3rd Party Risk Management , Governance & Risk Management

Cyber Supply Chain Security and Third-Party Risk Management

Sujit Christy on Why Their Intersection Requires a Paradigm Shift Sujit Christy • August 8, 2024

In today's interconnected digital landscape and global economy, chief information security officers face an increasingly complex challenge: securing not just their own organizations, but also the intricate web of suppliers, vendors and partners that make up their cyber supply chain. The cyber supply chain encompasses all entities involved in the development, production and distribution of IT products and services, including hardware manufacturers, software developers, cloud service providers and even the vendors used by direct suppliers.

As businesses become more reliant on third- and fourth-party services for operational efficiency and market competitiveness, the attack surface expands exponentially. The risks can stem from various factors, including compromised or faulty software updates, insecure hardware and insufficient security practices among third-party vendors, which expose companies to a myriad of cybersecurity threats. Because of this, a security breach in one entity can ripple through the entire network and potentially lead to significant operational disruptions, financial losses and reputational damage.

Third-Party and Fourth-Party Risks

Third-party risk involves the direct suppliers and vendors an organization engages with. These entities often have access to sensitive data, making them prime targets for cybercriminals. Third-party risks can manifest through data breaches, service disruptions and noncompliance with regulatory requirements.

Fourth-party risk extends beyond direct suppliers to include the subcontractors and service providers that third parties rely on. This indirect relationship can obscure visibility into potential vulnerabilities, making it challenging for organizations to assess and mitigate these risks effectively.

Strategies for Effective Supply Chain Risk Management

NIST defines supply chain risk management, or SCRM, as the process of identifying, assessing and mitigating risks associated with the distributed and interconnected nature of IT/OT products and services. NIST Special Publication 800-161, titled "Cyber Supply Chain Risk Management Practices for Systems and Organizations," offers a comprehensive framework for addressing supply chain risks.

The ISO/IEC 27001:2022 standard provides a globally recognized framework for establishing, implementing, maintaining and continually improving an information security management system. Aligning cyber SCRM efforts with ISO/IEC 27001:2022 ensures that organizations adopt a structured approach to managing information security risks.

Here's a tabulation of the key components of effective cyber supply chain risk management, or C-SCRM, organized according to the NIST Cybersecurity Framework functions: identify, protect, detect, respond and recover. To address the complex challenges of cyber supply chain security and third- and fourth-party risk management, CISOs should consider implementing the following:

Function	Component	Description
Identify	Context of the Organization	Create a detailed mapping of supply chain, including third- and fourth-party relationships, to identify vulnerabilities and dependencies.
	Risk Assessment and Treatment	Develop a rigorous process to assess the criticality and cybersecurity posture of each third or fourth party, using questionnaires, on-site audits and continuous monitoring. Systematically identify and assess alterations to the supply chain, such as new suppliers or technology changes, for potential risks. Evaluate how changes could affect the security posture of the supply chain, including new vulnerabilities introduced by changes.
	Perform Thorough Due Diligence	Conduct rigorous due diligence on potential third- and fourth-party suppliers, assessing their cybersecurity practices, financial stability and regulatory compliance.
	Develop a Comprehensive Policy	Establish a clear C-SCRM policy aligned with NIST guidelines and ISO/IEC 27001:2022 requirements.
Protect	Support and Operation	Ensure necessary resources, competencies and controls are in place. Incorporate security requirements into vendor contracts, including incident notification clauses, right-to-audit provisions and compliance with relevant standards.
	Secure Software Development	Implement secure coding practices, including regular code reviews, vulnerability scanning and penetration testing.
	Controlled Implementation	Implement changes in a controlled manner to reduce the likelihood of introducing new security vulnerabilities.
	Approval Processes	Ensure changes are approved through processes that include security assessments, addressing potential risks before implementation.
	Third-Party Access Management	Implement strict access controls and monitoring for all third-party connections, using principles of least privilege and just-in-time access.
	Supplier Diversity and Redundancy	Reduce reliance on single sources for critical components or services and develop contingency plans for supplier disruptions.
	Security Awareness Training	Educate employees about supply chain risks and their role in maintaining security, especially those involved in procurement and vendor management.
	Enhance Supplier Collaboration	Foster strong relationships with suppliers for collaboration and information sharing. Conduct regular joint security exercises.
Detect	Continuous Monitoring and Threat Intelligence	Implement real-time monitoring of the supply chain for potential threats and vulnerabilities. Leverage threat intelligence to stay ahead of emerging risks.
	Performance Evaluation	Continuously assess and audit suppliers' security practices to ensure compliance and address vulnerabilities promptly.
	Record Keeping	Maintain comprehensive records of changes to track and understand modifications and their impact on supply chain security.
	Communication	Ensure relevant stakeholders, including suppliers and internal teams, are informed of changes to prepare and address any associated risks.
Respond	Incident Response and Recovery	Develop and regularly test incident response plans for supply chain compromises outlining roles, communication protocols and recovery steps. Provide insights into recent changes that may contribute to incidents, facilitating quicker and more effective recovery. Ensure clear communication channels with key suppliers.
	Preparedness	Reduce the likelihood of disruptions by managing changes effectively, enhancing preparedness for potential incidents related to changes.
Recover	Incident Response and Recovery	Coordinate with suppliers during incidents to minimize impact and ensure swift recovery.
	Continuous Improvement	Promote a culture of continuous improvement to enhance the organization's ability to manage supply chain risks over time. Use feedback from incidents and risk assessments to improve supply chain security practices and adjust change management processes.
	Adherence to Standards	Ensure changes comply with industry standards and regulatory requirements, aiding in compliance verification and assessments.
	Audit Trails	Maintain detailed documentation of changes to support compliance verification and security audits, aiding in recovery and improvements.
	Train and Educate	Provide regular training and awareness programs for employees and suppliers to ensure understanding of C-SCRM and risk mitigation strategies.

Source: National Institute of Standards and Technology, ISO 27001 and NIST 800-161

The intersection of cyber supply chain security and third- and fourth-party risk management presents significant challenges for CISOs and requires a paradigm shift. By taking a proactive and comprehensive approach to cyber supply chain risk management, you can protect critical assets and enhance resilience against evolving threats.