In today's globalised marketplace, supply chains are critical in a wide range of industries, ensuring the seamless flow of goods and services.
The finance sector is no exception, as financial supply chains rely on intricate networks to facilitate transactions, investments, and run the business.
However, as supply chains grow in complexity and have an increasing reliance on technology the need for robust supply chain security has never been higher. Gartner predicts that by 2025, 45% of organisations worldwide will have experienced attacks on their software supply chains, marking a significant increase from 2021.1
Why Supply Chain Security Matters in Finance
A recent report from IBM shows that the financial services exhibit one of the highest industry average costs per data breach at £5.3 million.2
As well as substantial financial losses, breaches can also lead to operational disruptions, and considerable damage to a company's reputation. Vulnerabilities within financial systems can also result in regulatory non-compliance, loss of confidentiality, integrity, and availability, and even the loss of critical intellectual property.
Regulation
Financial sectors are also facing heightened scrutiny in supply chain risk due to the implementation of regulations such as the Digital Operational Resilience Act (DORA) and NIS2.
DORA requires financial institutions to transform the way they conduct supply chain risk management (SCRM.) Similarly, the NIS2 Directive advises entities under its scope to evaluate vulnerabilities related to each direct supplier and service provider. This includes assessing the overall cybersecurity quality of their suppliers' and service providers' products and practices, particularly their secure development procedures.
Nonetheless, regardless of whether you are impacted by DORA or NIS2, it is critical to re-evaluate your supply chain security to mitigate any potential risks on your organisation.
This article will delve into key principles that organisations can implement.
Gain Insight into your Supply Chain
It is essential to map out the various entities, systems, and data flows within your supply chain to understand who handles your data, where it resides, who can access it, and its vulnerabilities. Assess each partner's level of vulnerability, the extent of their access to your data, and the potential impact on your organisation if their security is compromised. Find out what their stance on security is and whether they have any security certifications such as Cyber Essentials or ISO 27001, as this shows that they take security seriously. Without visibility, protecting your assets becomes challenging.
Review the entire Supply Chain
Attackers often exploit vulnerabilities in the weakest links, such as small vendors or open-source communities, with far-reaching consequences. Even a minor security incident involving a small third-party supplier can have devastating effects on the entire supply chain. By compromising just one entity, attackers can trigger a chain reaction that destabilises the entire supply chain. Therefore, robust security measures, including effective management systems, are crucial for addressing both physical and cyber threats.
SaaS Platforms
It is important to review every single application your organisation is using especially SaaS platforms. A recent study by Wing showed that the number of applications used by organisations is typically 250% larger than what a basic and often-used query of the workspace reveals. This causes a huge supply chain risk as it means employees are using a lot of applications that probably no one knows about or managing the associated risk.
Anticipate Breaches
Despite robust preparations, security breaches are inevitable. Therefore, supply chain security best practices focus not only on prevention but also on preparation. An incident response plan should be a core component of your supply chain security programme, outlining roles and procedures for addressing security incidents promptly. Test and refine these procedures regularly to ensure readiness.
Security Involves People, Processes, and Knowledge
Security encompasses more than just technology; it involves people, processes, and knowledge. Many breaches result from human error, highlighting the importance of solid cybersecurity practices throughout the financial supply chain. It's important your employees are involved in regular testing and training on cyber hygiene best practise.
Ensure Seamless Integration of Physical and Cyber Security
Efforts to enhance physical and cyber security should be seamlessly integrated. Attackers can exploit gaps in physical security to launch cyberattacks and vice versa. Therefore, a holistic approach to security is essential.
Continuous Communication
As supply chain security is an ongoing challenge, close collaboration with partners is essential. Continuously monitor security risks, assess their severity, and collaborate on preventive measures throughout your partnership.
Third-Party Vendors with Access
Suppliers, including cleaning services and software engineering firms, that have access to information systems, software code, or intellectual property pose significant risks. It's best practise to conduct due diligence on every one of your supply chain partners.
Poor Information Security Practices
Lower-tier suppliers with inadequate information security practices can introduce vulnerabilities into the financial supply chain. Organisations should assess suppliers' security measures and offer guidance or support as needed.
Compromised Software or Hardware
Procuring software or hardware from suppliers with compromised products can jeopardise the entire supply chain. Rigorous testing and validation of software and hardware components are crucial to mitigate such risks.
Third-Party Data Storage
Risks associated with third-party data storage or data aggregators should not be overlooked. Consider location and jurisdictional factors that may affect regulatory compliance. Establish robust contracts and security standards for third-party data management.
Geopolitical Events
Shifts in international relations, political instability, or trade disputes can disrupt your supply chain suddenly. Stay informed about political developments in your supply ecosystem to adapt quickly to changes.
As supply chains continue to evolve and grow in complexity so must your approach to safeguard them.
It is important that you and your organisation stay informed, adapt to emerging threats, and implement rigorous security practices to protect the integrity and future of your financial supply chain.
If you would like support in securing your financial supply chain please email mike@torosolutions.co.uk.
2. https://uk.newsroom.ibm.com/24-07-2023-IBM-Security-Report-Cost-of-a-Data-Breach-for-UK-Businesses-Averages-3-4m