In the current digital landscape, protecting the supply chain comes hand in hand with cybersecurity defense. With organizations increasingly turning to outside vendors and third-party software to meet their needs, we’re now experiencing a whole new set of risks outside the four walls of the organization. And those supply chain risks can impact everything in the company from software design to deployed software products.
In this blog, we will learn the concept of supply chain risk management and its role in cybersecurity. We will also discuss how common risks can be identified, how effective assessment methods can be developed, and how robust security strategies can be established. We’ll also discuss some of the major frameworks, industry-specific use cases, and other best practices that organizations can use to ensure supply chain security.
What is Supply Chain Risk Management
Supply chain risk management (SCRM) is the set of actions and processes that allow organizations to recognize, evaluate, and minimize risks that involve its external partners, vendors, and service providers. It encompasses digital elements that deliver a product or service.
Supply chain risk management scans various components for vulnerabilities before entering the organization environment. It also establishes monitoring to detect potential issues that may arise later. This approach aims for security in every point of contact between the outside world and internal systems.
Security, IT, procurement, legal, and business teams all need to work together for SCRM to be effective. This cross-functional approach ensures that the entire security risk spectrum of vendor relationships is covered, from selection to contract management and periodic security reviews.
Why is supply chain risk management important?
In an era where organizations rely more on external vendors, third-party libraries, supply chain risk management has gained prominence. Today, most companies have dozens or hundreds of third parties that help them to run their business. Every relationship brings in security risks that can change the security posture of an organization.
Many modern software applications are made up of components from lots of different sources. The code in a business application will typically include dozens of third-party libraries and frameworks. If any of these components has a security vulnerability, the whole application can be compromised. The dependency problem also applies to cloud services, managed providers, and hardware suppliers.
Common Types of Supply Chain Risks
Supply chain risks may come in the form of compromised software, service attack, insiders, or third-party access, with each requiring its own methods for detection and protection. The most common types include:
Code injection attacks
Code injection attacks involve an attacker inserting malicious code into legitimate software either during development or distribution. This can happen when an attacker gains access to source code repositories, build systems, or update servers. A well-known example is the SolarWinds attack, in which code for backdoors was inserted into the software updates and delivered to thousands of customers.
Compromised software
Another significant risk comes from compromised software components. Open-source libraries can speed up development and are widely used by many developers, but they can also host vulnerabilities or malicious code. When these broken parts are built into applications, they will carry over their security defects.
Vendor security breaches
Vendor security breaches pose risk when suppliers with access to an organization’s systems or data experience security incidents. If someone with access to the network or sensitive information becomes compromised, attackers can exploit this relationship and laterally move into the customer environment.
Hardware tampering
Firmware supply chain attacks involve compromising the software embedded in hardware components. This can include injecting malicious code into firmware updates, compromising device drivers, or manipulating boot processes.
Update mechanism abuse
Abuse of update mechanisms targets the channels that are leveraged for delivery of real software updates. Attackers proceed to compromise these trusted distribution paths allowing them to serve malware disguised as coming from trusted vendors.
Key Components of Supply Chain Risk Management
There are key components of supply chain risk management that when used together can be effective. They form an comprehensive ecosystem for discovering, monitoring, and managing risks posed by third-party vendors and its components.
Vendor risk assessment and management
Vendor risk assessment lays the groundwork for supply chain security. This process assesses supplier security practices of new and existing suppliers prior to granting them access to systems or data. A good assessment examines technical controls and security policies, review of past incidents and the overall security maturity. During evaluation, organizations should have standardized questionnaire and scoring system for the vendors, which can help in the comparison of the vendors objectively.
SCA and software bill of materials (SBOM)
SCA tools scan application code to identify all third-party components which are used and look for known vulnerabilities in them. These tools generate a comprehensive list of all software dependencies and notify teams when vulnerabilities are detected within these components. SCA typically outputs a Software Bill of Materials (SBOM) that outlines all of the components in an application, along with their versions, configurations, and any vulnerabilities that may exist.
Incident response planning for supply chain attacks
Supply chain attacks involve some unique components that not every incident response plan will address. This makes it necessary for organizations to have action plans that pertain specifically to compromises entering via trusted suppliers. Such plans should focus on isolating devices, contacting the respective vendors, understanding the scope of the breach, and mitigating the damage done. Response teams require clear instructions on when and how to cut off access to compromised vendors, and restore services once an incident is over.
How to Identify and Assess Supply Chain Risks?
A systematic approach exists for recognizing and analyzing supply chain risks, which involves a mix of technical resources coupled with the analysis of a business process. But organizations have to clear ways of revealing potential issues before they start impacting operations.
Building a comprehensive software bill of materials (SBOM) of all third-party code, dependencies, containers, and cloud services used throughout the organization is where digital supply chain risk identification begins. This should take the form of an automated inventory that details which components are used in each application, their version information, known vulnerabilities, and criticality to business operations.
Security teams must integrate scanning tools with CI/CD pipelines and collaborate with development and IT teams to ensure no dependencies, APIs, or microservices fall through the cracks.
Techniques for Mitigating Supply Chain Risks
There are a number of effective strategies that organizations can deploy to reduce supply chain security risks. Together, these techniques provide a layers of defense to protect against external threats on a layered basis.
Vendor security requirements
Well-defined security requirements in vendor contracts lay a firm groundwork for supply chain security. These requirements should include minimum security controls, compliance certifications, breach notification time frames, and audit rights. Legal agreements should make security non-negotiable and allow organizations to enforce standards for vendors, holding them liable for any security lapse. They should be specific, measurable and have consequences for non-compliance.
Code integrity verification
Verifying the integrity of code ensures that any software coming into the environment is untampered. This includes verifying digital signatures, confirming that hash outputs are what they should be, and tracing where any incoming code came from. Organizations must deploy automated tools that validate software updates, third-party libraries and app components for integrity before installation. They not only prevent malicious code from being inserted into the supply chain, but also catch unauthorized modifications of legitimate software.
Least privilege access
Each third-party integration point should be configured with only the minimum API permissions and system access necessary for its functionality. This containment approach limits the blast radius of any breach, preventing compromised components from accessing critical systems beyond their required scope.
Dependency Redundancy
Implementing redundant sources for critical packages and libraries allows organizations to limit the damage a single compromised repository or container registry could cause. This strategy enables quick switching to alternative dependencies if security issues are discovered in a particular package. Maintaining multiple verified sources for key dependencies requires additional development resources, so for non-critical components, the security cost-benefit may not justify the effort.
Security testing
The constant security testing of third-party products and services provides validation of supplier assertions regarding security, such as penetration tests, vulnerability scans and code reviews of provided software. Since the highest risk often comes from the points of connection between vendor systems and internal networks, tests should target those integration points.
Supply Chain Risk Management Frameworks and Standards
Several established frameworks and standards help organizations build structured approaches to supply chain security.
The National Institute of Standards and Technology (NIST) cybersecurity framework
The National Institute of Standards and Technology (NIST) Cybersecurity Framework includes specific guidance for supply chain risk management. NIST Special Publication 800-161 offers detailed instructions for identifying, assessing, and responding to supply chain risks. This framework uses a tiered approach that helps organizations match their security efforts to their risk level and resource constraints.
ISO/IEC 27036
ISO/IEC 27036 focuses specifically on information security in supplier relationships. This international standard provides guidelines for security in procurement processes and ongoing vendor management. It helps organizations include security requirements throughout the supplier lifecycle, from selection to termination.
Cybersecurity Maturity Model Certification (CMMC)
The Cybersecurity Maturity Model Certification (CMMC) framework includes supply chain requirements for defense contractors. It sets specific controls that suppliers must implement based on the sensitivity of information they handle. While designed for defense, many organizations use CMMC as a model for their own supply chain requirements.
Software Assurance Forum for Excellence in Code (SAFECode)
The Software Assurance Forum for Excellence in Code (SAFECode) provides best practices for secure software development in the supply chain. This industry-led effort focuses on practical techniques for building security into software from the beginning.
Challenges Associated with Supply Chain Risk Management
Implementing effective supply chain risk management faces a number of major challenges. To ensure that external dependencies are well-protected, organizations need to rip off these layers of challenges.
Visibility limitations
The organizations’ ability to view the supply chain is incomplete. Most vendors procure through their own suppliers, which creates many tiers of dependencies that are hard to trace. Security teams might be unaware of potential risk being brought by open-source dependencies or relationships between third-parties. This allows for little transparency and makes it difficult to map all threat points.
Resource constraints
It takes a lot of resources to implement supply chain security effectively. Security teams need to weigh the thoroughness of their vendor reviews against the time and budget available to conduct them. This frequently drives organizations to focus security efforts on major dependencies and primary code repositories, while neglecting smaller components and microservices that can still represent significant security risks in the software supply chain.
Security vs. operational efficiency
Tight supply chain controls can halt business and delay important initiatives. Security reviews can delay the procurement process, leading significant tension with business units that require speedy onboarding of vendors. Organizations need to weigh security needs against business needs. Over-attention to security can create bottlenecks that harm competitiveness, on the other hand, prioritizing speed can create risk too big to bear.
Legacy systems
Numerous organizations are still using legacy systems that do not have modern security capabilities. These legacy applications could be using outdated components with known vulnerabilities as the given vendor has long-since discontinued support. The problem with this is that replacing these systems is expensive and disruptive to the business. Legacy components should be planned for to eventually be replaced, but in the meantime security teams will need strategies to mitigate these.
Consistent security standards
Creating consistent security across different vendors is nearly impossible. They are different industries, with different statutes and security maturity levels. A provider of cloud services may be different from a manufacturer of hardware. It is the challenge of organizations to create assessment techniques that are agile enough to account for those differences without sacrificing security assurance.
Best Practices for Supply Chain Risk Management
Effective supply chain security depends on consistent approaches along with records, policies, and organizational commitment. The following best practices help organizations develop strong defenses against supply chain threats.
Vendor security assessment protocols
Standardized testing processes are created to confirm that every vendor is evaluated the same way. This should include protocols such as security questionnaires, documentation reviews, and verification steps aligned with the risk level of the supplier. Organizations need to create a risk-based approach and define what checks should be done at which level, i.e., basic checks for low and medium risk vendors and in-depth reviews for critical suppliers.
Regular security audits
Random audits check if the suppliers practice what they preach. Examples of these reviews include automated code scans, dynamic API testing, and repository access audits for critical dependencies. Audits must verify the integrity of CI/CD pipelines, container registries, and package repositories to confirm proper security controls implementation.
Security requirements in contracts
Contractually embedding detailed security requirements for vendors creates obligations that can be enforced. Such clauses should detail minimum levels of security controls, timeframes for breach notification, rights to audit and consequences of non-compliance. Legal should partner with security to negotiate language that is technically accurate. Requirements should cover data protection, access controls, vulnerability management and incident response. Contracts should also have termination rights for breaches of cybersecurity.
Code signing and verification
Using code signing for all components of the software makes sure code is not altered post-creation. Enterprises must demand code from vendors be digitally signed, with verification methods. Signatures should be checked by internal systems prior to installation of updates or new components. This step is expected to ensure code integrity and authenticity. All such unsigned or improperly signed code should raise alerts and be prohibited from installing.
Security awareness culture
Creating employee awareness throughout all teams and interacting with suppliers enhances the human aspect of supply chain security. That covers training personnel on security standards, instructing developers to inspect component origins, and alerting business teams to the risks in vendor security. Staff should be regularly updated on emerging supply chain threats and attack techniques.
Notable Supply Chain Attacks
These below security incidents have featured prominently in two major supply chain attacks.
SolarWinds attack
Less than a month after the breach, various computer security vendors and government cybersecurity agencies concluded that the SolarWinds attack (discovered December 2020) was one of the most sophisticated supply chain compromises ever identified, or attempted.
Hackers broke inside the firm’s development environment and planted weapons into the Orion network monitor program. This update of compromised software was digitally-signed and distributed to an estimated 18,000 customers. After it was installed, the malware (dubbed SUNBURST) created a backdoor, giving the attacker entrance into the impacted network. The attack went undetected for months, hitting valuable targets, including several US government agencies, Microsoft, FireEye, and numerous Fortune 500 companies.
NotPetya attack
The NotPetya attack in June 2017 started with updates to M.E.Doc, a Ukrainian accounting software used in tax reporting. Hackers found a way into the software’s updating server, and uploaded terminal-destroying malware, masquerading as a real update.
Though designed to attack only Ukrainian organizations, the self-replicating malware quickly proliferated worldwide over network connections. Shipping giant Maersk, pharmaceutical company Merck, and delivery service FedEx experienced significant operational disruptions. Maersk, for instance, was forced to replace 45,000 computers and 4,000 servers, with damages to the company topping $300 million.
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As organizations increasingly find themselves under attack via their external vendors and software dependencies, supply chain security is becoming critical. The complexity of modern supply chains often generates security holes that attackers are more willing to exploit. Organizations can shield themselves from such cyber threats, to some extent, but only when there are structured risk management approaches in place.
Supply chain security comes down to a mixture of technical controls, vendor assessment processes, and organizational awareness. Organizations need to have visibility of their external dependencies without compromising on security requirements and business needs. Supply chain attacks are becoming more sophisticated with each passing day and security teams will require next-generation tools in order to catch them effectively.
FAQs
Supply chain risk management is the process of identifying, assessing, and mitigating security risks from external vendors, suppliers, and third-party components used in an organization’s operations.
Companies can identify supply chain risks through vendor assessments, security questionnaires, code scanning tools, and continuous monitoring of supplier activities.
Technology helps through automated scanning, continuous monitoring, and threat detection tools that identify vulnerable components and unusual behavior across complex supply chains.
A supply chain risk management strategy is a structured plan that includes vendor selection policies, security requirements, assessment methods, and incident response planning for external dependencies.
Financial services, healthcare, government, critical infrastructure, and technology sectors face the highest supply chain risks due to their valuable data and critical functions.
Yes, standards such as ISO/IEC 27036, the NIST Cybersecurity Framework, and the ISO 28000 series provide guidelines for supply chain security management.