The energy industry is experiencing a sharp increase in supply chain risks, largely driven by its growing reliance on external vendors. According to a recent report, two-thirds of security breaches in this sector now originate from software and IT vendors.
The study, conducted by SecurityScorecard and KPMG, titled "A Quantitative Analysis of Cyber Risks in the U.S. Energy Supply Chain," draws attention to frequent threats, including ransomware attacks targeting traditional IT systems.
Researchers have emphasized that as the transition to cleaner energy picks up pace, and as the grid becomes more interconnected and software-reliant, vulnerabilities in the energy sector are expected to increase.
Ryan Sherstobitoff, senior vice president of threat research and intelligence at SecurityScorecard, stated, “The energy sector's rising dependence on third-party vendors exposes a significant vulnerability—its security is only as robust as its weakest link."
He added that this growing reliance on external vendors introduces considerable risks, urging the industry to strengthen cybersecurity defenses before a breach escalates into a national crisis.
The report highlighted that third-party risks account for nearly half of all breaches in the energy sector—significantly higher than the global average of 29%. Over 90% of organizations that experienced multiple breaches were attacked through third-party vendors.
Additionally, the report found that software and IT vendors were responsible for 67% of third-party breaches, while only a small number were linked to other energy companies. A notable portion of these incidents stemmed from the MOVEit file transfer software vulnerability, which was exploited by the Clop ransomware group last year.
The report also pointed out application security, DNS health, and network security as some of the most significant weaknesses in the sector.
The findings come at a time when the U.S. Department of Energy is convening with energy sector leaders to promote the Supply Chain Cybersecurity Principles, urging companies to focus on reducing risks posed by software and IT vendors, which represent the highest third-party threats.
As part of this effort, energy operators are encouraged to ensure new technology purchases are secure by incorporating initiatives like CISA’s "Secure by Design" and following the Department of Energy’s Supply Chain Cybersecurity Principles. The industry must also bolster security programs to defend against supply chain risks and geopolitical threats, especially from nation-state actors, and analyze ransomware attacks affecting foreign counterparts to improve resilience.
“The energy sector is a complex system undergoing a significant generational shift, heavily reliant on a stable supply chain," said Prasanna Govindankutty, KPMG's principal and cybersecurity leader for the U.S. sector.
He further explained that with rising geopolitical and technology-based threats, the industry is facing a level of risk exposure that could negatively impact both businesses and citizens. Organizations that can quantify these risks and implement mitigation strategies will be better equipped to navigate the energy transition.