Navigating Vendor Vulnerabilities
Proactive Steps for Cyber Resilience
In today’s hyper-connected world, organizations rely on third-party vendors to power their operations. This seamless integration, while essential, also opens doors for cybercriminals to exploit vulnerabilities within these external partnerships.
Recent high-profile third-party outages have shown how quickly a single breach can ripple through and disrupt countless businesses. By taking a proactive stance on third-party risk management, you can protect your brand reputation, customer trust, and bottom line.
What is a Third-Party Vendor Breach?
A third party data breach is when a vendor or a supplier’s system has been compromised and the bad actor has used or compromised the data that belongs to you. A third party can be defined as an organization with which your organization has entered a business relationship to provide goods, access, or services for your use.
Risk Control:
The first step to building resilience is effective risk control, which involves identifying potential threats, and mitigating or eliminating them. When partnering with a third-party vendor, consider the following:
Implement Contracts:
Establish a contract or Service Level Agreement (SLA) with the vendor. An SLA outlines the services provided and the standards the vendor must meet. Ensure the SLA includes details on security controls and data protection. Additionally, verify that the vendor has adequate cyber insurance and consult a legal advisor specializing in data protection to review the contract.
Right to Audit:
Before finalizing an agreement, review any prior audits, such as SOC 2, ISO 27001, or CMMC certifications. These audits confirm that an independent third party has assessed the vendor’s security controls and adherence to established security frameworks.
Risk Mitigation:
Develop a Business Continuity Plan (BCP) or Incident Response Plan (IRP) to outline how your organization will resume operations during and after disruptions, such as cyberattacks. These plans are essential for minimizing downtime and quickly restoring business functions.
Failover Plan
If your key systems go down, do you have a backup plan? If a third-party vendor that you heavily rely on goes down, do you have a plan in place to continue operations without them? Ensure you have a backup plan for key systems and a strategy to maintain operations if a critical third-party vendor fails. A failover plan is vital in such scenarios.
Diversify Supply Chain Partners
Reduce risk by diversifying your supply chain partners. Identify potential single points of failure (SPOFs) and establish contingency plans for each. Preparing in advance can make the difference in maintaining smooth operations after a cyber event.
Risk Transfer:
Enhance your cyber resilience by transferring financial risk through a comprehensive cyber insurance policy. This policy provides financial protection in the event of a cyber incident affecting either your organization or a vendor. Here are a few essential components to look for in a cyber insurance policy to ensure comprehensive protection:
System Failure – Covers unintentional or unplanned outages on your network, whether caused by human or system errors.
- Contingent System Failure – Similar to System Failure but covers outages on your third-party vendor’s network.
Business Interruption – Provides coverage for income loss following a privacy or security breach.
- Contingent Business Interruption (or Dependent Business Interruption) – Covers financial losses due to disruptions in your third-party vendor’s operations, including lost income and additional expenses.
Key Takeaways
Working with third-party vendors is essential in today’s interconnected world. Be diligent in choosing vendors by proactively reviewing contracts and ensuring they have strong cybersecurity measures and proper cyber insurance. Have a plan, such as an Incident Response Plan or Failover, to quickly recover from cyber incidents. Lastly, protect yourself financially with a cyber insurance policy, which provides a dedicated team to assist with claims during cyber events.
Contact your M3 client executive to discuss your current protection for your organization and to learn more about cybersecurity risk management.
