this data may be compromised and what measures are required to protect such data.
Reduce cyber risks in the supply chain
Fortunately, there are some steps your organization can take to reduce its cyber risk in the supply chain. Be sure to implement these precautions:
- Include management of cyber risk in supplier contracts. This may include requiring suppliers to obtain cyber insurance, let them notify your organization after a cyber incident, and set clear expectations for the destruction of data after the termination of your contracts.
- Minimize third-party access to your organization’s data. Once a provider or vendor has been selected, work with them to address vulnerabilities and cybersecurity vulnerabilities.
- Monitor suppliers’ compliance with risk management procedures in the supply chain. Consider adopting a “strike and you’re out” policy with providers who experience cyber incidents or who do not meet compliance guidelines.
How to react to a compromised supply chain
In the event that your organization’s supply chain is compromised or exploited by cybercriminals, follow these steps to mitigate the damage and prevent future incidents:
- Mute first. This may include fixing or upgrading software systems, disabling Internet access, or moving applications behind firewalls.
- Contact your insurer immediately. Be sure to contact your insurer as soon as the incident occurs. Give them as much information as possible to get the claim process started.
- Hire legal advice. Consult your organization’s trusted lawyers for further guidance on how to adopt an appropriate response to the incident – for example, whether to contact law enforcement agencies or inform stakeholders.
- Hire forensic expertise. Have forensic experts work with your organization to investigate the incident. These experts can help identify the perpetrators, identify potential cyber-security loopholes that led to the incident and provide tips to prevent similar problems in the supply chain in the future.
Are you worried about your company’s cyber risk? We are here to help.
If you want additional information and resources, we are here to help you analyze your needs and make the right coverage coverage to protect your business from unnecessary risks. You can download a free copy of our e-book, or if you are ready make Cyber Liability Insurance part of your insurance portfolio, Request a suggestion or download and get started with our Cyber & Data Breach Insurance Application and we’ll get you started.