Best Practices in Supply Chain Risk Management (SCRM)

By Phoebe Fasulo

Posted on Apr 8, 2020

In an interconnected IT ecosystem, vendor relationship complexity obfuscates cybersecurity risk. Just as your organization hires vendors, so do your vendors and their business partners. In a lot of ways, cybersecurity risk is a digital game of “Six Degrees of Kevin Bacon,” where you can connect your IT infrastructure to a distant vendor that you may not even realize somehow impacts your information security posture. While organizations need vendors to streamline business operations, they also need to secure their data ecosystems using best practices for supply chain risk management (SCRM).

Why is Supply Chain Risk Management (SCRM) important?

While your organization controls its own cybersecurity risk posture, you likely lack the ability to control your third-parties’ cybersecurity. Adding in their complex IT ecosystems, you can be connected to over 33,124 fourth parties whose information security places your organization at risk.

Supply chain risk management is the series of strategies and activities for continuously monitoring risk along the supply chain to reduce IT vulnerabilities and ensure business continuity. In cybersecurity, your SCRM strategy involves monitoring all vendors, including ones with whom you do not have a direct contract, to ensure all controls remain effective at all times.

Creating a best practice for SCRM requires continuous monitoring for both known and unknown risks which can become overwhelming.

Identify known risks

The first step to creating an effective SCRM program is to identify known risks. You need to think in terms of both downstream and upstream supply chain risks, meaning that you want to identify:

  • Vendors
  • Customers
  • Systems, networks, and software that they access
  • Where they access your IT ecosystem
  • What sensitive information they access or transmit

Identifying risks across the supply chain is similar to the way you start your organization’s general risk assessment. However, since you have less control over the way your vendors and customers manage their IT, you may feel confident identifying the risks but not mitigating them.

Establish a SCRM framework

In the same way that you determine your own risk tolerance, you need to set one for accepting, transferring, mitigating, or refusing supply chain risks. In doing this, you start with your known risks and determine how you want to manage them. Some considerations include:

  • Determining critical vendors and customers
  • Analyzing the impact that their data breach would have on your security posture
  • Prioritize SCRM strategies for the vendors and customers who are highest risk
  • Determine whether any single points of failure exist

Starting with the security issues that you can control helps you better govern your information security program. You may not be able to control upstream and downstream supply chain members’ security, but you can decide whether to accept, reject, mitigate, or transfer those risks to protect your data.

Monitor risk

Monitoring risk across an extensive supply chain can be overwhelming. Building upon your SCRM framework, you should prioritize and focus on the supply stream members who pose the highest data security risk.

Once you establish these high risk supply stream partners, you may want to think about monitoring security controls such as:

  • Patching cadence: how often they install their security patches?
  • Network security: how well they manage firewalls, cloud configurations, and databases?
  • Endpoint security: how secure are the laptops, desktops, mobile devices, and employee devices accessing the network?
  • Web application security: how are they protecting from web attacks such as cross-site scripting or SQL attacks?

With the right automated tools, organizations can gain insight into their critical or high-risk supply chain partners’ security controls. Applying this up or down the supply chain, you can determine from these connected partners’ security the potential risks arising from their vendors or customers.

Create a risk-aware culture for managing unknown risk

Managing unknown risks within the supply chain can be the most difficult part of SCRM. You can’t verify what you don’t know. However, building a strong defense is still the best offense. Creating a risk-aware culture means removing communication silos within your organization.

Some strategies for creating a risk-aware culture to mitigate unknown risks include:

  • Training employees: make sure that everyone in the organization understands the impact of cybersecurity risk across the ecosystem
  • Clear communications: define and communicate the organization’s risk tolerance from the top down to ensure that stakeholders make informed decisions when working with vendors and customers
  • Agility: rapidly respond to new risks and empower stakeholders to mitigate them effectively

Creating a culture of risk-awareness prevents some of the unknown risks that organizations face. For example, users adopting applications outside of the traditional IT platform, such as a collaborative or chat application, adds another vendor and increases your supply chain risks through shadow IT. By establishing a culture of risk-awareness, you limit this unknown risk.

Similarly, you can incorporate risk-awareness as part of your vendor due diligence process. Working with vendors who also embrace a risk-aware culture can create a risk-aware supply chain that helps mitigate unknown risks.

Establish governance with internal reporting and communication

The final step to creating a robust SCRM program requires opening the lines of communication across the organization. A cross-functional risk and governance board further embeds the risk-aware culture throughout the company. Through communication, organizations can gain better visibility into the different departmental technology adoptions and needs that impact their ecosystem.

Some stakeholders to consider include:

  • Line of business managers
  • Risk and compliance function
  • Audit function
  • IT department
  • Procurement
  • Sales

Although procurement or sales may not seem directly related to risk, including them on the risk board can help promote an overarching culture of risk-awareness. On a day-to-day basis, they interact more intimately with different supply chain members, including upstream customers. By incorporating them into the team, the whole organization takes a risk-based approach to mitigating supply chain risk.

SecurityScorecard enables SCRM with continuous monitoring

SecurityScorecard’s security ratings platform enables efficient SCRM by enabling organizations to create supply stream profiles that provide visibility across ten groups of risk factors, including DNS health, network security, IP reputation, endpoint security, web application security, hacker chatter, leaked credentials, and social engineering.

To enable a risk-aware culture and stakeholder communication, our easy-to-read A-F rating system provides a high-level view of your security and your supply chain’s security posture. By bridging the gap between technical and non-technical stakeholders, you can use the ratings to give at-a-glance visibility into a variety of supply chain risks for greater insight into potential threats.

SCRM increasingly becomes a primary initiative as data breaches impact more aspects of the organization’s risk mitigation strategy. To ensure information security, organizations need to start continuously monitoring their interconnected IT ecosystem and establish the necessary documentation to prove their due diligence efforts.

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