Safeguarding the supply chain is a critical endeavor. But it is one that is growing in complexity. As the systems and processes used to drive a business become more connected, it is increasingly challenging for supply chain managers to ensure end-to-end protection.
Cybersecurity has quickly become a priority for all organizations - even federal government agencies. And with good reason. The risk of data breaches and other digital disruptions threatens the production, profitability and intelligence of a company. The possible ramifications that can be incurred from operating on unsecured platforms and networks are serious, which is why preventative measures must be taken along all points of the supply chain.
Supply chain risk management is an ongoing necessity that needs continuous updating. Efforts to combat cyber risks must adapt in tandem with the rapid pace at which they are evolving and becoming more sophisticated. It is safe to assume that there will never be a day when an organization can be sure there is absolutely no possibility of a disruption. However, there are specific steps and strategies to implement that can greatly reduce the chances of disasters occurring.
Understanding the depth of security threats
When trying to ramp up cybersecurity initiatives, it's important for supply chain leaders to look beyond their immediate operations. In a blog post for BitSight, Melissa Stevens recently pointed out that it would be beneficial for business managers to consider the ways in which all tiers of the production line can contribute to its overall vulnerability. For example, for organizations that assemble products in their facilities, it would be wise to consider what processes outsourced suppliers use to manufacture the necessary pieces and parts.
Another point Stevens touched on is the importance of addressing the security obligations of vendors in their contracts. The digital landscape of supply chain management has provided organizations access to more potential suppliers and partnerships. And while cloud-based systems can help businesses enhance visibility and connectivity between themselves and third-party contractors, it also makes them more susceptible to cyber threats.
Evaluating contractual agreements
Exploring this topic further, CIO Contributor Stephanie Overby recently interviewed Paul Roy and Lei Shen, partner and senior associate, respectively, of Mayer Brown, a global law firm well-versed in cybersecurity and data protection.
Roy explained that, even if the vendor is responsible for a IT-related disruption or failure, it is the customer that ultimately pays the price of damages. And this is why it is crucial that companies that outsource a contract set forth clear guidelines on the requirements for both legal and technical compliance. Essential protection measures that should be contained in the contractual agreements include ensuring the vendor will be held responsible for breach-related costs and fines, as well as those for remediation and notification.
In addition, Roy highlighted some of the most important contractual provisions that can help combat the risk of cloud vendors, which are:
- Supplier security requirements
- Subcontracting restrictions
- Worker-related safeguards (training, screening, etc.)
- Security assessments and audits
- Investigation and reporting of security incidents
- Data restrictions and accessibility
To increase efficiency and reduce costs, many supply chains are outsourcing IT operations to third-party vendors. However, as the supplier network grows, it can also become more permeable. It would be in the best interest of organizations to extend their cybersecurity efforts beyond the contractual level.
On top of ensuring vendors will be liable for any data breaches or digital disruptions, businesses are encouraged to regularly monitor suppliers to maintain effective risk management operations.
"Customer data and systems are only as secure as the weakest link in the vendor ecosystem," Paul Roy said, according to Overby. "The risks for customers are twofold: Not only does the customer increase its risk of a data breach, it also increases the risk that it will be in breach of its regulatory or contractual obligations if its vendors fail to comply with such obligations."
The cybersecurity expert also added that as these threats become a growing concern, regulations will likely continue to evolve. And, therefore, it is imperative that organizations stay up to date on any adjustments or changes that occur and ensure both their own supply chains and those of their outsourced vendors are maintaining compliance.