Transforming Supply Chain Security into a Strategic Asset: Achieving NIS 2 Compliance

Understanding the Evolving Landscape of Supply Chain Security Under NIS 2

The cybersecurity landscape is evolving rapidly as firms become increasingly interconnected across borders, sectors, and service providers. With the European Union’s revised Network and Information Systems Directive 2 (NIS 2) and its UK counterpart, the Cybersecurity and Resilience Bill, organizations face new regulatory pressures aimed at enhancing cybersecurity oversight for medium to large entities in essential and important sectors. This regulatory framework places a renewed emphasis on supply chain security, transforming it from a mere compliance checkbox into a critical operational and reputational necessity.

The New Importance of Supply Chain Risk Management

Supply chain risk management is no longer just about ticking boxes for compliance; it has become a board-level issue. NIS 2 mandates that firms strengthen the weakest—often overlooked—links in their digital ecosystems: the supply chain. As organizations adapt to these new regulations, they must rethink their approach to supply chain security.

Challenges: The Evolving Landscape Under NIS 2

One of the foremost challenges in this new landscape is the complexity that comes with implementing a robust supply chain security framework. Below are key hurdles organizations must navigate:

1. Broader Scope, Increased Responsibility: NIS 2 extends its requirements to a wide range of organizations and third parties, complicating supply chain security management. This necessitates oversight of a larger number of suppliers, including subcontractors and digital service providers. Companies must possess a comprehensive understanding of their essential services, the network and information systems that support them, and the third-party dependencies that are fundamental to their functionality.

2. Achieving Comprehensive Visibility of Supply Chain Dependencies: Traditional tiering models fall short when identifying supply chain cybersecurity risks. Organizations need to pinpoint which suppliers—regardless of their tier—are critical from a cyber disruption and business continuity perspective. Seemingly insignificant suppliers can have cascading impacts if their services are compromised. A new risk management approach tailored to NIS 2’s requirements is essential.

3. Strengthening Contractual Obligations: Upgrading supplier contracts for compliance with NIS 2 is one of the most challenging aspects of the regulation. Security, legal, and procurement teams must collaborate to integrate cybersecurity requirements into both new and existing contracts. This includes obligations for incident reporting, audit rights, secure development practices, and real-time collaboration during crises.

4. Heightened Expectations for Incident Response and Communication: Regulatory expectations for an organization’s ability to detect, respond to, and communicate about supply chain-related incidents have intensified. Essential and important entities must notify incidents within tight timeframes—often within 24 hours for early warnings and 72 hours for full notifications. Firms must ensure they have strong incident detection mechanisms and clearly defined communication protocols that enforce timely information sharing with suppliers.

5. Shifting Supplier Assurance from Tick-Box Questionnaires to Verifiable Evidence: Recent updates to the UK’s NCSC Cyber Assessment Framework (CAF), aligned with NIS 2, demand that organizations obtain evidence from suppliers demonstrating adherence to secure development lifecycle (SDLC) practices. This shift emphasizes the need for organizations to change their approach to supplier due diligence, ensuring ongoing evidence-backed validation of cybersecurity standards.

Key Considerations for Building an Effective Supply Chain Security Programme

NIS 2 presents organizations with an opportunity to re-evaluate and modernize their existing supply chain security practices. As firms embark on enhancing their supply chain security, senior leaders should consider the following questions across four core areas as part of their compliance programs:

1. Governance and Oversight: How can our board ensure that cybersecurity oversight is integrated into our risk management and governance frameworks?

2. Supplier Relationships: What steps are we taking to assess the cybersecurity posture of all our suppliers and not just the tier-one ones? How can we enhance our collaboration with suppliers to develop robust incident response capabilities?

3. Incident Management: Is our incident response plan comprehensive and sufficiently tested against supply chain disruptions? Do we have protocols for timely communication and information sharing with both internal and external stakeholders?

4. Compliance and Continuous Improvement: Are we proactively aligning our cybersecurity practices with NIS 2 requirements? What metrics can we develop to ensure ongoing compliance and focus on continuous improvement in our supply chain security strategies?

By confronting these challenges thoughtfully and strategically, organizations can not only achieve compliance but also strengthen their overall cybersecurity posture in an increasingly interconnected world. Supply chain security under NIS 2 is not just about meeting regulatory demands; it’s about safeguarding the integrity and resilience of the business itself.