The digital supply chain – an evolving extension of a company’s supply chain improves its ability to manage risks. However, the supply chain’s digital aspect introduces a new dimension of risks that need to be dealt with. 2020 revealed that the supply chain’s digital health is just as important as its physical health.
The chaos of 2020 has underlined the necessity of completely digitizing global supply chain operations. Many companies reacted to the pandemic’s supply chain disruptions by adopting Supply Chain 4.0 – the digital supply chain. The increasing connectivity and data sharing across supply chain entities via the widespread use of networks and sensors prepare supply chains to resist future disruptions.
Even though the digital supply chain was a welcome solution to 2020’s challenges, the rapidly growing connectivity also creates increased cyber risks. These risks arise because increasing interconnection creates an expanding attack surface and vulnerabilities that threat actors can exploit. As a result, it is no longer enough for companies to tend to their own cyber security maturity – they need to continuously and proactively monitor the cyber hygiene of their supply chain partners as well.
Increasing Digital Interconnectivity Risks
There are multiple ways that a digital supply chain increases risk.
- Exposure of proprietary data like trade secrets, intellectual property, government-owned information and other confidential business information about an organization or their partner’s operations.
- Exposure of sensitive personal data like personally identifiable information of customers and the employees.
- Spillover cyber incidents, wherein a cyber-attack against a supply chain partner can affect the company’s operational technology or interconnected information technology networks
- Cyber shutdown of a supplier, when a malware or ransomware incident suddenly overthrows a key vendor, creating a missing link in the supply chain
Any of these risks could result in costly fines and legal fees, lost revenue, and long-term reputational damage. As per IBM’s Cost of a Data Breach Report 2020, the cost of a data breach averages around $3.8 million in the U.S. And, the current large-scale remote work environment heightens these risks.
Mitigating Supply Chain Cyber Risks
Cybersecurity and data privacy challenges for the digital supply chain are substantial but not unassailable. Organizations can strengthen their resiliency to these risks with the following strategies:
- Identify – Organizations should begin by asking the essential questions like what data needs to be protected, who can access the data across the supply chain. A robust data governance program can make this process easier. If an organization has an outdated data governance program, they can create one by interviewing internal stakeholders and reviewing contracts to identify data flows.
- Analyze – After assessing who has access to sensitive data across the supply chain, companies need to shift the focus to their cybersecurity posture. Organizations can achieve this by leveraging external tools that discreetly analyze cybersecurity risk exposure from public sources like suppliers’ websites and other resources. An “inside-out” approach can also be used where they engage suppliers with a cybersecurity assessment questionnaire. Finally, penetration testing or in-person assessments can be used for the most critical suppliers to obtain clarity regarding cyber risk.
- Remediate – In this step, it is important to prioritize the gaps that need to be dealt with. Where control is not implemented, there is a gap, but every control gap is not an equal risk; therefore, organizations can prioritize the supplier against the level of sensitivity related to data or access being shared.
- Monitor – After the remediation plan has been established, it is crucial to regularly monitor to ensure the supplier delivers on its promises. Regular updates on the progress of a mutually agreeable schedule are necessary. Moreover, while monitoring, constant communication with all suppliers on cybersecurity is necessary. A low-risk supplier can swiftly become high risk when organizational needs change or if there is a shift in the cybersecurity environment.
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