Third-Party Cyber Attacks: How They Happen and How to Protect Your Business

Cyber threats are not always direct. In fact, some of the most damaging breaches occur through third-party connections that businesses rely on every day. Vendors, contractors, and even professional associations can become gateways for hackers to infiltrate your systems.

A recent incident involving a state professional society illustrates this risk. Hackers compromised the society’s website using a social engineering scheme, inserting a Trojan virus that targeted visitors. When members logged into the “members-only” section, they unknowingly gave attackers back-door access to their firms’ networks. This example underscores why cyber liability insurance with third-party coverage is essential for firms of all sizes.

Why Third-Party Cyber Risk Is Growing

Modern businesses operate in a highly interconnected environment. Your firm’s network interacts with numerous external systems during routine operations. These third parties may include marketing partners, technology providers, financial intermediaries, subcontractors, and vendors. Additionally, customers, affiliates, freelancers, and remote employees often connect to your systems.

Every one of these virtual connections introduces potential vulnerabilities. If an outside party suffers a cyberattack, your firm’s sensitive data—such as client records or financial information—could be exposed.

Real-World Examples of Third-Party Breaches

The Center for Cyber Security highlights several high-profile cases that demonstrate the severity of third-party risks:

• J.P. Morgan Chase outsourced event registration for a corporate race to a Michigan firm. When that vendor’s system was hacked, sensitive data was compromised.
• Target Corp. experienced a massive breach affecting 110 million customers. Hackers gained access through an HVAC vendor after sending phishing emails to its employees. Once inside, they used stolen credentials to infiltrate Target’s systems.
• A photo center company serving Walmart, Costco, CVS, Rite-Aid, Sam’s Club, and Tesco suffered a breach that exposed credit card data and personal information of customers across multiple retailers.

These examples show that even large corporations with robust security measures can be vulnerable through third-party relationships.

Legal and Financial Consequences

States are increasingly holding companies legally responsible for data stolen during third-party breaches. This means your firm could face lawsuits, regulatory penalties, and reputational damage—even if the breach originated outside your organization.

Cybersecurity experts recommend working only with vendors who have strong security protocols and conducting regular audits to ensure compliance. However, even with these precautions, no system is completely immune. Bad actors can exploit unforeseen weaknesses, leaving your firm exposed.

How Cyber Insurance Protects Your Firm

Because third-party risks cannot be eliminated entirely, cyber liability insurance plays a critical role in protecting your business. This coverage helps mitigate financial losses and legal liabilities resulting from data breaches, whether they occur within your firm or through an external partner.

Protect Your Firm Today

If you’re ready to safeguard your business against third-party cyber risks, contact ProDefender. Our experts will help you determine the right level of cyber liability coverage and secure competitive rates to protect your firm from the unexpected.