Editor’s note: The way businesses approach risk is undergoing a fundamental shift. This article is the second in a series entitled Future of Risk. The series opener explored the growing prevalence of systemic risks — challenges that are unpredictable, deeply interconnected, and capable of causing widespread disruption. This second installment explores systemic cyber risk in more detail.
Cyber threats now extend beyond phishing attacks and stolen data to far-reaching events that can destabilize entire industries. As businesses increasingly rely on cloud platforms, automation, AI, and global supply chains, exposure to cyber risks grows. Many organizations aren’t aware of these hidden vulnerabilities until it’s too late.
Third-party cyber vulnerability: The hidden risk no one sees coming
Cybersecurity teams previously focused on securing their own networks. Today, organizations need to scrutinize third-party risk, too. A single vendor misstep can cause widespread operational disruptions, supply chain failures, and financial instability.
The following high-profile events highlight how seemingly isolated cyber failures can have far-reaching consequences:
- CrowdStrike outage: A faulty software update from CrowdStrike caused mass system failures, disrupting businesses and government operations worldwide. This incident showed how even a routine update can wreak havoc when organizations rely heavily on a few key vendors.
- Change Healthcare cyberattack: A breach at a revenue cycle management provider caused operational delays affecting 80% of the U.S. healthcare industry.
- Colonial Pipeline ransomware attack: A cyberattack on one company triggered fuel shortages and economic disruptions across the Eastern U.S.
Businesses often don’t recognize their exposure until a disruption unfolds. Mergers and acquisitions introduce hidden third-party risks, especially when a small but critical vendor is acquired — creating an overlooked single point of failure. Without proper cybersecurity due diligence, inherited vulnerabilities can expose an entire ecosystem, amplifying the impact of an attack or operational failure.
Proactively assessing vendor dependencies and integrating cyber risk assessments into M&A due diligence helps prevent unseen vulnerabilities from escalating into industry-wide disruptions. Strengthening visibility into third-party relationships ensures greater resilience and business continuity, reducing the risk of cascading failures.
The cloud conundrum: When convenience becomes a weakness
Cloud technology has redefined how businesses operate, offering efficiency, scalability, and cost savings. However, heavy reliance on a few dominant providers introduces systemic vulnerabilities.
A handful of vendors, including AWS, Microsoft, and Google, support thousands of businesses. A disruption at any one of them instantly cascades across industries. Many organizations are unaware of how deeply embedded these dependencies are within their own infrastructures.
For example, a company may contract with a managed service provider (MSP) for IT support, assuming security and stability are handled. But if that MSP relies on AWS for cloud hosting and CrowdStrike for endpoint security, a failure at any level directly impacts business operations.
Visibility into vendor dependencies and infrastructure reduces exposure to these vulnerabilities. Backup strategies, diversification, and alternative suppliers strengthen continuity when disruptions occur.
AI cybersecurity risks: the next big threat
AI is transforming business operations, yet many organizations adopt it without fully understanding its risks. AI influences decision-making in healthcare, finance, legal services, and cybersecurity, creating new vulnerabilities.
- Healthcare: AI-powered diagnostics and patient care decisions can introduce legal and liability risks if algorithms produce biased or inaccurate results.
- Legal and finance: AI-generated contracts and financial decisions may contain errors that lead to compliance violations or lawsuits.
- Cybersecurity threats: AI models can be manipulated by cybercriminals, introducing flaws in decision-making and operational risks that businesses struggle to detect.
Most AI systems are developed externally, making vendor oversight an important factor in managing risk. Businesses using third-party AI solutions benefit from a clear understanding of vendor responsibilities, data security practices, and accountability for errors or biases. Without well-defined agreements and ongoing validation, AI risks can spread across an organization, increasing legal and operational exposure.
AI governance and human oversight help mitigate these risks. Organizations embedding AI into core operations gain more control through clear policies, vendor assessments, and validation measures to support accuracy, security, and accountability.
How to build cyber resilience against systemic threats
Instead of reacting to cyber threats, adopt a resilience-first approach that accounts for third-party failures, cloud dependencies, and AI vulnerabilities:
- Map vendor risk: Identify critical technology providers, including third-party suppliers embedded within infrastructure.
- Reduce overreliance on any one technology solution (e.g., cloud provider, MSP, software, etc.): Search for and resolve single points of failure. If a vendor’s product or service goes down, what is your contingency plan?
- Enhance AI governance: Establish clear accountability and validation measures. AI can support decision-making, but it does not replace human judgment.
- Stress-test cyber resilience: Reveal weaknesses in vendor dependencies and help refine continuity plans.
- Align cyber insurance with business needs: Ensure cyber policies extend beyond breaches to cover business interruption, third-party failures, and AI-related liabilities.
See Cybersecurity Trends 2025: Resilience Planning for additional strategies to navigate today’s cyber risk landscape.
The future of cyber risk
Cybersecurity is no longer just an IT function; it is a business-wide issue that affects operations, financial stability, and industry reputation. The consequences of vendor failures, AI vulnerabilities, and infrastructure disruptions extend far beyond isolated data security incidents.
Understanding hidden digital dependencies, diversifying risk exposure, and strengthening AI governance will help you navigate the next wave of cyber disruptions — before they escalate into crises.
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