NIS 2 Has Deep Impacts on the Supply Chain, Not Just Plant Operations
The manufacturing industry is undergoing a significant transformation as it grapples with the implications of the Network and Information Systems Directive 2 (NIS 2). This EU-wide regulation, designed to bolster cybersecurity and ensure the resilience of essential services and digital infrastructures, presents both challenges and opportunities for manufacturing supply chains. As cyber threats continue to evolve and increase in sophistication and volume, cyber resilience is critical.
Understanding NIS 2 Regulations
The NIS 2 Directive is an update to the original NIS Directive enacted in 2016. Its primary aim is to enhance the security of network and information systems across the European Union. The directive expands the scope of the original regulation to include more sectors and entities, including the manufacturing industry. It mandates stricter security requirements, incident reporting obligations, and greater cooperation between Member States.
NIS 2 requires companies to implement appropriate technical and organizational measures to manage risks posed to the security of their network and information systems. This includes risk analysis, security of supply chains, and incident response capabilities. Non-compliance can result in significant fines and sanctions, making it imperative for companies to adhere to the new regulations.
Impact on Manufacturing Supply Chains
Increased Security Requirements
One of the most immediate impacts of NIS 2 on manufacturing supply chains is the increased security requirements. NIS 2 recognizes that cyber attackers often exploit vulnerabilities in third-party suppliers to compromise an organization’s systems, making supply chain security crucial. Manufacturers must now assess and bolster their cybersecurity measures to comply with the directive. This involves implementing advanced security technologies, such as intrusion detection and prevention systems, firewalls, and encryption protocols. Manufacturers must also ensure that their supply chain partners adhere to the same high standards of cybersecurity.
This heightened focus on security can lead to significant costs for manufacturers, both in terms of financial expenditure and time investment. However, these costs are offset by the long-term benefits of enhanced security and reduced risk of cyber-attacks. By investing in robust cybersecurity measures, manufacturers can protect their intellectual property, ensure the continuity of their operations, and maintain the trust of their customers. Organizations are expected to incorporate cybersecurity requirements into their contracts with suppliers, ensuring they maintain adequate security standards.
NIS 2 Improves Supply Chain Resilience
NIS 2 emphasizes the importance of supply chain resilience. Manufacturers are required to identify and mitigate risks throughout their supply chains, ensuring that all partners and suppliers meet the necessary cybersecurity standards. This necessitates a thorough evaluation of supply chain partners and the implementation of stringent security protocols. Building resilient supply chains involves adopting a proactive approach to risk management. Manufacturers must conduct regular risk assessments, monitor the security posture of their partners, and establish clear communication channels for incident reporting.
Incident Reporting and Response Requirements
NIS 2 mandates that companies report significant security incidents to the relevant authorities within 24 hours of detection. Manufacturers must be prepared to quickly identify, contain, and mitigate security incidents to minimize their impact on operations. Incident reporting also encourages greater transparency and collaboration between companies and regulatory authorities. By sharing information about security incidents, manufacturers can contribute to a better understanding of the threat landscape and help to develop more effective cybersecurity strategies. This collaborative approach can lead to improved security for the entire industry. Collaboration also extends to working with government agencies and regulatory bodies. Manufacturers must engage with these entities to ensure compliance with NIS 2 and to stay informed about the latest developments in cybersecurity regulations.
Challenges and Opportunities
Challenges
NIS 2 also poses several challenges for manufacturers. Increased security requirements and incident reporting obligations can be resource-intensive, requiring substantial investments in technology, personnel, and processes. Manufacturers must also navigate the complexities of ensuring compliance across their global supply chains, which may involve different regulatory environments and varying levels of cybersecurity maturity. Not all EU member countries are fully prepared to implement NIS 2, as we discussed in this previous blog post about NIS 2 Day, which happened on October 17.
Opportunities
Despite these challenges, NIS 2 also presents numerous opportunities for manufacturers. By enhancing their cybersecurity measures, manufacturers can protect their intellectual property, safeguard their operations, and maintain the trust of their customers. Increasing your cyber resilience can improve your balance sheet because your company stands a greater chance of avoiding a cyber-attack and all the resulting unplanned downtime, reporting requirements, and potential impact to market performance. Increased supply chain cyber resilience also leads to stronger and more reliable partnerships. By working closely with their supply chain partners to ensure compliance with NIS 2, manufacturers can build more resilient and collaborative relationships.
Conclusions
While NIS 2 is an EU regulatory framework, the adoption of NIS 2 should improve supply chain cybersecurity around the world, because NIS 2 applies to companies located outside the EU if they provide services within the EU. Adopting a risk management framework for cybersecurity is something that all manufacturers should be doing. As with any regulatory framework, NIS 2 tells you what needs to be done, not always how to do it. There is an entire spectrum of ways to do assessments, from questionnaires to on site assessments. NIS 2 does mandate that you develop “cybersecurity protocols.” How you build those protocols and what resources you use to develop good protocols is up to you.