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Investigate due diligence as it applies to the purchase of components or services from vendors. Answer the question: how can due diligence processes help a company manage supply chain risks?

Research best practices and recommended strategies and approaches for managing global supply chain risk?

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Cyber security in a supply chain usually refers to the management of the security requirement of IT systems, networks, and software (Boyson, 2014). The cyber security threats are due toissues such as data theft, malware, cyber terrorism, and Advanced Persistent Threat (Tankard, 2011). The usual activities for the minimization of cyber security risks include transactions with only trusted vendors, disconnection of critical systems and machines from external or public networks, and spreading awareness on the potential threats and measures that can be deployed to mitigate them.
The increasing popularity and implementation of the Internet of Things along with other innovative platforms require organizations to continuously analyze the security of their data, which are usually highly complex in nature (LMI, 2019). Digitization has made it easier to speed up the access of data and also to facilitate the building of better and stronger connections within any supply chain, which makes it all the more important to secure them from cyber threats.

Supply chain risks

There are numerous challenges presented by complex data when it comes to the cyber security of supply chains. There has been a massive growth in the volume of processes, data and data sources, and various other systems, mostly because organizations are aiming to capture and utilize all the accessible information on their hands. They are doing this before they can even establish the utility of the data that has been captured. Furthermore, this is also leading to an unchecked increase in the complexity of the data systems, without much regard for the need of a management approach and data strategy for the enterprises. However, the most important challenge remains that of being able to secure the supply chain against the cyber threats due to the numerous IT risks that are currently prevalent.

Below is an account of the numerous cyber security risk factors in supply chain management -

1. It is extremely important to be aware of the location of the production facilities of the supplier from whom an organization is sourcing the products, services or raw materials. This is necessary for understanding the degree to which the supply chain is susceptible to cyber security threats. In case the country or territory of origin is more vulnerable to such threats, it could lead to a compromise in terms of the supplier facilities and can thus contribute to delays in the entire process (Urciuoli, Männistö, Hintsa, & Khan, 2013). It could also affect the quality of the products that are transferred.

2. The physical security of the suppliers is another important factor that must be assessed, and could be at risk, especially if the location is in a country or region that is prone to high levels of terrorist activity. There are multiple factors that need to be taken into account for securing the physical location, which would give an idea of the ability of the suppliers to safeguard their products.

3. A third risk factor in this regard is the accuracy of the shipment or delivery. It is important that the supplier is able to deliver the necessary products or services on time, and it also makes it possible to analyze and measure the amount of risk that is imposed on the supply chain. The time, mode and rerouting procedures of the delivery methods must always be taken into account (Speier, Whipple, Closs, & Voss, 2011).

4. There are numerous social as well as environmental responsibilities that must be taken into account. For instance, the manufacturing processes of the products should be considered, in order to ensure that they have been pursued with minimal damage to the environment and society. Furthermore, internal policies such as paid leaves, maternity leaves, and the overall work environment are also some factors that should be considered. These social responsibilities have started to gain major momentum when it comes to the possible risks of supply chain management due to the imposition of numerous safety regulations that are being passed.

5. The fifth risk factor that can be mentioned here is that of the internal processes that enable to get a view of not just the security but also the different controls that the manufacturing processes are subject to. For instance, the control and restriction of computer usage and electronic data are important factors, along with the necessity of performing background checks of all the employees (Blanchard, 2009).
Despite these supply chain risks, many organizations are still not very aware of the numerous security vulnerabilities of their supply chains, not to mention their lack of ability to even diagnose or determine those issues. A significant amount of threats is covered under this arena. For instance, the low-tier suppliers could have little or no measures for security practices in terms of the information they process, store and transfer. Also, the hardware and software that has been purchased from the suppliers could be compromised in many manners, especially if the manufacturing country is subject to high-level threats (National Institute of Standards and Technology, 2018).
This could lead to serious security vulnerabilities and threats in the supply change management.

The hardware procured could be infected with malware, which is the case for most counterfeit products sourced from unreliable suppliers. Another key cyber supply chain risk is that of data aggregators or third-party data storage facilities, especially those vendors that outsource their services, ranging from engineering to janitorial facilities (National Institute of Standards and Technology, 2018). They often have access to the software codes, IP addresses and the information systems in either virtual or physical form.

Due diligence

As stated by Norton (2014), it is no secret that the easiest pathway to classified data of any organization or firm is through a third-party vendor, often one that has been authorized by the enterprise themselves. This new threat has given rise to the necessity for going beyond the due diligence associated with monitoring and allocating the third-party vendors or systems on a real-time basis. In other words, it is important that the enterprise possesses the ability to take real-time action against the vendor in case of a potential security breach. This can limit the damage to a significant extent. In order to have a highly enhanced due diligence process, there are several steps that an organization can follow to avoid the harm brought forward by third-party entities (LexisNexis, 2019) -
1. The enterprise should understand all the compliance concerns and regulations that are formulated with the intention to mitigate the risks.

2. The corporate objectives for this purpose, i.e., for due diligence must be clearly defined, as they must be in alignment with the various risks in terms of regulatory, financial, or strategic.

3. Important information, such as details of shareholders, board members, identity proofs, funding sources, and official references, among many others, need to be collected.

4. Third-party vendors should be screened using a watch-list or a checklist to assess whether the third-party vendor can pose a potential risk or threat.

5. A risk assessment should then be performed, which would consider entity risks, internal factors, and sector-specific risks.

6. The information collected should be validated and verified through a crosscheck with various public records and databases.

7. The entire due-diligence process should also be audited. In other words, a record must be kept of the evaluations, documents and decisions involved with the process.

8. After selecting a third-party entity, the organization should continue to actively keep track of and monitor their activities, so that they do not become risky assets.

9. Finally, the due diligence processes should be regularly reviewed and updated in order to be aligned with the changes that occur over time.

There are also certain questions that can be utilized for determining the extent of riskiness of the cybersecurity practices of the suppliers or third-party vendors (National Institute of Standards and Technology, 2018). Some of the more relevant questions on cyber security can be as follows -

1. What are the various controls for managing and monitoring the various production processes?

2. How are configuration management and quality assurance measures performed? What are the tests for quality and vulnerabilities of the code?

3. Are employee background checks conducted frequently? What kind of checks are performed?

4. In what way does the third-party entity assure the organization of security through the life cycle of the products?

5. To what extent are malware detection and protection tasks performed?

6. Is the distribution process secure? What are the different measures available?

As far as the political dimensions are concerned, government and other entities can impact the various social norms, which in turn influence the environmental underpinnings. In terms of supply chain management, these three factors affect the operations and product transference, along with a significant impact on the risk management practices.

Best practices

When it comes to the best practices that have been adopted by numerous companies or organizations for maintaining the cyber supply chain risks, mention can be made of the following -

1. A tight control on the purchase of components, which can be practiced only with vendors that have the approval on a predetermined basis. In such a case, the products obtained from the vendors are subject to thorough scrutiny before they are accepted with the use of x-rays and other inspection methods (National Institute of Standards and Technology, 2018).

2. The software as well as the hardware used can have security protocols. The booting process for the same can be secured through the use of codes for authentication, and the system can be programmed to not complete the boot in case the codes entered are wrong.

3. A security team can work hand-in-hand with the selected vendors to ensure that all the security gaps and vulnerabilities are identified and addressed as swiftly as possible. Furthermore, in case the vendors provide counterfeit or questionable products, or if they do not adhere to the security policies, they can be disqualified (Gort, 2019).

4. The testing processes, along with the manufacturing regimes, can be automated, which implies that human intervention would be unnecessary (National Institute of Standards and Technology, 2018). This will help reduce the risks associated with human errors or interference.

5. All the processes must be tracked and traced, which would make it easier to keep a record of the systems, components and parts obtained from the vendors. Furthermore, the security measures must be tested and improved as time passes.

Having best practices such as the aforementioned ones enable organizations to develop a defense system that is based on the assumption that the systems will be subject to security breaches. In this case, since the firm has already expected the breach, it is quite natural they would be fully equipped to mitigate the risks if and when they must arise. Furthermore, the best practices take into consideration the fact that these lapses occur mostly due to human error and seek to reduce such instances by using cyber security practices (National Institute of Standards and Technology, 2018). They also benefit organizations by closing the gap between cyber and physical security.

Summary and conclusion

Supply chains and their management are extremely vital for the development as well as the fulfilment of any kind of technology, and organizations thus tend to invest quite heavily in their supply chains. The increase in the globalization of companies as well as their supply chains have also made it mandatory to manage risks and have an assessment method in place, which can not only evaluate the potential threats but also etch out plans to mitigate them. In terms of cyber security, numerous threats can surface, ranging from software-based issues to hardware infected with malware. Furthermore, the reliance of many organizations on third-party vendors and entities have also increased, which has paved the way for the due diligence measures, that are aimed at ensuring that these entities can work harmoniously without causing security breaches for the firms they are associated with. This has also led to the need for a set of best practices, which benefit the enterprises by enabling them to be ready for security breaches, and also by reducing the instances of such issues due to human error by reducing the need for manual intervention.
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