Cyberattacks are consistently among the top risks that concern global executives. Hackers commonly exploit the interconnectedness of companies and their suppliers to gain access to enterprise IT systems. To defend themselves, companies need to ensure cybersecurity throughout their supply network.
The ripple effect: how cyber incidents impact businesses
According to the World Economic Forum’s Global Cybersecurity Outlook 2024, “54% of organizations fail to understand cyber vulnerability in their supply chain sufficiently – and it shows.” Less than half of the WEF’s survey participants say their supply chain partners have requested proof of cybersecurity.
Companies that do not take cyber risk seriously often end up paying a high price. According to a 2023 IBM survey of more than 550 global organizations that had experienced a data breach, the average cost was $4.45 million. The costs and consequences of cyber incidents include:
Financial losses from compromised data and operational disruptions.
- Direct costs involve detection, data recovery and, in some cases, payment of ransom.
- Indirect costs include impacts to business or higher insurance premiums.
- Long-term implications affect revenue, profitability and market competitiveness.
Legal and compliance issues from violations of data privacy regulations.
- Sensitive information within supply chains can be exposed or stolen. Threat actors might steal the data or passwords of a company’s customers, for instance.
- Data protection and privacy violations could be prosecuted. Under the EU’s General Data Protection Regulation (GDPR), fines run up to €20 million or 4% of a company’s global revenue.
Reputational damage from loss of partners’ and customers’ trust.
- Cyber incidents erode trust and brand equity. Customers may feel the company does not value their security.
- Businesses doubt their partners’ competence and governance. Cyber incidents indicate negligence.
- Restoring operations can take significant time. Companies may experience negative media when systems are down.
A recent example illustrates the cyber threat arising from supplier networks. In June 2023, the ransomware gang CL0P exploited the security vulnerability of MOVEit Transfer, a provider of file-sharing solutions. In the following months, the data of at least 2,500 companies and 67 million individuals was compromised or stolen.
The importance of safeguarding your supply chain
In recent years, ransomware has been among the top global cyber threats that target software supply chains, according to the U.S. Cybersecurity & Infrastructure Security Agency. Ransomware is a type of malware (malicious software) that blocks access to data. The attackers then demand money to restore services.
Managing cyber risk in the supply chain begins with identifying where risks exist. This includes determining whether your suppliers have sufficient security technology and policies in place. Further steps include proactive measures to mitigate risk:
- Secure your own infrastructure through technology such as firewalls. Many IT specialists rely on the ISO/IEC 27001 standard, which details the requirements that information security management systems must meet.
- Require specific security measures in supplier contracts. Verify suppliers’ cybersecurity systems and certificates through assessments or audits.
- Continually monitor your supply base for data breaches or cyber incidents. Uncover hidden vulnerabilities by gaining visibility across the sub-tiers.
Data breaches can be enabled through an outdated software version, insufficient resources or lack of awareness on the part of employees. Phishing, for example, relies on imposter emails that fool users into revealing sensitive data. In any case, it is critical to have ongoing monitoring that notifies you of incidents in your supply chain as quickly as possible.
An escalating threat landscape for supply chains
Unfortunately, cyber risks are evolving at lightning pace. In addition to securing their infrastructure, companies need to fortify their cybersecurity processes through awareness and training. The most advanced firewalls or antivirus software are not sufficient if staff members do not follow data protection policies.
Similarly, a supplier handling data on behalf of the buying organization could make a mistake that leads to a cyber-related issue with downstream customer data. Under data protection laws, liability could extend to the enterprise if it did not ensure that the supplier had appropriate security.
Professionals in procurement and supply chain management also need insight into the potential effects that cyber incidents can have. This enables them to get ahead of cyber risk and to be aware of related financial or reputational issues that could arise. They can react faster to minimize disruptions.
Building resilience: strategies for mitigating cyber risks
With Sphera’s comprehensive suite of supply chain risk management solutions, you gain instant risk evaluation of your suppliers. This enables you to proactively set the right risk management priorities and take the correct actions to prevent damage from cyberattacks.
- Risk Intelligence performs real-time media monitoring of billions of articles monthly, so you have immediate insight into the risk exposure of your supply chain dependencies. This information is automatically displayed in risk scorecards.
- Supply Chain Risk Assessment uncovers vulnerabilities and hidden risks in your supply network. Through automated surveys, you get firsthand knowledge of suppliers’ cybersecurity.
- Impact Analyzer assesses the criticality of your supply base at the category level, so you understand the impact of cyberattacks on your most important suppliers.
As cyber threats continue to evolve, ongoing vigilance is needed. In Sphera’s Supply Chain Risk Report 2024, cyber threats are among the top five risks. Our Risk Intelligence data indicated a 62% increase in cyber-related supply chain issues over 2022.
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