Vendor risk is a growing concern – especially when it comes to cybersecurity. Most businesses, regardless of size or industry, rely on third-party providers for essential services like software, cloud storage, logistics and customer support. But these partnerships come with risks that are often outside your client’s control. By understanding how vendor risk works, your clients can better prepare for potential disruptions, data breaches, or compliance issues.
Examples of vendor risks for your clients
As a broker, you deal with many different clients from a variety of industries. But no matter what kind of industry your clients are in, working with vendors means there is potential for risks. A few examples of vendor risks include:
- A supplier fails to deliver products on time.
- A software provider suffers a data breach.
- A service provider goes out of business.
- A cloud storage service experiences an outage.
- A vendor mishandles sensitive client data.
Cybersecurity and vendor risk
Cybersecurity isn’t just something for big corporations to worry about. Cybercrime can impact any business in Australia that uses digital tools or handles data, including your small business clients.
How does cybersecurity fit in with vendor risk?
Let’s consider the recent Qantas cybersecurity event. This cybersecurity breach occurred because a third-party customer service platform used by Qantas’s offshore call centre was targeted by a global hacking group. This is what’s known as a supply chain cyberattack.
The hackers breached the third-party vendor’s system – likely via a social engineering attack. The criminals were then able to hack into Qantas’s system through the third-party vendor, which led to an approximate 5.7 million customer records being compromised.
Also this year, Hertz confirmed that it had been hit by a data breach relating to one of its vendors. Australian Hertz customers’ names, contact information, dates of birth, driver’s license information and payment card information were all stolen. According to the global car hire company, the attackers “exploited zero-day vulnerabilities within [the third-party vendor] platform.”
While both these attacks were against multi-billion dollar companies, hackers are increasingly targeting small businesses because they generally have weaker cybersecurity infrastructures. This makes them low-cost, high-reward targets for cybercriminals.
Updated privacy laws could impact your clients
With Australia’s updated privacy laws, businesses are expected to take reasonable steps to protect their clients’ data. In some contexts, this could also extend to properly vetting and monitoring vendors. So even if your clients’ cybersecurity measures are up to scratch, can they say the same for their vendors?
No system is 100% foolproof against hackers
The world of cybercrime is evolving every day, which means that businesses must remain vigilant to aways stay one step ahead of hackers.
But even if your client has taken proactive security measures and the initial breach starts with a vendor, the reputational and financial consequences can fall squarely on your client’s shoulders – especially if they’re seen as not having done enough to protect customer data.
In case the worst should happen, Cyber Insurance can act as a backup plan to protect a business’s profitability and reputation.
How brokers can add value
As a broker, you’re in a prime position to educate clients about the hidden risks in their supply chain. Use real-world examples, like the Qantas breach, to show how quickly and unexpectedly third-party issues can escalate.
Here are a few key talking points to raise in conversations:
- What would happen if your main software vendor was hacked?
- Are you confident your vendors are meeting the same cybersecurity standards you hold yourself to?
- If a cyber incident affected your business, do you know what your legal obligations would be and how you’d cover those costs?
By proactively discussing these scenarios, you can help clients see Cyber insurance not as a “nice to have,” but as a smart part of their broader risk management strategy.
BizCover for Brokers offers cyber protection for your SME clients
The world of cybercrime and security is growing more complicated every day – but selling Cyber Liability insurance doesn’t have to be.
BizCover for Brokers gives you a streamlined, effective way to protect your SME clients from cyber threats, including those resulting from vendor risk and supply chain attacks. Our platform makes it easy to quote and bind cover from three leading insurers – Chubb, Dual, AIG – so you can find the right fit for your client’s unique risk profile.
To help you provide fast and reliable service, we’ve also built a 10-question Cyber question set that gives you clear insights into your client’s vulnerabilities.
Whether your client is worried about vendor data breaches, ransomware or meeting updated privacy regulations, our cyber solution is designed to give brokers the tools they need to provide tailored protection to a range of clients in different circumstances.
Start quoting and binding today with BizCover for Brokers.