While cybersecurity has traditionally focused on blocking attacks from the outside through perimeter defenses (e.g., firewalls, intrusion detection, penetration testing), unfolding facts concerning the recent Target data breach have underscored the need for a more holistic approach.1 To penetrate Target's fortified cyber perimeter, attackers allegedly first breached the computer systems of one of Target's vendors, an HVAC company, which may have been poorly secured.2 Like many of Target's other vendors, the HVAC company had credentials to Target's vendor portal to submit invoices and perform contract administration.3 Once the attackers gained access to these credentials, they were reportedly able to access Target's internal network and compromise its consumer payment card systems.4 Even after identifying the breach, it took Target several days to remove related malware from the infected machines.5 Based on current reports, the resulting data breach has cost banks and credit unions alone over $200 million in replacement debit and credit cards6 and total costs are estimated to potentially exceed $1 billion based on data concerning the average per record costs of data breaches.7

Specifically, the Target data breach highlights two additional areas that should be considered when establishing and maintaining cybersecurity. First, the Target incident highlights the dangers of allowing a third party into a company's internal network, even if it is for purposes related to services that are not seemingly technological in nature or a clear cybersecurity threat. In allowing a vendor access for any reason, companies need to consider not only their own security, but also the security of such vendor. Notwithstanding the otherwise robust security measures of a company, a vendor may ultimately be the weak point for attackers to gain entry into internal systems or compromise sensitive data.8 While more heavily regulated industries such as financial services and healthcare already force companies to maintain closer oversight over their vendors and their vendors' data security practices, the same formal requirements have not been clearly placed on retailers and similarly less regulated businesses. Second, robust internal controls and internal facing security systems are critical to mitigating the risk that any one individual or entity could cause extensive damage to a company's internal systems or access its or its customers' most sensitive data.

Moving forward, the focus of cybersecurity needs to shift from being only perimeter focused to a more complete approach that does not overlook or underestimate even the most seemingly innocent use of a corporate network. A few specific things companies can do include:

  • instituting and consistently executing a comprehensive cybersecurity check as part of their vendor due diligence processes, including reviewing the vendor's internal controls, and physical and logical security protections, and requesting that the supplier perform or participate in annual security and penetration testing;
  • not underestimating the risks presented by any vendor that is to get either physical or logical access to a company's information technology infrastructure, regardless of the nature of the services that they are to perform;
  • implementing internal security systems, controls and policies designed to monitor and restrict access to authorized users for only specific systems required for such users to perform identified and approved tasks, identify potential threats or unusual behaviors, and quickly isolate and contain any compromised systems;
  • utilizing technology such as two factor authentication or virtual private networks (VPNs) when granting remote system access to vendors;
  • requiring that vendors have appropriate protections in place to monitor for and combat malware; and
  • in the absence of satisfactory evidence of appropriate security and encryption, preventing the use of memory sticks or USB drives and storage of company data on local drives of vendor hardware or cloud-based storage solutions.

Finally, recognizing that even the best efforts of a company may not in the end be sufficient to defend against all cybersecurity attacks, companies need to also have a plan in place to address a data breach before one happens. It is best to be proactive not reactive in such situations. If a data breach or other cybersecurity incident occurs, companies should immediately assemble a response team that consists of technology and legal professionals. Utilizing attorneys will not only provide the company with advice concerning legal and contractual exposure, insurance coverage, and legal reporting and remediation obligations, but also potentially shield documents prepared in the incident investigation under the attorney-client privilege. Such protections may ultimately prevent disclosure of the materials in any resulting litigation.