Did you know that eight out of 10 small businesses have no employees? Yes, you read that right: Out of the 33 million small businesses in the U.S., 27 million are run by a single owner with no other employees. 

To make up for a lack of employees, smaller businesses often rely on third-party vendors for much-needed operational support. And although third-party vendor risk is something every size business should be aware of, smaller businesses face a unique set of challenges regarding third-party risk management (TPRM) that makes it even more essential to implement a comprehensive TPRM process.

Unique TPRM Challenges for Small Businesses

Small businesses often lack the resources of large enterprises, such as financial safety nets, employee headcount, and security teams and expertise. This can make it extremely difficult for a small business to bounce back from a breach. As a result, strong cyber practices – including a TPRM strategy – are essential for small businesses.

Brand Reputation Can Make or Break a Small Business

A data breach caused by a third-party vendor attack could cause fatal damage to a small business’s reputation. Small businesses often don’t have the financial resources and manpower required for a robust marketing program. Brand reputation and word-of-mouth could be the only thing a small business has to bring in new customers. 

In fact, word-of-mouth is the primary factor behind 20% – 50% of all purchasing decisions, and 5X more sales than paid media impressions. And since word-of-mouth proves to be valuable, brand reputation could be the deciding factor of a small business’ success. 

When it comes to a third-party vendor attack, a larger company may have the longstanding reputation and marketing/public relations resources to survive a breach. But a smaller company, especially one that relies on word-of-mouth marketing for new customers, will find it more challenging to overcome a reputation marred by a breach.

Ransomware Groups Target Smaller Businesses

Black Kite’s 2023 Ransomware Threat Landscape Report reveals that ransomware groups tend to target companies with annual revenues of around $50 million to $60 million. 

Some may classify a small business based on headcount or revenue. But what’s important to note from our 2023 Ransomware Report is that no company is too small for a ransomware attack. In fact, smaller companies are often more appealing to bad actors, as they likely have the financial resources to pay ransoms but lack the robust security measures needed to fight back. 

If a small business falls victim to a ransomware attack and does not have a security team to fight back, the owners may feel there’s no other option but to pay the ransom. And if the business must halt operations to protect its data and private information from the bad actor, the owners could lose revenue and be forced to permanently close.

Vendors Can Have an Outsized Impact on Small Business Operations

Relying heavily on third-party vendors (without vetting them properly) could pose a substantial risk to small businesses. If a single vendor falls victim to an attack, your entire business could face setbacks. This over-reliance is known as concentration risk.

Concentration risk is “the level of risk an organization faces due to the concentration of value or assets in a single entity.” For example: You’re a restaurant using a third-party vendor for your point-of-sale (POS) systems. If that vendor falls victim to an attack, you could lose access to your POS systems. Losing access to the POS system means you can’t sell or serve food. As a result, every employee will lose money for each day they can’t work and will consequently suffer from the third-party vendor attack. And in the same situation, the bad actor behind the attack could collect sensitive data from transactions conducted on the POS system. A breach like that would open your business up to breach notification costs and regulatory fines.

TPRM the Black Kite Way

In today’s world, vendor risk assessment should be a key business practice for small businesses that heavily rely on third-party vendors for critical operations — such as payroll, HR, customer relationship management, and project management.

Leveraging Black Kite for your TPRM strategy provides access to our full-spectrum intelligence platform, including our technical cyber rating, cyber risk quantification, compliance correlation, and Ransomware Susceptibility Index® (RSI™). With insight from a technical, financial, and compliance perspective, you can utilize a truly holistic approach to vendor risk management.

Black Kite’s RSI™ utilizes data analysis techniques and common indicators to accurately detect the likelihood of a ransomware attack on your organization –  helping you to develop informed policies around emerging threats and avoid business interruption and data loss.
Now that you know how to assess your third-party vendors, what should you do if your assessment reveals that your vendor is not as secure as you had hoped? Check out our blog Should I Talk to My Vendors About Their Cyber Posture?