A freight brokerage’s success hinges on its relationships, which increasingly involve vast amounts of data. Sensitive data — often financial — constantly flows between shippers and carriers, and freight brokers bear the responsibility for the security of both parties’ information. As the link between parties, freight brokers must manage that data tactfully, protecting it from bad actors.
Cyberattacks are on the rise
Data security has been a growing concern for supply chain companies, with the cost of cybercrime expected to reach $10.5 trillion by 2025, according to Cybersecurity Ventures’ 2022 Cybersecurity Almanac. The threat of a data breach, ransomware incident or phishing scheme has increased across all industries, with IBM X-Force ranking transportation as the seventh most-attacked sector in 2021.
Transportation companies spend about $3.75 million per breach, and logistics, freight and trucking businesses are experiencing cyberattacks of increased complexity. Breaches negatively impact a company’s bottom line and signal flaws in its security posture. Attacks also damage a company’s reputation, eroding customer trust and loyalty: a 2021 IBM Security publication reports that loss of customer business accounts for 38% of the cost of a data breach. As more aspects of freight become digitized, freight brokers, in particular, must give adequate attention to cybersecurity practices.
Factoring and cybersecurity
Following the eCapital Corp. compromise of 2021, cybersecurity became top of mind for freight professionals who use factoring. Freight brokers use factoring to provide immediate capital to support healthy cash flow. Transportation companies using invoice factoring see a 90-97% advance of the invoice, providing immediate cash flow to pay contractors and maintain operations.
While freight factoring has become an essential source of cash flow and a critical component of supply chain success, the process also involves a high volume of sensitive financial information. Without the right cybersecurity practices, factoring companies could introduce security vulnerabilities for freight brokers, shippers and carriers.
Because of their role as financial intermediaries and their reliance on outdated technology and relatively large teams, traditional factoring companies are likely targets for cybercriminals. Many factoring companies use old software, and cybercriminals exploit these vulnerabilities, primarily through ransomware attacks. Criminals access and encrypt sensitive data and demand payment for its return. The resulting chaos disrupts a factoring company’s entire IT network, leading to downtime and subjecting freight brokers and their customers to potential data loss.
Factoring companies also employ large teams. The more employees a company has, the greater the opportunities for cybercriminals to strike. By launching phishing attacks and social engineering schemes, hackers can trick team members into divulging confidential information — including data belonging to shippers and carriers.
To protect their financial information and essential relationships, freight brokers should look for a factoring company that uses encryption processes and employs cloud-based solutions.
A secure freight factoring partner should limit the amount of personally identifiable information collected from customers and securely encrypt any customer data — at rest and in transit. These actions ensure protection against data leakage, breaches and lost or stolen devices. The company should use data backups and regularly test those backups.
Look for a partner offering secure data transmission. All modern websites incorporate Secure Sockets Layer and Transport Layer Security to authenticate and encrypt data moving across the internet. And ask how the company handles Distributed Denial of Service (DDoS) threats, which occur when attackers flood a server with internet traffic to prevent legitimate users from accessing connecting services or websites. The IT team should implement several layers of DDoS mitigation infrastructure to mitigate these threats.
While the freight industry has long relied on legacy systems, adding more tools to an old system won’t satisfy the needs of today’s fast-paced freight landscape or protect against evolving cyber risk. Cloud-based solutions streamline operations and simplify software systems, leaving fewer gaps for cybercriminals. Backing up sensitive information in online systems improves data security and accessibility, eliminating the pitfalls of hardware failures or breaches.
As transportation and logistics companies leverage more technology solutions to manage their businesses, cyberattacks are increasing in scope and frequency. To protect against attacks and maintain business operations, freight brokers must prioritize cybersecurity, including that of their freight-factoring partners.
Shawn Vo is CTO chief technology officer and co-founder of Denim.
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