When supply chain leaders think about the risks that could destabilise their organisations, financial pressures, operational disruption, and regulatory issues are usually top of mind. Yet cyber risk is rapidly emerging as an equally significant threat.
Recent research underlines this point. A Hiscox survey revealed that 67% of firms reported an increase in cyberattacks over the past year, while 40% said breaches involving supply chain vendors were the most common type of incident. The problem is not confined to the private sector, claims Moody’s.
According to the U.S. General Services Administration (GSA), the rising frequency and impact of supply chain cyber incidents have prompted new legislation and executive orders mandating cybersecurity supply chain risk management (C-SCRM) practices across federal agencies. The danger is clear: attacks such as the SolarWinds Orion hack demonstrated how malware introduced through supplier updates can compromise tens of thousands of organisations across both public and private domains.
Despite this rising tide of attacks, many businesses admit they are unprepared. Around a third of leaders (34%) do not believe their organisations have the expertise to manage supply chain cyber risks effectively. This leaves businesses exposed to disruption, financial loss, and reputational harm, making resilience a critical priority.
Supply chain cyber risk is often a hidden vulnerability, stemming from weak points in supplier systems, third-party infrastructure, and procured products or services. Multi-tiered supply chains, subcontractors, and external vendors introduce blind spots, while inconsistent oversight and fragmented security standards across global operations amplify exposure. The fallout from a breach can be severe, ranging from service interruptions and data theft to compromised intellectual property and long-term reputational damage.
Weak supplier defences typically leave companies vulnerable in three main ways. The most common is a data breach, where supplier systems expose confidential information such as contracts or designs. Less common, but highly damaging, are system breaches that allow attackers direct access to internal operations. Finally, supplier breaches that temporarily disrupt operations may not halt deliveries altogether but still carry risks of delay and knock-on disruption.
For governments and companies alike, tackling this challenge starts with limiting access to sensitive systems. Service providers with access rights should be carefully vetted and monitored, using standard supply chain due diligence processes. Restricting information shared with vendors is also vital – ideally only mission-critical data should be available, and it should be transferred via secure channels such as encrypted cloud environments or company-issued devices.
Building a comprehensive C-SCRM strategy involves several steps. Organisations should identify all suppliers with access to sensitive data, reduce that list to the minimum necessary, and apply restrictive policies to govern what can be shared. They must also assess suppliers’ cyber risk profiles through external evaluations and align information-sharing protocols to risk levels. Finally, risk mitigation strategies should be chosen based on the organisation’s appetite and resources.
External partners can support these efforts. Moody’s, for example, offers cyber risk ratings through its Supply Chain Catalyst solution, which evaluates suppliers’ likelihood of suffering a cyber incident. This intelligence helps businesses prioritise monitoring and apply proportionate safeguards, in partnership with IT security teams.
Ultimately, resilience is about more than cybersecurity alone. Organisations must also prepare for scenarios where cyberattacks exacerbate other supply chain risks, such as financial instability. Stockpiling additional inventory and establishing contingency plans remain tried-and-tested approaches to protecting against cascading disruptions.
As cyber threats grow in scale and sophistication, businesses can no longer treat supply chain cyber risk as a secondary concern. Effective monitoring, restrictive data sharing, and robust contingency planning are essential steps in building resilience and safeguarding operations in an increasingly connected world.
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