NERC CIP-013: Vendor Risk vs. Vendor Risks

In last week’s post regarding FERC’s recent Notice of Proposed Rulemaking (NOPR) for CIP-013-2, the NERC supply chain cybersecurity risk management standard, I noted that FERC is apparently quite concerned that NERC entities aren’t properly performing the three essential elements of any risk management activity:

1. Identify risks. Of course, in the case of CIP-013, those are supply chain security risks to the Bulk Electric System (BES). They primarily arise through the vendors in the supply chain for intelligent hardware and software that operate or monitor the BES, although they can also arise through the NERC entity itself (for example, does the entity have a policy always to buy from the lowest cost vendor, without being concerned with frou-frou like cybersecurity?).
2. Assess those risks. The whole point of risk management is that some risks are very serious and need to be addressed as soon as possible, and others are not important and can simply be accepted. The assessment tries to distinguish high from low risks.
3. Respond to those risks. FERC notes that CIP-013-2 only mentions identifying and assessing risks, but never requires the entity to do anything about them. It’s a sure bet that the order FERC issues sometime after the NOPR comment period ends (in early December) will focus heavily on response.

The NOPR states that FERC proposes to issue an order for NERC to revise CIP-013-2 (i.e., replace it with a new standard, which will be CIP-013-3). Since FERC addresses each of the three risk management elements separately in the NOPR, I’ll discuss them in three separate posts, starting with risk identification in this post.

Probably the most important lesson I took from my experience working with NERC entities during the runup to compliance with CIP-013-1 was the difference between “vendor risk” and “vendor risks”. By vendor risk, I mean the risk posed by the vendor itself. Vendor risk is important when you’re considering whether to buy from a particular vendor at all; for example, when you’re evaluating five vendors with a competitive RFP. In that case, you ideally want to rank all five vendors by their overall level of risk (although that’s hard to do in practice).

In the OT world (i.e., the world that CIP compliance lives in), overall vendor risk isn’t usually a consideration. This is because the decision which vendor to buy (for example) electronic relays from is almost always “the same guys we’ve been buying from for the last 15 years”. Your relay vendor was chosen long ago for technical reasons, and your organization is very familiar with their products. Only a huge screw-up by that vendor would justify even talking to other vendors – and it still isn’t likely you would drop them, unless they had done something horrendous.

There are various services that will sell you risk scores for vendors, which are based on many factors (you can also compute your own scores, of course). For those rare occasions when you might switch vendors (or you’re starting to purchase a new type of product that you’ve never bought before), overall vendor risk scores can be very helpful. But for most OT procurements, vendor risk scores don’t help much. The engineers will make the decision based on functionality. Even if one vendor has an overall risk score that’s higher than another vendor’s, that’s not usually going to sway the decision.

So, why do you need to “identify” risks, if the decision which vendor to buy from was made long ago and won’t change for just one procurement? It’s because the risks that apply to one vendor can change substantially from one procurement to the next.

For example, suppose your organization’s last procurement from Vendor A was a year ago. The vendor hasn’t changed very much, but the environment certainly has. Let’s say that in the past year, the SolarWinds attack happened. Before SolarWinds, your organization never even considered whether a vendor maintained a secure software development environment. This year, you decide you need to ask them questions like

1. Do you require MFA for access to your development network?
2. How do you vet your developers?
3. Do you utilize a product like in-toto (an open source product) to verify the integrity of your development chain?

Or, suppose Vendor A has recently been acquired by Vendor B. Of course, they assure you up and down that they’re still the same Vendor A you’ve known and (mostly) loved for the last ten years. However, you decide that the safe path is to re-assess them before you start a new procurement. Along with the questions you’ve asked them in previous assessments, you add new ones like

1. How have your security practices changed since you were acquired?
2. What security certifications does Vendor B have? If you (Vendor A) don’t have one of them, when will you get it?
3. Will you merge your network with Vendor B’s, and if so, what measures will you take to make sure there’s no degradation of security controls?

All six of the above questions are based on new risks; that is, you have identified these as risks that apply to Vendor A, even though you’re not now even considering whether you want to continue using them. You’ll keep using them, but at the same time you need to identify all the risks that now apply to them, so you can pressure the vendor to mitigate them if needed.

In other words, it isn’t a question of whether Vendor A is now too risky to continue buying from. Rather, it’s a question of what are the new risks that apply to A, that didn’t apply the last time you bought from them? You’re not asking about Vendor A’s overall risk level; you’re asking what new risks they may pose to you, that arose since the last time you assessed them.

Any opinions expressed in this blog post are strictly mine and are not necessarily shared by any of the clients of Tom Alrich LLC. If you would like to comment on what you have read here, I would love to hear from you. Please email me at tom@tomalrich.com.