As cloud storage and payment processing continue to grow in importance, so does the use of third-party vendors. This drastically affects how businesses operate today. While these partnerships help drive efficiency and innovation, they also pose major threats that cannot be ignored. As a consequence, a single breach from any vendor can put the entire organization at risk of cyberattacks, loss of funds, and even damage to the reputation of the business.

Criminals are now targeting supply chains more than ever before and this has caused timely business operations to reach an all-time fragile state. So, even the presence of solid security measures does not guarantee protection against a breach as a single gap in a vendor system is enough to compromise the overall security.

Understanding Third-Party Data Breaches

As a business, integration with a third-party vendor allows them to access your data and systems. This can serve as a dangerous gap, and without the presence of cybersecurity measures, works as a means for criminals to attack. These concerns no longer look hypothetical as 61% of companies claim having suffered from a data breach caused by a vendor. This is astonishing, considering it stands at a 49% rise from last year.

Common Attack Vectors

• Phishing: In this modern world, it has become increasingly easy for cybercriminals to target vendors using deceptive emails to trick them into sharing login credentials. These can go on to be leveraged to gain entry to sensitive corporate systems.

• Weak Credentials: The use of easy or shared passwords by vendors increases the chances of unauthorized access, making it easier for attackers. In 2022, compromising credentials was responsible for almost 20% of cyberattacks.

• Supply Chain Vulnerabilities: Attackers take advantage of the gaps in software or services that the vendors provide. Third-party software vulnerabilities accounted for 13% of the cyberattacks that occurred in 2021.

The Rising Frequency of Vendor Breaches

The number of data breaches reported for 2024 stands at 3,158, the same as in the previous year. The difference is the impact, more than 1.7 billion breach notices were reported throughout the US which is significantly worse.

A specific important case was the breach of National Public Data in August of 2024 that exposed the personal information of roughly 2.9 billion people. This breach had the sensitive data of social security numbers, names, and addresses of people from the US, Canada, and the UK.

Breaches of this kind can result in enormous financial impacts, increased legal liabilities, and damaged credibility for businesses. For consumers, the risks range from identity theft and financial fraud to privacy infringement.

As the number of vendors increases, so does this risk since the vulnerability in the vendor’s system becomes a playground for hackers who in turn, can compromise the data of multiple firms and their clients.

In order to reduce the risks, businesses should employ strong vendor management policies, perform regular security checkups, and check that their associates follow the third-party cybersecurity requirements.

Consequences of Third-Party Data Breaches

Paying out of pocket to fund the damages inflicted by a third-party vendor will no doubt put your business at risk financially. One example would be MGM Resorts International which paid $45 million in settlement costs due to data breaches in 2019 and 2023 which revealed the personal information of 37 million customers.

Not only do these breaches cause direct losses, but your company’s brand reputation takes a hit as well. Customers place a lot of trust in you due to the sensitive information given, and major breaches like these lose customer trust and lead to a damaged brand reputation. Research on 45 companies concluded that data breaches result in obliterating the company’s reputation by decreasing trust and loyalty from customers.

Usually, these types of incidents come with significant legal ramifications. Customers or your business partners may sue, and together with that, regulatory authorities could issue fines for neglecting to protect the information.

Take the data breach AT&T suffered in January 2023 and subsequently agreed to pay $13 million for. They breached data protection laws and suffered compliance penalties like many organizations do when failing to comply with data protection laws.

Strategies to Mitigate Third-Party Risks

It is essential to check the security policies of the vendors before collaborating with them. Such analysis, if done thoroughly, shall give rise to problems that could threaten your information.

Remarkably, two years prior, 98% of companies reported having at least one third-party vendor with whom they did business and who suffered a breach. Your organization and its mitigating efforts would greatly benefit from thorough assessments so as to nip issues into the bud.

Limiting the vendor’s access to specific information and systems shrinks the damage that could be caused. These steps made it possible to detect prompt abuse detection through careful observation. Remarkably, vendor compromises account for 32% of all publicly disclosed breaches, so this figure illustrates as to why it is necessary to take these actions.

Make sure that your employees and your vendors are proficient in security policies. Organizations should routinely hold training sessions to help mitigate human blunders that often result in incidents that contravene security. There is also the necessity of making people adhere to the established policies that pertain to security.

There is no doubt that enforcing strict policies combined with continued training reduces the likelihood of breaches.

Conclusion

Data breaches of third-party vendors pose a risk that businesses continue to underestimate. As cyber threats increase, businesses should consider taking vendors’ security assessments, data access restrictions, and compliance enforcement on the priority list. Improving the cybersecurity posture of your supply chain will mitigate risk and safeguard sensitive information. Being watchful and active will minimize the chances of a breach and reputational harm to the business.

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