Retail Business & Risk Management
Retail businesses are adopting more advanced technologies to drive their daily operations. Software-as-a-Service (SaaS), Infrastructure-as-a-Service (IaaS), and Platform-as-a-Service (PaaS) are just some of the many innovative technologies that retailers are using to boost business efficiency. These systems streamline data collection, make transactions easier to process and even uncover valuable insights that company data may hold.
But as retailers continue to handle large amounts of data, new cybersecurity risks are emerging. Hackers know that business data is valuable in many ways, and they’re relentlessly trying to penetrate your systems and cause havoc. Therefore, having a risk management and cybersecurity plan for your retail business is critical. And because retailers frequently handle personally identifiable information (PHI), the need for data security is at an all-time high.
How Digital transformation has disrupted retail operations
Retailers now use many different systems to facilitate their daily operations. For example, retail stores use mobile apps to receive and process orders from customers. These apps are then integrated into inventory systems and other in-house platforms to make the ordering process more efficient.
Retailers also use supply chain platforms to communicate their inventory requirements with upstream suppliers. A potential data breach could potentially affect the entire supply chain, including your company operations. As digital transformation has made retailers more efficient, the need for data security should not be ignored.
Data Risks that retail businesses face
Due to the types of data that retailers handle daily; the risks of data breaches are many. The 2018 retail cybersecurity report showed that 50% of retailers had experienced a data breach, while 84% of respondents had plans to strengthen their IT security environment.
The systems that retail businesses use are also particularly vulnerable to data breaches. For example, there is currently no standardized framework in place for handling IoT cybersecurity concerns. Cloud platforms also remain exposed to many emergent risks that may come with catastrophic consequences.
Understanding supply chain risks to retailers
The supply chain is the flow of goods and information from manufacturers to consumers. Retailers sit right in the middle of an extended supply chain that has many different risk areas.
For example, manufacturers (the producers of a product) sell to merchants (wholesalers) who then sell to retailers. A typical business supply chain (for a retailer) includes multiple players who all expose your company to risk. If your manufacturer’s database is hacked, the information obtained can be used to access your merchant’s information (such as email addresses and passwords).
In turn, this data could ultimately be used to compromise your retail business data. A data breach at the manufacturing level may eventually trickle down to the consumer level and put their data at risk.
In addition to the business supply chain, retailers are also exposed to a digital supply chain. The digital supply chain refers to integrated information systems that facilitate order processing, inventory management, among other relevant services. These systems are powered by SaaS providers (such as AWS, Microsoft Azure, and IBM), and they’re used by manufacturers, merchants, and retailers alike. Therefore, any risks that a vendor is exposed to may also result in your information being compromised.
How to Develop a Risk Management Plan for Your Retail Business
Due to the many different risks that retailers face, they need to build a risk management plan that will reduce the likelihood of data breaches.
A risk management plan for retailers should include the following steps:
1. Identifying and Assessing Potential Risks
The first step is to identify the potential risks that your retail business faces. Such risks may come from IoT devices (which are exposed to intercepted signals), SaaS systems, third-party vendors, and upstream suppliers of your products.
2. Risk Analysis
Risk analysis involves determining which risks are likely to cause more extensive consequences than others. For example, cardholder data (including names, addresses, and credit card numbers) is a more significant risk when compromised than inventory data. Risk analysis allows you to prioritize the most significant risks and develop an adequate response.
3. Developing a Risk Response Strategy
Considering the dangers that your retail business faces, your next step is to develop a risk response strategy. This is a series of steps that your company will take to respond to a threat.
4. Risk Monitoring
Even after you develop a plan for responding to various risks, you still need to actively monitor your data environment to determine how practical these steps are. Risk monitoring also allows you to identify new risks and to respond to them before your data is hacked.
5. Implementing Vendor Risk Management
Remember that threats may also come from your third-party vendors. Part of your retail risk management plan should involve a vendor risk management program.