Top tips for managing supply chain risk and compliance

For many SMEs, suppliers are critical to day-to-day operations. But when something goes wrong, particularly involving data or cybersecurity, the impact can be significant and often difficult to recover from or mitigate.

A key challenge is that, taking legal action against a supplier can be costly, time-consuming and uncertain. That’s why the most effective approach is to focus on prevention and risk management from the outset, rather than relying on remedies after the event. In this blog, senior commercial lawyer Sarah Liddiard shares practical tips to help businesses manage supply chain risk and compliance more effectively.

1. Have the right conversations early

Before entering into any agreement, take the time to have clear, practical discussions with your suppliers. Ask how they will:

• respond to a cyber incident
• restore key services (such as your website or systems)
• notify you if personal data they process on your behalf is compromised.

Clear expectations at the start can prevent misunderstandings, and disputes, later on.

2. Don’t be afraid to ask difficult questions

Suppliers should be able to demonstrate that they are managing risk appropriately. This includes:

• confirming what security measures they have in place
• explaining how they meet relevant compliance standards
• being transparent about their processes in the event of a breach.

If a supplier is unwilling to provide that reassurance, it may indicate that they may not have considered their own cyber and data protection risk as seriously as they should.

3. Check insurance cover

If something does go wrong, insurance cover provides some remedy towards  a cyber incident or data protection breach. Make sure your suppliers have appropriate cover in place and that you understand what it includes. This can make a significant difference in mitigating financial loss.

4. Get the contract right

Your contract should reflect the discussions you’ve had, including:

• clear obligations around data protection and cybersecurity
• defined response times in the event of an incident
• requirements to notify you promptly of any breach (particularly given regulatory reporting obligations)
• separate out limitations of liability of the supplier depending on the different legal risks and obligations set out in the contract.

A well-drafted contract provides clarity and helps manage expectations on both sides.

5. Identify and protect your most valuable data

Not all data is equal. Focus on understanding where your most critical information sits – your “data diamonds” – and ensure these are appropriately protected. This helps you prioritise resources and reduce exposure where it matters most.

6. Start with the basics and build from there

Managing risk and compliance is not a one-off exercise. For SMEs in particular, it works best as a layered, ongoing process:

• Start with baseline standards and good practices
• Build your approach as your business grows
• Seek advice where needed to ensure you stay on the right track

Ultimately, taking a proactive approach to supplier relationships and compliance can save significant time, cost and disruption later on. By asking the right questions, setting clear expectations and putting the right safeguards in place, SMEs can better protect their business and continue to grow with confidence.