Many entities are positioned at the center of a supply chain. You offer not only a product or service to your customers but also leverage third-parties in facilitating the operations of your business. For data security, you must carry out rigorous due diligence in an effort of mitigating risk in a given supply chain.
What does Supply Chain Compliance Entail & How can it be Achieved?
What does “Supply Chain Risk” mean?
Conventional supply chain risk management looks at the plan, market, execution, and performance risks, for instance, a procurement entity may focus on working conditions and labor laws, especially when deciding which performance and strategy risks are essential when it comes to selecting a manufacturing entity.
Nonetheless, with the growing use of Platform-as-a-service, Infrastructure-as-a-service, and Software-as-a-Service, the risk management plans currently focus on both data breach risk mitigation and cybersecurity controls.
Therefore, developing an effective vendor risk management strategy transforms into a technique of mitigating supply chain risk, particularly in an integrated information technology (IT) setting.
What is the Role of Supply Chain Compliance in Compliance Risk?
Compliance risk entails the possible loss of finances as a result of financial forfeiture, legal penalties, or material loss due to noncompliance with internal policies, industry standards, or regulatory requirements.
Supply chain risk rests where organizational compliance risks intersect mainly due to the following reasons:
- Industry standards and regulations mostly hold entities responsible for all data breaches caused by the existing vulnerabilities in vendor security.
- Organizations mainly incorporate third-party technologies into their vital enterprise activities.
Therefore, your organization’s vendor risk management supervision is associated with your own compliance risk and your cybersecurity stance.
Which Regulations and Standards Govern Supply Chain Management?
Whereas many regulations and standards integrate supply chain management either indirectly or directly, it is safe to conclude that some are more important than others. Several regulations that incorporate supply management into their compliance management efforts include the European Union General Data Protection Regulation (GDPR) and the Healthcare Portability and Availability Act (HIPAA).
- Healthcare Portability and Availability Act (HIPAA)
Failing to participate in an enterprise associate agreement that governs how third-parties administer electronic PHI or Personal Health Information can result in penalties for the involved entities.
- European Union General Data Protection Regulation (GDPR)
The European Union General Data Protection Regulation includes a 72-hour breach alert requirement that is intended for data controllers, even if the malicious act comes from any of their data processors. As far as GDPR is concerned, you are responsible for alerting all your clients, especially when any of your vendors experiences a data breach. What’s more, make sure that you collaborate with vendors who are compliant with GDPR in a bid to avoid fines.
What are the Obstacles Surrounding Supplier Management?
Supplier management or otherwise known as vendor management can be difficult since you have no control over your third-party enterprise partners. Even if you conduct due diligence, you may lack the ability to supervise them frequently. The list of impediments matches that of the obstacles you encounter in your company. Nevertheless, several supply chain risks are predominantly invisible.
Monitoring of Cybersecurity Perpetrator
Irrespective of the outcomes of an audit, that review can be invalidated any given time. Perpetrators of cybercrimes frequently upgrade their threat techniques. What this means is that useful controls of today may not be effective tomorrow.
Patch Management
In case one vendor device does not have the necessary security upgrade, it can pose a threat to everyone. Hence, if your vendors fail to maintain a stringent patch management plan, then a single device on their respective network, which has access to your data, can result in a data breach that can severely affect the financial status of your organization.
Password Hygiene
Even though your supplier might have implemented password policies, one worker using a password like “123456” may give malicious people unpermitted access to data, software, networks, and systems. Similarly, one vendor utilizing the same password to access their social media accounts or even gaining access to their social media accounts by using their work password and email can affect your systems and data considerably.
The Effectiveness of Employee Training
You can assess your supplier’s training documents. Nevertheless, the qualifications may have little or no significance. Phishing is still a significant threat factor, which means that aspects of training may not always be useful.
How do you Come up with a Useful Supply Chain Risk Management Plan?
As your company includes additional suppliers of technology, ensure that you incorporate vendor management into your compliance program. Quality management systems or QMS help in documenting the responsibilities, procedures, and processes over control and quality objectives, including the management of vendor relationships, by shifting your focus to the vendors that are most important to your business enables you to not only protect your clients but also maintain the continuity of your enterprise.
Set up Control Prerequisites in Service Level Agreements
Your organization’s service level agreements legally bind your suppliers to comply with your security posture. By describing all the controls that you expect, you can start managing your vendor’s compliance with your organization’s risk tolerance effectively. By leveraging such requirements, you can decide whether you want to do away with or maintain your relationships with vendors. For instance, you might need to include a level of in-transit or at-rest data encryption in a bid to ensure that your data is secure.
Creating Vital Performance Indicators
While monitoring the information security controls put in place by your supplier, you have to establish vital performance pointers, especially within the service level agreements. For instance, you might require including a baseline to help in reinstating the critical operations of your business in case a service outage occurs. As such, you can gauge not only the resiliency of a given vendor but also their incident and monitoring response program.
Establishing Communications
Supplier relations ought to involve continuous interaction between all the involved stakeholders. Therefore, you must make sure that you assign someone within your organization or business the role of overseeing the particular relationship. The yearly SOC audit, for instance, only focuses on a given duration of time. Hence, this means that quarterly or even monthly communication might allow you to maintain a better level of oversight.
Benefits of Supply Chain Risk Management Automation
By leveraging some of the governance, risk, and compliance management solutions available on the market, you can streamline your company’s workflow. You can get rid of emails while keeping track of outstanding activities. Some software solutions come with a combined control management tool that helps companies in mapping controls across various regulations, standards, and frameworks in a bid to establish whether there are any existing compliance gaps. This mapping feature assists you in managing mundane activities, especially those that are related to vendor risk management.
Furthermore, their streamlined workflow can show task managers the exact date that a given vendor gave a response. What such details mean is that compliance managers might not have to spend much of their time monitoring a company’s countless vendors. Instead, they can devote such time to other important tasks.
