It is well known that technology is evolving faster than ever before, and so are tech-related threats. This means that supply chain or vendor compliance and risks have taken on a new meaning in today’s digital world. Cybersecurity and data breach mitigation isn’t what comes to mind when you think about traditional supply chain risk management.
Historically, supply chain risk management revolved around things like strategy, market reality, and performance risks. As a business owner, due diligence is a must to ensure your supply chain is compliant with data protection regulations.
Even if your business ensures compliance with industry regulations, your business will be held accountable for data breaches arising from non-compliant vendors within your supply chain. With that being said, vendors with security vulnerabilities increase your business’s compliance risks.
- Healthcare Portability and Availability Act (HIPAA): If you fail to enter into a business associate agreement that covers the way third parties (your vendors or partners) manage personal health information (PHI) or electronic PHI (ePHI), you will be fined for both entities.
- General Data Protection Regulation (GDPR): GDPR’s 72-hour breach notification requirement applies to both data controllers (your business) and data processors (your supply chain). In other words, you are responsible for notifying your customers even if it is your vendor that has suffered a data breach. Failing to do so will make your business liable to pay penalties.
“It takes years to build your business’ reputation, but just one unfortunate moment to ruin it all”
Below, we are going to dive into more specifics in how your supply chain can add to your compliance risks, the types of challenges you may face while rectifying supply chain risks, and how you can start to ensure compliance within your supply chain immediately.
Compliance Risks To Watch Out For
To ensure your business and your supply chain are compliant, a regulatory agency will evaluate and determine if enough has been done to protect the data from falling into the hands of nefarious insiders or cybercriminals.
Below are the most common reasons why your supply chain could be declared non-compliant with data protection mandates:
- Compromised software or hardware that has been acquired from suppliers
- Data security breaches or hacks within the supply chain that exposes the protected data of your clients
- Poor information security practices or controls followed/implemented by your suppliers
- Existence of software security vulnerabilities in the supplier systems
- Potential threats from third-party data storage or data aggregators
- Usage of counterfeit hardware or hardware with embedded malware
Challenges With Supply Chain Compliance Management
Constantly monitoring your third-party vendors and business partners for potential instances of non-compliance is no small task. Below are the 4 common challenges you need to be prepared to deal with:
- Cybersecurity Monitoring: Monitoring your own cybersecurity posture can be daunting; ensuring your supply chain’s cybersecurity posture is as up-to-date as your own can be extremely challenging since a one-time review will not suffice. Data-Tech can take cybersecurity monitoring off your plate and assist with supply chain risk management.
- Patch Management: All it takes is the compromise of a single device in your vendor’s network to put sensitive data at risk. Ensuring your vendors follow a strict patch management program can be quite a task. Patch Management can easily fall by the wayside. The longer your vendor takes to update the latest patch, the more vulnerable you become.
- Password Hygiene: Human Error tends to be the cause of data breaches more often than technical failure. Let’s be honest, not a single employee is happy when they see a notification that their password needs to be changed. They probably see it as another annoying task that just gets in the way of their important work. Even so, it is imperative that each employee understands the importance of password hygiene because even a single employee that violates your vendor’s strict password policies could compromise the integrity of all the data.
- Employee Training: No matter how in-depth, one single training that is conducted as part of onboarding new employees does not suffice. Despite being given sufficient training, employees still tend to fall prey to cyberthreats such as phishing attacks. Regular security awareness training will greatly reduce the potential for employees to fall victim to cybercriminals and their variety of cyberattacks.
Effectively Implementing Supply Chain Risk Management
Implementing powerful and effective supply chain risk management is not a one-time project, it requires continued effort. With that being said, it is very helpful to establish your supply chain risk management processes and plans correctly the first time. This is not the time to rush through to implementation. Take the time to create a well-thought-out risk management strategy.
It is considered best practice to incorporate the following principles into your strategy:
- Insist on transparency and visibility: You must clearly communicate the importance of transparency and visibility. Some 3rd party’s initial reaction may be to push back or take offense to the request for more transparency/visibility. Use the ‘trust but verify’ principle to ensure your supply chain produces documented evidence of compliance and understands why this is so important. Hold your supply chain responsible for any lack of transparency.
- Establishing control requirements in service level agreements (SLAs): Your SLAs must legally require your supply chain to align with your compliance stance. This will help you hold your supply chain responsible. Clearly define the data security controls you expect the third-party partner to implement. The more specific the expectations, the less room for interpretation and potential vulnerabilities down the road. Once you have laid out these expectations, you can start to establish a thorough vetting process and start to include a due diligence policy in your agreements moving forward.
- Establishing standards for data structure and collaboration: Data is the key to compliance. You must carefully analyze everything that you are told, what you know, what you can verify, what you can properly monitor, and determine whether the data is right or not. Any opacity or gray area in this matter that leads to a breach or regulatory infraction can seriously damage your business’ reputation and the trust of your customers.
- Build a communications channel: Communication is essential. A suitable communications channel between your business and your supply chain is non-negotiable. The goal should be to build a frictionless communications channel to ensure hassle-free, continuous monitoring and mitigation of supply chain compliance risks.
Gone are the days of relying on your supply chain’s cybersecurity risk management and compliance based on their word. The ever-constant threat of cyberattacks has made it essential to establish and monitor visibility into your supply chain’s commitment to compliance. Working with a long-term vendor that refuses to adopt these new measures is not worth the risk of violations and penalties incurred by association. Your inaction could jeopardize the security of protected data and irreversibly damage your organization’s reputation.
It is very understandable and relatable to feel overwhelmed after reading this. Identifying and mitigating supply chain compliance and cybersecurity risks doesn’t have to be chaotic with the right partner by your side. Reach out to Data-Tech, a leading managed service provider in Tampa, and let us help you mitigate security and compliance risks from within your supply chain and strengthen your commitment to compliance.