Why Third-Party Risk Management Is Crucial for Cybersecurity in Manufacturing

Prakash Srinivasan

Prakash Srinivasan is a Director of Product Management at Seclore and drives the simplification of product solutions for customers. He comes with more than a decade of experience in Market research, solution consulting, customer success, and product management. Prakash enjoys seeking and telling stories. He is passionate about travel writing and spending evenings doing improv.

Intellectual Property Protection

A majority of manufacturers either develop or manage large portfolios of valuable intellectual property (IP), including proprietary designs and patented processes. Third-party vendors and other partners that receive this sensitive data become an integral part of protecting the original organization’s competitive edge. Without proper oversight, data breaches at the vendor level can expose IP, result in a loss of reputation for both parties, and compromise future profits.

To safeguard intellectual property (IP), manufacturers should implement key security controls such as multi-factor authentication for access to sensitive data, encryption of IP at rest and in transmission, and regular vulnerability assessments to identify risks. Establishing visibility into third-party activities through monitoring solutions that track access logs and potential data leaks is also essential. Additionally, due diligence requires third-party vendors to undergo security audits and assessments, ensuring they comply with industry standards for IP protection. These steps can help enhance security and standardize protective measures across vendors.

Increased Attack Surface Through Vendors

Each third-party vendor connected to your network adds complexity and widens the attack surface, creating multiple entry points that can be exploited in a cyberattack. Attacks on manufacturing supply chains are increasingly common, and a single vulnerability in one of your third-party vendors can lead to catastrophic data loss.

Managing third-party risk means ensuring that your vendors implement and maintain effective data security standards.

Supply Chain Disruptions

A cyberattack targeting third-party suppliers can result in severe disruptions to supply chains, impacting business operations. For example, a ransomware attack on a key supplier can halt production due to delays in the delivery of critical components. With business continuity on the line, mitigating risks within the supply chain becomes essential for minimizing operational disruption. To protect against these risks, manufacturers must prioritize vendor risk management and establish an incident response plan that integrates the unique challenges posed by external suppliers. This includes evaluating the security and reliability of vendors to ensure that their data-handling processes meet industry standards.

Compliance and Regulatory Pressure

Manufacturers must navigate various regulatory requirements around data protection and cybersecurity compliance. Standards such as DORA, NIST, and ISO 27001 often require organizations to assess and manage third-party risk as part of their broader risk management process. Failing to adhere to regulatory compliance standards can result in hefty fines, diminished reputations, and legal consequences. A robust third-party risk management (TPRM) program that includes regular audits, ongoing monitoring, and adherence to information security controls helps ensure compliance.

Cybersecurity in Third-Party Environments

Not all third parties maintain a satisfactory cybersecurity posture, and small or niche suppliers may lack the resources to implement robust security controls. Properly screening vendors during onboarding and periodically reassessing their cybersecurity capabilities through questionnaires and third-party risk assessments can help organizations evaluate a vendor’s level of adherence to cybersecurity best practices.

Managing Fourth Parties

Protecting sensitive data shared with third parties becomes even more complicated when that data is also shared with fourth parties or a vendor’s vendor. This exponentially larger extended supply chain can expose manufacturers to additional risks if not managed properly. A well-structured TPRM program should consider the entire supply chain, including fourth parties, and regularly assess the additional cybersecurity risks.

Mitigating Operational Technology (OT) Cyberattacks

Manufacturing environments are heavily dependent on operational technology (OT) systems, such as industrial control systems (ICS) and supervisory control and data acquisition (SCADA) systems. Many of these systems are managed by third-party vendors, which increases the risks of cyberattacks due to potentially weaker security measures and vulnerabilities in the vendor’s infrastructure. Implementing vendor risk management strategies, such as network segmentation, vendor access controls, and risk assessments, can prevent a third-party OT-focused cyberattack from causing severe operational disruptions in your manufacturing environment.

Strengthening Business Relationships

Building strong business relationships with third parties goes beyond regulatory compliance and demonstrates a commitment to mutual protection and risk mitigation. Regular vendor training, webinars, and workshops that educate stakeholders about cybersecurity threats can foster trust, improve collaboration, and enhance the overall cybersecurity effectiveness of your partnerships. A well-structured third-party risk management program should also include performance metrics to evaluate the effectiveness of the risk management process.

Best Practices for Managing Third-Party Risks in Manufacturing

Adopting a proactive approach to third-party risk management is essential to safeguard your manufacturing operations and mitigate risks. Here are some best practices:

Conduct Thorough Vendor Risk Assessments: Evaluate your vendors’ cybersecurity posture and operational capabilities using detailed questionnaires and risk assessments. Regular audits can also help identify potential weaknesses in vendor security protocols.
Implement Continuous Monitoring: Automate real-time monitoring of third-party vendors, and integrate SIEM solutions with specific data sets like access logs or transaction records. Collaborate with vendors to leverage APIs or secure agreements for tracking critical events while respecting data privacy. These methods enable quick identification and remediation for threats such as unauthorized access or data breaches while adhering to the boundaries set by the third party.
Establish Strong Legal Agreements: Ensure contracts with third parties include provisions for reporting requirements, data handling, incident response, and regulatory compliance that align with industry standards and reduce risk.
Adopt a Zero Trust Approach: Limit third-party access to only the systems or data they need and employ strict identity verification and monitoring for access requests. This strategy can help prevent unauthorized access and data exfiltration.
Develop a Comprehensive TPRM Program: Ensure your TPRM program covers the entire vendor lifecycle from onboarding to threat remediation and off-boarding, to effectively manage risk.

Conclusion

The threat landscape in manufacturing is constantly evolving, and third-party risk management is key to keeping sensitive data and manufacturing processes secure. As the supply chain becomes increasingly digital, manufacturers must prioritize developing robust TPRM programs to manage risk, ensure compliance, and protect sensitive data. By integrating the strategies above into their cybersecurity playbooks, manufacturers can strengthen their defense against cyber attacks, safeguard critical business operations, and protect their reputations and competitive advantages.

Cybersecurity isn’t just an internal challenge; it’s a shared responsibility across your entire supply chain, including third-party vendors and suppliers. Manufacturing organizations must prioritize third-party risk management to secure their future.