The Shocking Cost of Vendor Data Breaches

Modern supply chains are a complex web of interconnected, intertwined digital ecosystems, each supporting the other. Look around you, and everything from how your workstations perform to how your data is being managed consists of several different suppliers and vendors, beyond what might be evident to you on first glance.

You may have bought your web domain from an American company, but your hosting servers are in Europe. You probably bought your cloud infrastructure from AWS or Google, but your data is being stored in a remote village in Norway.

Beyond what is visible lies a plethora of vendors and suppliers that work together like clockwork to make sure your business infrastructure remains up and running.

However, this is where the problem begins. A single outage, data breach or fault with one of these vendors can have a devastating ripple effect on your business operations.

Your direct vendor might not even be responsible, but their service might depend on a third-party provider, with whom you have no connection, and yet, your business takes the complete brunt of the situation.

Therefore, in today’s world, companies don’t just have to prepare for internal data risks but also think about the data risks posed to their suppliers and vendors.

Related: How to Mitigate Cybersecurity Risks Associated With Supply Chain Partners and Vendors

Vulnerabilities due to a web of interdependencies

In 2021, millions of websites across the world suddenly went offline. This included business websites, banks, ecommerce ports and even government agencies. In fact, it took out a major chunk of European and mostly French websites.

After a couple of hours, it was found that one of the four data centers owned by the company OVHcloud was destroyed due to a fire.

While the data centers supposedly had backups, the resulting damage in terms of data breaches and lost business cost tens of millions of dollars.

Even some of the largest companies in the world are regularly attacked and are susceptible to data leaks.

Orange Belgium’s data breach exposed information of 850,000 customers. Allianz Life’s data breach exposed personal information of more than a million customers, and a Qantas cyberattack leaked information on over six million airline customers!

More recently, a ransomware attack on the UK’s NHS (National Health Service) disrupted blood tests across several London hospitals, eventually leading to the death of at least one patient. The software provider for the NHS, Advanced Computer Systems, was eventually fined £3 million, but only after an innocent life had already been lost.

While these large organizations cannot be solely blamed, it is clear that even if you have the most robust IT and security infrastructure within your organization, you are never immune to the vulnerabilities of your vendors.

Common mistakes that lead to weak data management

Similar to the example of OVHcloud, many vendors simply lack a robust backup system to ensure operations run smoothly — this is where the problem starts. Due to a poor backup system, they also have an insufficient disaster recovery plan in case of a ransomware attack. Therefore, a fire in only one of their four data centers brought down millions of their customers’ websites.

Another example might be the NHS’s software. They probably had data integrity checks built into their security, but they were insufficient, making it easy for an attack to take place across a number of locations. Overall, a reliance on manual recovery efforts and weak cybersecurity practices creates vulnerabilities that can have devastating consequences.

Related: 3 Ways to Ensure Cybersecurity Is a Priority for the Companies You Partner With

Cost of a vendor data crisis

Any data breaches or attacks on your vendors will have a direct impact on your business. It can directly result in operational downtime, which can include workflows that completely stop working, supply chain disruptions, invoicing issues and much more.

In the short run, it can lead to lost sales, SLA breaches and even penalties, while in the long run, the financial impact due to reputational damage can be even worse. If customers can’t trust you to deliver on time or protect their data, they might never return.

It’s important to safeguard your business against such scenarios, and there are a couple of steps that can help you mitigate these.

How to mitigate a vendor data crisis

Before signing a contract with a vendor, it’s important to do your due diligence and assess their data and security infrastructure. This might seem instructive, but it is one of the important first steps you can take to protect your business and data against vulnerabilities.

It is also important to carry out regular audits and ensure SLAs are met and that they are up-to-date with industry standards.

Overall, there needs to be a plan for diversification so that no single vendor can impact a critical workflow.

Related: Why Cybersecurity is the Key to Unlocking the Full Potential of Supply Chains

Why it’s important to have robust data recovery tools

Despite all the due diligence and backups, no system is 100% fail-proof. This is why your business must have reliable recovery tools that can help recover damaged files, important emails and even complete databases, making sure your organization can be back on its feet as soon as possible.

A company’s data can be worth tens of thousands of dollars for a small business and much more for a larger organization. Using such software is the perfect safety net when prevention fails.