Mr Dutton, we need help with supplier risk

When we speak with heads of cyber, risk and privacy, eventually there comes a point when brows become more furrowed and the conversation turns to suppliers and the risk they pose.

There are a couple of likely triggers. First, APRA’s new CPS 234 regulations require regulated entities to evaluate a supplier’s information security controls. Second, there’s heightened awareness now in the business community that many data breaches suffered by organisations are ultimately a result of the breach of a supplier.

The problem space

Organisations today use hundreds or even thousands of suppliers for a multitude of services. The data shared and access given to deliver those services is increasingly so extensive that it has blurred the boundaries between organisation and supplier. In many cases, the supplier’s risk is the organisation’s risk.

Gaining assurance over the risk posed by a large number of suppliers, without using up every dollar of budget allocated to the cyber team, is an increasingly difficult challenge.

Assurance

To appreciate the scope of the challenge, we first need to understand the concept of “assurance”, a term not always well understood outside the worlds of risk and assurance. So let’s take a moment to clarify, using DLP (Data Loss Prevention) as an example.

To gain assurance over a control you are required to evaluate the design and operating effectiveness of that control.  APRA’s new information security regulation CPS234 states that regulated entities require both when assessing the information security controls they rely upon to manage their risk, even if that control sits with a supplier. So what would that entail in this example?

  • Design effectiveness would be confirming that the DLP tool covered all information sources and potential exit points for your data. It would involve making sure data is marked and therefore could be monitored by the tool. Evidence of the control working would be kept.
  • Operating effectiveness would be the proof (using the evidence above) that the control has been running for the period of time that it was supposed to.

The unfortunate reality of assurance

In previous roles, members of our team have been part of designing and running market-leading supplier risk services. But these services never actually gave any assurance, unlike audit reports (eg. SOC2, ASAE etc). Supplier risk reports typically include a familiar caveat: “this report is not an audit and does not constitute assurance”.

This is because the supplier risk service that is delivered involves the consulting firm sending a supplier a spreadsheet, which the supplier fills in, prompting the consulting firm to ask for evidence to support the responses.

This process provides little insight as to the design or operating effectiveness of a control. If the worst case happens and a supplier is breached, the organisation will point to the consulting firm, and the consulting firm will point to that statement in the report that said the service they were providing did not constitute assurance.

We need your help, Mr Dutton

The reality is that every organisation getting actual assurance over every control at each of its suppliers is just not a feasible option.

We believe Australia needs a national scheme to manage supplier risk. A scheme in which baseline security controls are properly audited for their design and operating effectiveness, where assurance is gained and results are shared as needed. This would allow organisations to focus their cyber budget and energies on gaining assurance over the specific controls at suppliers that are unique to their service arrangement.

Last week, Home Affairs Minister Peter Dutton issued a discussion paper seeking input into the nation’s 2020 cyber security strategy. This is a great opportunity for industry to put forward the importance of a national and shared approach to managing supplier risk in this country. We will be putting forward this view, and some of the ideas in this post, in our response.

We encourage those of you struggling with supplier risk to do the same. If you would like to contribute to our response, please drop us a line here.