Information security risk management in the supply chain

There is no doubt that information security in the supply chain is a critical aspect for organisations to manage. With the increasing reliance of all types of entities on information technology and the complexity of supply networks, a number of challenges related to the protection of sensitive data and risk management arise.

In this article, we will explore in detail information security risk management in the supply chain, its challenges, best practices and the importance of implementing effective measures to mitigate potential threats.

Supply chain and information security

The supply chain refers to the set of processes involved in the production and distribution of goods and services, from the acquisition of raw materials to the delivery of the final product to the customer. In today's context, the supply chain is not only limited to physical logistics, but also encompasses the exchange of information between the various actors involved, such as suppliers, manufacturers, distributors and customers.

Information security risk management in the supply chain is becoming a fundamental requirement

Thus, information security in the supply chain refers to the protection of sensitive and critical data exchanged throughout these processes. This includes confidential information on products, prices, inventories, business strategies, as well as personal and financial data of customers and employees. The loss, theft or compromise of this information can have serious consequences, ranging from loss of customer confidence to reputational damage and significant financial impacts.

In this scenario, information security risk management in the supply chain faces a number of unique challenges, including:

1. Complexity of supply chains, with multiple suppliers, subcontractors and trading partners interconnected. This increases the attack surface and the difficulty of ensuring safety at all points in the chain.
2. Regulatory demands on privacy and information security, such as the General Data Protection Regulation (GDPR) or the Digital Operational Resilience Regulation (DORA), which impose strict requirements on how organisations must protect and handle personal and business data, increasing the pressure on risk management.
3. Extension of internal and external threats, as the exposure surface of the entities in the supply chain becomes the exposure surface of the entity itself, and threats from both internal actors, such as dishonest or careless employees, and external actors, such as hackers, competitors or even governments, become threats to the entity itself.

For all these reasons, information security risk management in the supply chain becomes a fundamental and unavoidable requirement for organisations:

• Protects the confidentiality, integrity and availability of sensitive data.
• It helps prevent revenue loss and reputational damage due to security incidents.
• Ensures compliance with privacy and information security regulations.
• It increases the confidence of customers, partners and other stakeholders in the organisation and its products, services and solutions.
• It minimises the risk of disruptions in the supply chain and thus ensures the continuity of the business itself.

By legal imperative

It is important for organisations to review the specific regulations that apply to their industry

As noted above, there are a number of legal regulations and standards that include provisions related to supply chain security risk management. Some of the most important are:

• General Data Protection Regulation (GDPR): establishes strict requirements for the protection of personal data and requires organisations to implement adequate measures to ensure data security, including risk management throughout the supply chain.
• National Security Scheme (NSS): whose provisions apply to both the public sector and its private sector technology providers. It imposes the obligation of security measures when services are rendered or solutions are provided to public sector entities, a circumstance that will be manifested by the display of the corresponding conformity mark.
• ISO 27001 - Information Security Management System (ISMS): ISO 27001 is an international standard that provides a framework for establishing, implementing, maintaining and improving an information security management system. Within this standard, specific provisions on the assessment and management of security risks in the supply chain are included.

Highly regulated industries, such as banking, financial services and insurance, also have specific regulations addressing supply chain security risk management.

• Digital Operational Resilience Regulation (DORA): which requires assessing, monitoring and documenting third party risk in strategic services.
• Payment Services Directive (PSD2): this legislation focuses on the regulation of payment services. PSD2 includes security requirements related to customer authentication, but also addresses information security and risk management in the financial services supply chain.
• Network and Information Systems (NIS) Security Directive: applicable in the European Union, the NIS Directive establishes security requirements for operators of essential services and providers of digital services, including risk management in the supply chain of financial services and insurance companies.
• European Banking Authority (EBA) regulation: the EBA issues specific guidelines and regulations for the banking sector in the European Union. They include requirements related to information security and risk management in the supply chain.

These regulations and standards are just a few examples of regulations and frameworks that include provisions related to supply chain security risk management. It is important for organisations to review the specific regulations that apply to their industry and location to ensure proper compliance.

How to address risk management

To address these challenges and mitigate the risks associated with information security in the supply chain, organisations can implement a number of best practices, including:

• Regularly assess risks to identify and prioritise potential threats.
• Implement technical and organisational security controls in the entities that are part of the chain.
• Promote information security education and awareness among employees and business partners to help prevent incidents caused by human error or careless behaviour.
• Develop incident response plans to be able to act quickly and effectively in the event of a security breach in the supply chain. This includes assigning roles and responsibilities, as well as conducting regular drills and tests.

The evaluation mechanisms used cannot be the same for all entities

Assessing the security of suppliers in the supply chain is the crucial part of information security risk management. A secure supply chain depends not only on an organisation's internal security measures, but also on the security practised by each of its suppliers and business partners. 

The assessment mechanisms used cannot be the same for all entities in the supply chain. This approach would not be practical or effective for a number of reasons:

1. Diversity of suppliers: entities may vary in size, industry, geographic location, experience, resources and focus on information security. What works for one provider may not be suitable for another because of these differences.
2. Differential risks: the risks associated with information security can vary significantly between providers. For example, one provider may handle highly sensitive data while another may handle less critical information. The security risks and possible consequences of a breach may also differ.
3. Limited resources: eequiring the same level of information security from all providers may be unrealistic, especially for smaller providers or those with limited resources. They may not have the financial, technical or human capacity to implement and maintain sophisticated security measures.
4. Strategic business relationships: some suppliers may be considered more critical to the operation and success of the business than others. Therefore, imposing the same security requirements on all suppliers may not be compatible with strategic business relationships and the need for flexibility in supply chain management.
5. Compliance complexity: evaluating and enforcing a single information security standard for all suppliers can lead to excessive administrative and compliance burdens. This could lead to a lack of focus on key security issues and an increase in operational costs.

In summary, it is important to tailor the information security assessment and requirements to the specific characteristics and risks of each provider rather than applying a one-size-fits-all approach.

Different but complementary mechanisms are therefore required to assess the security of suppliers:

1. Conduct supplier-specific risk assessments to identify potential vulnerabilities and risks in their systems and processes. This may include the review of security policies, access management practices, technical security controls and the history of security incidents.
2. Send security questionnaires to suppliers to gather information on their security policies, procedures and controls. These questionnaires may address aspects such as access management, data encryption, patch management, information security policies, incident management practices and staff security training.
3. Verify that suppliers comply with relevant legal and regulatory requirements on information security, such as RGPD, DORA, EIOPA, or industry-specific security standards, such as ISO 27001 or ISO 22301. This verification may require the review of relevant documentation and certifications.
4. Assess suppliers' technical capabilities in terms of information security, including the quality of their security systems, the expertise of their security team, and their ability to detect and respond to security incidents.
5. Conduct security audits to assess the effectiveness of the security controls implemented by the supplier. During these audits, security logs may be reviewed, penetration tests may be conducted, system and network configurations may be assessed, and relevant personnel may be interviewed to obtain a full assessment of the vendor's security posture.
6. Assess suppliers' security culture, including senior management's awareness of and commitment to information security, as well as employee participation in security awareness programmes.
7. Assess suppliers' ability to maintain business continuity in case of security incidents, including the existence of incident response plans, data backups, and disaster recovery measures.
8. Conduct regular security reviews of suppliers to ensure that they continue to meet agreed security standards and to identify and address any changes in security risks.
9. Obtain references and assessments from third parties, such as security reports from industry analysts or results of external audits. This can provide additional insight into the reputation and security effectiveness of the provider.

In assessing the security of suppliers, it is important to establish clear and objective criteria, and to conduct a thorough and systematic evaluation of each supplier. In addition, it is crucial to establish open and transparent communication channels with suppliers to address any security issues that may arise during the assessment or ongoing collaboration. 

The role of Izertis as a supplier

Our clients reduce risk and protect their business-critical information assets

Information security in the supply chain is an ongoing challenge for organisations in an increasingly interconnected and complex business environment. In this context, collaboration with IZERTIS, a specialised information security provider, can be an effective strategy to manage and mitigate the associated risks.

Some of the services we can offer include:

• Conduct comprehensive supply chain risk assessments to identify vulnerabilities and areas for improvement. This may include technical vulnerability analysis, security controls assessment and operational risk analysis.
• Conduct regular security audits to assess compliance with information security standards in the supply chain. 
• Advise on the implementation of effective security controls throughout the supply chain such as the configuration of protective measures, intrusion detection systems, data encryption and user authentication.
• Provide information security awareness and training programmes for employees and business partners to foster a culture of security and reduce the risk of incidents caused by human error.
• Provide incident response services, including crisis management, digital forensics and system restoration, to minimise the impact of security breaches in the supply chain.

Izertis' collaboration in the management of cybersecurity risks associated with the supply chain provides organisations with high added value:

• Experience: Izertis has experience and expertise in information security, which allows us to offer effective solutions tailored to the specific needs of the supply chain.
• Cost reduction: Outsourcing certain information security functions can be more cost-effective than maintaining a dedicated in-house team, especially for smaller organisations or those with limited resources.
• Continuous improvement: Izertis manages information on the latest trends and threats in information security on an ongoing basis, enabling its clients to keep abreast of best practices and technologies.

In summary, information security risk management in the supply chain is a critical aspect for any organisation in today's economy. Working with an external specialist information security provider such as Izertis can help address the associated challenges and strengthen an organisation's security posture throughout its supply chain. 

By leveraging the expertise and services offered by Izertis, our customers reduce risk and protect their business-critical information assets.