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Security Scorecard

How To Identify, Mitigate, And Prevent Supply Chain Risks

Posted on June 29th, 2022

As cyber attacks and security breaches have increased in recent years, managing digital supply chain risks is becoming more difficult. Cybercriminals exploit vulnerabilities in the ecosystem of less secure suppliers and third-party vendors to gain access to larger institutions. These institutions need to look beyond their own cybersecurity maturity to be successful; cyber risks need to be identified across the ecosystem.

In this article, we will analyze the top 4 cybersecurity risks faced by digital supply chains and provide practical tips to mitigate them.

What are the most common risks associated with the supply chain?

Digital supply chains face significant privacy and cyber security challenges, but they are not avoidable. Gaining familiarity with the primary types of risks is essential to creating an effective plan that avoids and minimizes their deleterious effects.

Here are four types of supply chain risk you need to be aware of:

Legal risks

Supply chains largely rely on contractual relationships. The process of purchasing, producing, selling, and shipping goods is sustained by legal agreements, and as such, supply chains are vulnerable to legal risks. From a cybersecurity perspective, the most significant legal risk businesses will face is the threat of a data breach. Working with third parties increases the risk of data mishandling or incorrect storage, which can put customers’ personal information in jeopardy. This leaves the business responsible for costly fines and legal fees.

Financial risks

Businesses can also experience financial risks, many of which are driven by suppliers’ financial instability or outright bankruptcy, but other factors can take a financial toll as well. Data breaches cost an average of $4.2 million when including the costs related to the disruption of business, investigations, and providing credit monitoring services to the affected customers. Ransomware attacks, which are designed to extort money from companies in exchange for restoring access to the company’s data which has been held for “ransom,” can also be costly, and may result in the loss or exposure of sensitive information.

Scheduling risks

While issues related to the statement of work (SOW) are common causes of scheduling risk, there are less-common issues that can also create delays. In today’s digital world, more of the physical objects around us are now part of the Internet of Things (IoT). But with the added benefits of controlling equipment and processes digitally come the added risk of failure if they are not properly secured. Exploited vulnerabilities of manufacturing or packaging equipment can shut down essential parts of a supply chain for extended periods of time.

Environmental risks

Businesses are being held accountable for their own environmental impact as well as the impact of their vendors and other third-party partners. Environment risks would include any potential negative impact on air, water, or soil from discharge or emissions.

Another concern within environmentally-driven supply chain risks is climate change and the unpredictable weather events that have come with it. Over time, climate change is expected to pose threats of exponential flooding and extreme weather patterns that will disrupt the flow of the supply chain — not to mention the quality and quantity of raw materials and manufacturing that are impacted by this as well.

While increasing the use of artificial intelligence, machine learning, cloud computing, and automation are essential for businesses looking to reduce their environmental impact, the expanded use of these technologies can open the door to additional cybersecurity vulnerabilities if not properly protected.

How to mitigate cybersecurity supply chain risks

Now that the types of risks have been outlined, the next step is to assess which cybersecurity risks apply to a business’s digital supply chain and create a plan to mitigate these risks going forward. Here are some steps and questions you can keep in mind to help analyze which cybersecurity risks present the most danger to your organization and determine how best to address them.

Identity, evaluate and address supplier risks

Mitigating risk starts by understanding the risks your suppliers face. Businesses must first identify which risks their existing suppliers are most likely to be affected by and how much damage the business could incur if those risks are exploited. Supporting existing supplier relationships should be priority number one before moving on to evaluating new partnerships. Do your current suppliers practice good digital hygiene? How is their customer data protected? What are some scenarios that could create disruption for your suppliers?

Designate a group of well-trained staff to focus on existing and evolving supply chain risks to be sure your business identifies and mitigates new threats. If you aren’t keeping up with the new risks, then who is?

Ensure supplier quality

Next, conduct a due diligence questionnaire to evaluate suppliers’ quality, including their digital maturity. What are the standards and practices for their cybersecurity policy? Who is responsible for managing their information security and privacy policy? Answering these important questions (and others) will prevent your business from discovering third-party risks in the future.

Diversify vendors

An additional layer of security can be provided by creating vendor diversity, especially for the most important elements of the business. If there is only one supplier who provides a particularly crucial resource, and they become inoperable due to a malware attack, does the company have a backup? Who else could reliably offer the same resource or service?

Consider vendor tiering

With vendor tiering, vendors are classified according to the level of security risk they present to an organization. The less critical the cybersecurity risk, the lower the tier. For each vendor, what would be the financial and time impact on the business if they were to become suddenly unable to provide their services? How high is the likelihood that they could experience severe delays or shutdowns? For which vendors is it most important to have backups in place?

Assess vendor risks routinely

Lastly, as risks do not remain consistent and unchanging over time, these evaluations should be continued on a regular, recurring basis to ensure that new risks are accurately captured before they have the potential to become problematic. Have new vendors been added? Has due diligence been performed to ensure that they have technical prevention measures in place, including firewalls, intrusion detection, and anti-virus software? Have all previously identified risks been assessed and plans created to mitigate them? Conducting routine vendor risk management assessments will help your business better identify, assess, and mitigate any vendor risks that otherwise could have gone unnoticed.

How SecurityScorecard can help prevent digital supply chain risks

Once you've established your organization's primary third-party risks, it's time to set up a vendor control system and an oversight process. And part of that oversight process must include a plan for ongoing third-party risk monitoring. While ongoing monitoring can be time-consuming and tedious, there are ways to automate and simplify the process.

By providing advanced security ratings, automated assessments, third-party risk management, and comprehensive third-party security ratings, SecurityScorecard helps businesses identify and track their digital supply chain vulnerabilities. SecurityScorecard makes it possible to continuously monitor all the organizations in the complex ecosystem across which businesses operate, helping organizations to mature their supply chain risk management programs quickly and efficiently. By reducing the workload associated with monitoring digital supply chain risks, you can ensure continuity of service and digital security without compromising the resources needed to accomplish primary business objectives.


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