Protecting Your Business from Supply-Chain Attacks: What to Do When Third Parties Are Breached

In today’s interconnected digital ecosystem, businesses rely heavily on third-party vendors for various tools, technologies, and services. While these partnerships often bring efficiency and expertise, they also introduce risks. A breach at a trusted third-party vendor can expose confidential data and disrupt operations, causing substantial damage to the partnering company.

One of the most significant risks is a supply-chain attack, where hackers infiltrate a company through vulnerabilities in third-party software, services, or tools. So, how can businesses protect themselves from these indirect threats?

Understanding Supply-Chain Attacks

A supply-chain attack occurs when a hacker compromises a trusted vendor and exploits this connection to breach or, in other ways, affect their customers (e.g. denial of service, confidential data leaks, etc.). This type of attack is often stealthy and sophisticated, targeting widely used tools or services. Once hackers gain access, they can manipulate updates, inject malicious code, or exploit sensitive data from companies that use the compromised vendor’s products or services.

Supply-chain attacks present a unique challenge because businesses frequently operate under the assumption that their trusted partners (suppliers, vendors, contractors, etc.) within the supply chain have strong security measures in place, leaving potential vulnerabilities overlooked.. However, even a well-secured company can be vulnerable if a third party with access to their systems is compromised.

We often read about protective measures before the incident, but we rarely see articles discussing post-incident or incident response actions during such cyber-attacks. Therefore, in this article, we want to focus on what a company can do if it is affected by such a third-party breach.

What to Do When a Third-Party Breach Occurs

Even with strong preventive measures, breaches can still happen. When your third-party vendor is compromised, and it affects your company, taking swift, strategic action is critical. Here’s what you should do:

  1. Activate Your Incident Response Plan
    If a third-party breach occurs, immediately activate your incident response plan (IRP). This plan should already include predefined actions for dealing with third-party breaches. Start by assessing the scope of the breach and determining whether your data or systems have been compromised. It’s essential to act quickly to mitigate any potential damage.
  2. Communicate with the Vendor
    Establish clear communication with the affected vendor. Demand transparency regarding the breach, including how it occurred, what data or systems are affected, and what the vendor is doing to contain the issue. Request specific details about the timeline of the breach and ensure you receive timely updates.
  3. Contain the Breach
    Once the breach is identified, work with your internal teams to isolate any connections between your systems and the vendor. This may include revoking or limiting vendor access, applying security patches, or disconnecting affected systems. Containing the breach quickly is essential to prevent further spread or damage.
  4. Conduct a Forensic Investigation
    Collaborate with the vendor and possibly third-party cybersecurity experts to conduct a forensic investigation. This will help determine whether any of your systems or data were compromised during the breach. The investigation can provide insights into how the attack occurred and whether further action is necessary to protect your assets.
  5. Assess Data Exposure and Notify Affected Parties
    If sensitive or confidential data was exposed during the breach, it’s crucial to assess the extent of the damage. Determine what data types were affected and if they include personal or sensitive information about customers, partners, or employees. Depending on the severity of the breach, you may be legally obligated to notify affected parties, regulators, and stakeholders. Ensure that this communication is timely and transparent to maintain trust.
  6. Work with Law Enforcement (if applicable)
    In cases where the breach may involve criminal activity, such as a ransomware attack or intellectual property theft, collaborate with law enforcement. This can help in tracking down the attackers and potentially recovering compromised data.

Now that we have provided generic steps on how to deal with a third-party breach, let’s dive a bit deeper into its most essential part: the incident response plan.

For Supply-Chain Attack an Incident Response Plan (IRP) is essential for mitigating security incidents, including third-party breaches, ensuring a swift, organized response to limit damage and protect assets.
An Incident Response Plan (IRP) is essential for mitigating security incidents, including third-party breaches, ensuring a swift, organized response to limit damage and protect assets.

Incident Response Plan: Preparing for Third-Party Breaches

An Incident Response Plan (IRP) is a critical component for any business looking to mitigate the impact of security incidents, including those stemming from third-party breaches. A robust IRP outlines the specific steps a company must take when a breach occurs, ensuring a swift and organized response that limits damage, contains the breach, and protects critical assets.

When it comes to third-party breaches—where your vendors or service providers are compromised—having a well-documented and practiced IRP is essential. The plan should focus not only on your internal processes but also include coordination with the third party, clear communication with stakeholders, and recovery actions.

Here’s what should be in an IRP designed to address third-party breaches:

1. Preparation and Prevention

Before an incident occurs, the IRP should lay the groundwork for minimizing potential threats from third-party vendors. This includes:

  • Vendor Risk Assessment: Continuously assess third-party vendors for potential risks. Review their security practices, compliance certifications, and incident response capabilities.
  • Contractual Safeguards: Ensure that contracts with third parties include terms for data security responsibilities, breach notification timelines, and liability for incidents. These agreements should define what constitutes a breach and the specific actions the vendor must take if compromised.
  • Training and Awareness: Regularly train your internal teams on the IRP, ensuring they understand how to recognize a breach and what immediate steps to take. Make sure your third-party vendors are aware of their role in your incident response process.

2. Identification and Detection

Once a potential breach has occurred, early identification is key to limiting the damage. The IRP should outline how the breach is detected and reported, whether by the vendor or internally:

  • Monitoring and Alerts: Ensure continuous monitoring of third-party systems and services integrated into your environment. Implement automated alerts for unusual activity, access anomalies, or performance degradation that may signal a breach.
  • Breach Notification from Vendors: Include in the plan clear protocols for how vendors must notify you of a breach. Vendors should be required to inform you promptly once a breach is identified, and this timeline should be specified in your contracts.
  • Internal Reporting Process: Create a formal process for internal employees to report suspected third-party breaches. Make sure the plan specifies who in your organization (e.g., security teams, legal counsel) should be notified first.

3. Containment

After a third-party breach is detected, the next step is to contain it to minimize the impact on your business. This involves isolating affected systems and cutting off further access:

  • Vendor Access Controls: Immediately suspend or revoke access privileges for the compromised vendor until the breach has been fully assessed. This might include limiting access to sensitive systems or data and deactivating any integration points between your network and the vendor.
  • Network Segmentation: If the affected vendor has access to various parts of your network, ensure your systems are adequately segmented to prevent the breach from spreading. Segmenting critical systems from those accessed by vendors will reduce the blast radius of the attack.
  • Emergency Patches and Updates: If the breach is related to a software vulnerability or compromised tool from a vendor, ensure that emergency patches and security updates are deployed quickly to minimize further exposure.

4. Eradication and Remediation

Once the breach has been contained, the IRP should outline the steps to fully eradicate the threat and remediate any damage:

  • Forensic Investigation: Conduct a thorough forensic investigation to determine the full extent of the breach. This should include identifying how the attacker gained access through the vendor, whether any of your systems or data were compromised, and whether the breach has been completely contained.
  • Vendor Collaboration: Work closely with the vendor to understand how they plan to eliminate the threat from their systems. Insist on transparency regarding the steps they are taking to address the root cause of the breach.
  • Data Restoration: If any data was lost or compromised during the breach, establish a process for restoring it from backups and ensuring its integrity. Before restoring, verify that backups are clean and unaffected by the breach.
  • System Hardening: Identify any vulnerabilities in your own systems exposed by the breach and take steps to harden them. This may involve applying patches, enhancing encryption, or closing security gaps identified during the investigation.

5. Recovery and Communication

After the threat has been eradicated, focus on recovery—restoring business operations to normal—and communicating with key stakeholders:

  • Restore Business Functions: Coordinate the safe reintroduction of affected systems back into production. This process should be gradual and closely monitored to ensure that the breach is truly resolved.
  • Notify Affected Parties: If the breach resulted in the exposure of sensitive data (e.g., customer or employee information), you may be legally required to notify affected parties. The IRP should include a detailed communications plan outlining how to inform regulatory authorities, customers, partners, and employees about the breach and its impact. Timing, transparency, and trust-building are critical in these communications.
  • External Communication: Manage your public relations carefully. In some cases, third-party breaches can lead to reputational damage. Prepare statements to address any public concern, particularly if sensitive data has been exposed.

6. Post-Incident Review and Lessons Learned

Once recovery is complete, the IRP should include a post-incident review to analyze what went well and what could have been done better:

  • Internal Debriefing: Conduct a post-mortem with key stakeholders, including your IT, security, legal, and PR teams, to discuss how the breach was handled. Evaluate the effectiveness of your response efforts and identify any gaps in your current security posture or response protocols.
  • Vendor Re-Evaluation: Reassess the compromised vendor’s security controls and practices. Determine whether you need to impose stricter requirements or, in extreme cases, terminate the relationship. Ensure that any new measures are included in future contracts or security reviews.
  • Update the IRP: Based on the lessons learned, update your IRP to address any shortcomings identified during the breach. This could include adjusting the roles and responsibilities of teams, improving communication channels, or enhancing security monitoring tools.

7. Ongoing Improvement

Incident response is not a static process. Your IRP should be a living document that evolves based on new threats, lessons learned from incidents, and changes in your business:

  • Regular Testing and Simulation: Periodically test your IRP through tabletop exercises or breach simulations. These exercises should include scenarios where third-party vendors are breached to ensure your team is ready to act in such cases.
  • Vendor Audits and Security Improvements: Regularly audit your third-party vendors to ensure they continue to meet your security expectations. Encourage vendors to improve their own incident response capabilities, conducting drills and updating their procedures based on industry best practices.

Preparing for the Inevitable

No matter how stringent your security practices are, breaches—especially those involving third-party vendors—are a matter of “when,” not “if.” Having a well-structured Incident Response Plan that addresses the specific challenges of third-party breaches is crucial for minimizing the impact on your business. By focusing on preparation, clear communication, containment, and continuous improvement, companies can not only survive these incidents but also come out stronger and more resilient.

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