Report: Cyber Attacks Threaten Supply Chain


By University Alliance on October 07, 2013

October 07, 2013

Cyber attacks and technology failures are posing new and growing dangers to business supply chains worldwide, according to a new report by a global risk assessment and reinsurance firm.

From 2011 to 2012, the number of cyber attacks that resulted in reported data losses more than doubled to approximately 2,600, the Guy Carpenter company noted in its September 2013 report, Tomorrow Never Knows: Emerging Risks.

“We are observing the rise of many new risks as technological, economic and scientific advancements are made,” David Flandro, the company’s global head of business intelligence, said in a statement.

The report found that cyber attacks now outstrip fire and social unrest as a cause of supply chain disruption. Combined with other technology risk factors, such as unplanned power outages and service provider failures, cyber risks are the leading cause of supply chain stoppages.

Economic losses associated with supply chain disruption have consequently increased significantly in recent years,” the report’s authors noted. For example, data breaches cost organizations an average of $5.5 million, while the average loss associated with simply misplacing a laptop computer was $50,000 in 2012

In addition to data losses, cyber attacks can result in the exposure of confidential information and damage to a company’s reputation. Even disruptions far from a firm’s headquarters or main operational base can cause widespread damage, given the increasing automation and interconnectedness of modern supply chains.

Innovations in digital technology have “added an element of structural vulnerability into the economy,” the authors wrote.

“Technology is indeed a critical enabler of a supply chain’s operations,” the report continued. “Therefore a cyber attack has the potential to put an entire company’s supply chain at risk.”

The federal government also is highlighting the looming threat posed by cyber criminals and other online intruders. In an August 2013 blog post, The White House discussed the dangers facing the nation’s electric grids, water supplies, transportation systems and other networks.

“As with any networked system, these systems are potentially vulnerable to a wide range of threats, and protecting this critical infrastructure from cyber threats is among our highest security priorities,” the post noted.

In 2013, President Barack Obama signed an executive order to help harden cyber defenses. The government also is considering several voluntary and mandatory measures, including cybersecurity insurance, infrastructure grants, and research and development.

Additionally, October marks the 10th anniversary of National Cyber Security Awareness Month, which is sponsored by the U.S. Department of Homeland Security.

The Guy Carpenter report recommends that companies consider purchasing insurance coverage to protect against cyber attacks, as well as take steps to gauge the ability of their suppliers to maintain business continuity in the event of such an incident.

“The disruption potential of cyber risks on supply chains has often been overlooked or discounted,” the report noted.

Category: Supply Chain Management