The Weakest Link: Managing Supply Chain Risk

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Cybersecurity Fundamentals, Third Party Risk

Risk Level

In the interconnected web of modern business ecosystems, supply chain risks have emerged as insidious threats, leaving even the most vigilant organizations vulnerable to devastating cyber breaches.

In today's hyper-connected global economy, organizations rely on complex networks of suppliers, vendors, and service providers to remain competitive and agile. While these connections bring numerous benefits, they also expose organizations to a unique set of cybersecurity risks – supply chain attacks. This blog post will explore the evolving threat landscape of supply chain attacks, highlighting recent statistics and offering practical recommendations for organizations looking to strengthen their cybersecurity posture.

What are supply chain attacks?

A supply chain attack, also known as a third-party or value-chain attack, occurs when a cybercriminal exploits vulnerabilities in a vendor, supplier, or service provider's systems to infiltrate a target organization's network and potentially exfiltrate sensitive information. These attacks can take various forms, such as compromising software updates, exploiting hardware vulnerabilities, or stealing third-party credentials.

The frequency and severity of supply chain attacks have increased significantly in recent years, plaguing even the most robust cybersecurity programs as evidenced by the following statistics.

1. According to a report by Sonatype, the average growth rate of Supply Chain Attacks year-over-year since 2019 was 742%,  showcasing an incredible increase in supply chain-based attacks in recent years (Source: Sonatype)

2. The 2020 SolarWinds attack, one of the most high-profile supply chain attacks in history, affected over 18,000 organizations, including government agencies and Fortune 500 companies (Source: United States Securities and Exchange Commission)

3. A study by the Ponemon Institute revealed that 59% of organizations have experienced a data breach caused by a third-party vendor or supplier (Source: Ponemon Institute & RiskRecon)

4. According to the same study, only 34% of organizations are confident their suppliers would notify them of a breach of their sensitive information (Source: Ponemon Institute & RiskRecon)

These statistics underscore the critical importance of addressing supply chain cybersecurity risks and implementing robust protective measures.

Why does it seem like supply chain attacks are increasing?

Supply chain attacks are not new, in fact some of the earliest cybersecurity attacks relied upon supply chain attacks to breach Government and businesses alike. However, the number of occurrences, the scope of victims, and the profile of attacks have all increased dramatically in the last 5 years, primarily due to the increased reliance of organizations on the use of third-party services and vendors to more cost effectively address business needs. Beyond greater reliance on third-parties and supply chains, there are several factors that contribute to the increasing prevalence and impact of supply chain attacks:

1. Complexity: Modern supply chains are vast and interconnected, making it difficult to identify and mitigate all potential vulnerabilities. Attackers take advantage of this fact, banking on organizations not detecting or mitigating until it’s too late.

2. Reliance on third-party software: Organizations are relying more and more on third-party software, which can introduce vulnerabilities if not properly vetted and monitored.

3. Limited visibility: Organizations still have limited visibility into the security practices of their supply chain partners, making it difficult to assess and address risks, but this has not prevented organizations from engaging more and more partners to achieve their business missions.

4. Target attractiveness: Cybercriminals are attracted to supply chain attacks because they offer a way to compromise multiple organizations through a single point of entry.

What are some strategies for mitigating supply chain risks?

❯      To effectively mitigate the risks associated with supply chain attacks, organizations must adopt a proactive and multi-faceted approach.

Conduct comprehensive risk assessments:

Assess the cybersecurity posture of all third-party vendors, suppliers, and service providers in your supply chain. Consider factors such as their track record, security certifications (SOC2, ISO 27001, PCI-DSS, etc.), and incident response capabilities. Regularly review and update risk assessments to account for changes in the threat landscape. Remember that you can outsource operations but you can’t outsource risk. From the perspective of the people whose data you handle, third parties are expected to have equivalent or better security than your own.

Implement strong vendor management processes

Establish clear guidelines and expectations for third parties including requirements for security controls, data protection measures, and reporting procedures. Include contractual language that outline these expectations and the consequences for non-compliance. You may need to run these by legal counsel for approval and to make sure you’re not introducing any legal risk.

To further enhance vendor management processes, consider the following steps:

1. Due diligence: Thoroughly vet potential vendors and suppliers by evaluating their security posture, certifications, incident response capabilities, and reputation. This process should also involve examining their past performance and obtaining references from other organizations that have worked with them.

2. Risk-based vendor classification: Categorize vendors based on the level of risk they pose to your organization. Higher-risk vendors should be subject to more stringent security requirements and monitoring, or isolated from your high risk data. This approach enables organizations to focus resources on managing the vendors that pose the greatest potential threat.

3. Security training and awareness: Encourage vendors to participate in security training programs or provide them with resources to improve their cybersecurity knowledge. This will help ensure that they understand the importance of adhering to security best practices and are better equipped to prevent and respond to potential threats.

By implementing a comprehensive vendor management process, organizations can reduce the risk of supply chain attacks and foster a culture of shared responsibility and collaboration in cybersecurity efforts.

Foster transparency and collaboration

Continuous communication is key. Maintain open lines of communication with your vendors to stay updated on any changes in their security posture, potential vulnerabilities, or breaches. Regularly share information about evolving threats, best practices, and industry standards to ensure both parties remain aligned on cybersecurity priorities.

Monitor and audit third-party compliance

Regularly (especially prior to onboarding) review and audit third-party security practices to ensure they adhere to established standards and promptly address any identified vulnerabilities. Developing a systematic approach to monitoring and auditing can help maintain robust security across your supply chain:

1. Establish key performance indicators (KPIs): Identify specific KPIs to measure the effectiveness of your vendors' security controls and their compliance with your organization's requirements. Examples of KPIs include the frequency of security incidents, time to respond to incidents, and the number of vulnerabilities identified and remediated.

2. Conduct regular audits: Prior to onboarding and periodically thereafter, perform audits of your vendors' security practices, including on-site visits, remote assessments, or assessments by third-parties. These audits should verify that vendors are meeting contractual obligations and adhering to industry best practices and regulations.

3. Use automated monitoring tools: Leverage automated tools and platforms to continuously monitor your vendors' security posture. These tools can help identify potential vulnerabilities, assess compliance with security policies, and track changes in the vendor's risk profile.

4. Incorporate incident reporting and response: Establish clear incident reporting procedures for vendors and define the required actions to be taken in case of a security breach. Regularly test these procedures to ensure timely and effective response in the event of an actual incident.

5. Encourage transparency and accountability: Foster an environment of openness and trust with your vendors by sharing information about potential risks and areas of improvement. Encourage them to be forthcoming with any security issues, concerns or incidents, and work together to address them proactively.

By actively monitoring and auditing third-party compliance, organizations can maintain greater visibility into the security practices of their supply chain partners, allowing for quicker identification and remediation of potential risks before they result in a breach.

Deploy a defense-in-depth strategy

Implement multiple layers of security controls to minimize the potential impact of a compromised supply chain partner. This may include network segmentation, strong access controls, and continuous monitoring and threat detection. Additionally, consider implementing solutions like zero trust architecture, which assumes that all users, devices, and network traffic are inherently untrusted and requires continuous verification for access to resources. By incorporating defense-in-depth, organizations can create a robust security posture that helps to protect against potential breaches, even if a supply chain partner is compromised.

Embrace third-party and open-source library vulnerability management

Open-source and third-party libraries play a crucial role in the development of modern applications, but they can also introduce security risks if not properly managed. To effectively address these risks, establish a thorough vulnerability management process for third-party components. This includes maintaining an up-to-date inventory of all external libraries used within your organization, regularly scanning for known vulnerabilities using Software Composition Analysis (SCA) and Static Application Security Testing (SAST) tools, tracking vulnerabilities identified, communicating with vendors or open-source maintainers about vulnerabilities affecting their codebases, and applying timely patches and updates when made available by those maintainers.

Additionally, establish a robust open-source usage policy that outlines guidelines for selecting, integrating, and maintaining open-source components in your applications. By proactively managing the security of third-party and open-source libraries, organizations can significantly reduce the attack surface and mitigate potential supply chain risks. The same standard and practices should be communicated to vendors whose components use open-source and third party components.

What else can we do to protect ourselves?

If you’re still not sure how you can strengthen your organization’s supply chain risk management, it may be best to consult specialists that can objectively assess, make recommendations to improve, and help you implement improvements to your supply chain risk management processes. The expert team at Hive Systems has extensive experience assessing, designing, and implementing supply chain and third-party risk management processes for organizations big and small. Hive Systems can help you establish a third-party risk management program including due diligence processes, or execute such programs and assessments of vendors in a managed security role. In any case, Hive can help!

If you think Hive Systems can help you achieve your goals in reducing supply chain risk to your organization, contact us today!

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