Retail Cybersecurity Is Lagging in the Digital Transformation Race, and Attackers Are Taking Advantage

Digital transformation is dominating retailers’ attention — and their IT budgets. As a result, significant gaps in retail cybersecurity are left unfilled just as retail IT faces new challenges, from infrastructure moving to the cloud without clear security policies to an array of new threat vectors focused on personal customer information, ransomware and underprotected business-to-business (B2B) connections.

Just as with line-of-business functions like merchandising and operations, retailers’ cybersecurity functions must undergo a digital transformation to become more holistic, proactive and nimble when protecting their businesses, partners and customers.

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Retailers Aren’t Prioritizing Security, and Attackers Are Exploiting the Gaps

According to the retail edition of the “2018 Thales Data Threat Report,” 75 percent of retailers have experienced at least one data breach in the past, with half seeing a breach in the past year alone. That puts retail among the most-attacked industries as ranked by the “2018 IBM X-Force Threat Intelligence Index.”

Underfunded security infrastructure is likely a big reason for this trend; organizations only dedicated an average of around 5 percent of their overall IT budgets to security and risk management, according to a 2016 Gartner report.

While retailers have done a great job addressing payment card industry (PCI) compliance, it has come at a cost to other areas. According to IBM X-Force Incident Response and Intelligence Services (IRIS) research, 78 percent of publicly disclosed point-of-sale (POS) malware breaches in 2017 occurred in the retail sector.

In addition to traditional POS attacks, malicious actors are targeting retailers with new threat vectors that deliver more bang for the buck, such as the following:

  • Personally identifiable information (PII) about customers — Accessible via retailers’ B2C portals, attackers use this information in bot networks to create false IDs and make fraudulent transactions. An increasingly popular approach involves making purchases with gift cards acquired via fraud.
  • Ransomware — Criminals are exploiting poorly configured apps and susceptible end users to access and lock up data, so they can then extract pricey ransoms from targeted retailers.
  • Unprotected B2B vendor connections — Threat actors can gain access to retail systems by way of digital connections to their partners. A growing target is a retailer’s B2B portals that have been constructed without sufficient security standards.

What Are the Biggest Flaws in Retail Cybersecurity?

These new types of attacks take advantage of retailers’ persistent underfunding of critical security defenses. Common gaps include inadequate vulnerability scanning capabilities, unsegmented and poorly designed networks, and using custom apps on legacy systems without compensating controls. When retailers do experience a breach, they tend to address the specific cause instead of taking a more holistic look at their environments.

Retailers also struggle to attract security talent, competing with financial services and other deeper-pocketed employers. The National Institute of Standards and Technology (NIST) reported in 2017 that the global cybersecurity workforce shortage is expected to reach 1.5 million by 2019.

In addition, flaws in governance make retailers more vulnerable to these new types of security threats. To keep up with rapidly evolving consumer demands, many line-of-business departments are adopting cloud and software-as-a-service (SaaS) solutions — but they often do so without any standardized security guidance from IT.

According to the “2017 Thales Data Threat Report,” the majority of U.S. retail organizations planned to use sensitive data in an advanced technology environment such as cloud, big data, Internet of Things (IoT) or containers this year. More than half believed that sensitive data use was happening at the time in these environments without proper security in place. Furthermore, companies undergoing cloud migration at the time of a breach incur $12 per record in additional costs, according to the “2018 Cost of a Data Breach Study.”

To protect their data, retailers need tools to both identify security threats and escalate the response back through their entire infrastructure, including SaaS and cloud services. But many enterprises lack that response capability. What’s more, the “Cost of a Data Breach Study” found that using an incident response (IR) team can reduce the cost of a breach by around $14 per compromised record.

Unfortunately, cybersecurity is not always on the radar in retailers’ C-suites. Without a regularly updated cybersecurity scorecard that reflects an organization’s current vulnerability to attack, senior executives might not regularly discuss the topic, take part in system testing or see cybersecurity as part of business continuity.

3 Steps to Close the Gaps in Your Security Stance

Time isn’t stopping as retailers grapple with these threats. Retail cybersecurity leaders must also monitor the General Data Protection Regulation (GDPR), where compliance requirements are sometimes poorly understood, as well as the emergence of artificial intelligence (AI) in both spoofing and security response. In addition, retailers should keep an eye on the continued uncertainty about the vulnerability of platform-as-a-service (PaaS), microservices, cloud-native apps and other emerging technologies.

By addressing the gaps in their infrastructure, governance and staffing, retailers can more effectively navigate known threats and those that will inevitably emerge. Change is never easy, but the following three steps can help retailers initiate digital transformation and evolve their current approach to better suit today’s conditions:

1. Increase Budgets

According to Thales, 84 percent of U.S. retailers plan to increase their security spending. While allocating these additional funds, it’s important for retailers to take a more holistic view, matching budgets to areas of the highest need. Understanding the costs and benefits of addressing security gaps internally or through outsourcing is a key part of this analysis.

2. Improve Governance

Enacting consistent security guidelines across internally run systems as well as cloud- and SaaS-based services can help retailers ensure that they do not inadvertently open up new vulnerabilities in their platforms. Senior-level endorsement is an important ingredient in prioritizing cybersecurity across the enterprise. Regular security scorecarding can be a valuable tool to keep cybersecurity at the top of executives’ minds.

3. Invest in MSS

A growing number of retailers have realized that starting or increasing their use of managed security services (MSS) can help them achieve a higher level of security maturity at the same price as managing activities in-house, if not at a lower cost. MSS allow retailers’ internal cybersecurity to operate more efficiently, address critical talent shortages and enable retailers to close critical gaps in their current security stance.

Why Digital Transformation Is Critical to Rapid Response

Digital transformation is all about becoming more proactive and nimble to respond to consumers’ rapidly growing expectations for seamless, frictionless shopping. Retailers’ cybersecurity efforts require a similar, large-scale transition to cope with new threat vectors, close significant infrastructure gaps and extend security protocols across new platforms, such as cloud and SaaS. By rethinking their budgets, boosting governance and incorporating MSS into their security operations, retail security professionals can support digital transformation while ensuring the business and customer data remains protected and secure.

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