A new report from SecurityScorecard reveals alarming trends among the world's top energy companies, with 90% of them suffering third-party data breaches in the last year. This statistic is particularly worrying given the vital role these companies play in their daily lives.
Their increasing reliance on digital systems has led to an increase in attacks on infrastructure networks. This suggests that these energy companies need to take a proactive approach to protecting their networks and customer information.
In 2023, the energy industry faced significant challenges, with a significant increase in third-party data breaches. These incidents not only leaked sensitive information, but also raised questions about the industry's security protocols. Violations are varied, but all result in financial damage, reputational damage, and erosion of customer confidence.
Some of the key findings of this report include:
The energy industry reported 264 breaches related to third-party issues, and the top 10 U.S. energy companies were all included in the list of confirmed third-party breaches, and the moveit vulnerability was particularly prevalent in the past six months, affecting numerous global energy companies, with 33% of energy companies scoring C or lower on security, indicating a higher risk of breaches. The surge in breaches has prompted the industry to strengthen security measures, potentially leading to stronger defenses against future incidents.
When focusing on expansion, energy companies often hire multiple third-party vendors to provide professional services. These external partners, from software to logistics providers, bring their unique security configurations to the table.
While these collaborations bring multiple benefits, they also introduce new security vulnerabilities. A compromised merchant system can act as a gateway for cybercriminals to infiltrate a partner's data network.
Another key factor in the rise in the incidence of cyber breaches is the energy industry's push for digitalization. The integration of technologies such as IoT devices, cloud computing, and machine learning offers numerous benefits, but it also expands the attack surface.
With growth at the forefront of many energy companies, a thorough understanding of their chain's security tends to take a back seat. This lack of oversight can lead to critical weaknesses going undiscovered, creating a challenge for preemptively addressing vulnerabilities. These overlooked areas can become prime targets for cyber attackers seeking to exploit these security vulnerabilities.
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Critical infrastructure entities must remain vigilant against third-party breaches, as these incidents can jeopardize not only financial stability, but also operational efficiency and their public image.
Financial Implications
The economic impact of a data breach is enormous. Costs range from direct expenses for detecting and fixing violations to regulatory penalties and possible legal action for those affected. According to a recent IBM report on the cost of a data breach in 2023, the average financial loss from such incidents reached $4.45 million last year, a 15% increase over the past three years.
Impact on operations
Violations from third parties can significantly disrupt operational processes. This can lead to a period of inactivity and reduced productivity. In extreme cases, organizations may find it necessary to suspend their operations altogether to manage the situation. The cessation of this activity is especially important for organizations responsible for essential services such as electricity, water, and transportation, as it could lead to widespread social impacts.
Reputational damage
In addition to the financial and operational impact of third-party breaches, a company's reputation is also at risk. Trust is very important, and once lost, it is difficult to re-establish it. This can cast doubt on an organization's ability to protect sensitive information, which could impact its future business growth.
With the growing concern about third-party breaches, companies in the energy industry are not sitting idle and are implementing better security measures to protect against these threats. Here are some of the main strategies they use.
A detailed assessment of business and business risk management
A thorough vendor assessment should be conducted to mitigate third-party risk. This step is critical to ensure that partners' security protocols and practices meet company standards. It includes an assessment of its security practices, such as data protection policies, incident response plans, regulatory compliance, and financial health.
Continuously audit and monitor the best merchant systems
An important component of third-party risk management involves ongoing auditing and monitoring of external vendor systems and networks. This constant oversight helps companies detect changes in their business risk profile and identify potential threats more quickly. Leverage real-time monitoring tools to provide immediate alerts and routine audits for anomalous activity to ensure that vendors consistently meet established security standards.
Secure data transfer methods and strategic network segmentation
In the ordinary course of business with third parties, the secure sharing of data is a key issue. Companies are adopting secure data transfer protocols, such as data encryption, secure file transfer systems, and strict access management.
Network segmentation is another important strategy to reduce third-party risk. It involves dividing the network into different parts, each of which is protected by specific security measures, locating and limiting the impact of any potential breaches.
The recent increase in attacks against third-party vendors underscores the importance of continuously updating and improving third-party risk management strategies. By regularly reviewing and enhancing these policies, companies can stay ahead of potential threats and keep customer data safe.