Vendor relationships are essential to business continuity—but they can also create new cyber exposures. One growing threat is vendor email compromise (VEC), a sophisticated form of supply chain fraud in which cybercriminals impersonate trusted partners or suppliers. By exploiting existing business relationships, attackers can manipulate payments, steal sensitive data and disrupt operations with little warning.
Unlike traditional business email compromise, which typically targets internal executives, VEC focuses on external partners. Because these communications appear routine and familiar, they can be harder for employees to detect. This article outlines the risks associated with VEC, explains why such attacks are so effective and offers practical strategies to strengthen organizational resilience.
Understanding the Risks of Vendor Email Compromise
VEC attacks rely heavily on personalization and social engineering. Cybercriminals mimic genuine vendor behaviour, making fraudulent emails difficult to spot until financial losses or data exposure have already occurred.
A typical VEC attack may involve:
- Initial compromise—Attackers gain access to a vendor’s email account through phishing, credential stuffing or lookalike domains.
- Information gathering—Threat actors conduct long-term reconnaissance, reviewing payment cycles, approval processes and key contacts.
- Account takeover—Forwarding rules are set up within the compromised email account, allowing attackers to access sensitive communications without detection.
- Attack execution—Fraudulent messages are sent to clients, often requesting payment redirection, account updates or credential verification.
The consequences can be significant. Affected organizations may face financial loss, operational delays, legal exposure and reputational harm. Vendors themselves may experience customer loss, regulatory scrutiny and lasting damage to supply chain trust.
Why VEC Attacks Are So Successful
VEC attacks succeed because they target everyday business activity. Employees are accustomed to routine conversations about invoices, payment updates or contract changes, making subtle deviations hard to notice.
Additionally:
- Compromised vendor accounts make emails appear legitimate.
- Timing often aligns with scheduled payment runs.
- Traditional email security tools may not detect these socially engineered messages.
This combination of trust, timing and technical sophistication makes VEC particularly challenging to defend against.
Mitigation Strategies for VEC Attacks
Organizations can reduce exposure to VEC by adopting a layered defensive approach:
- Implement technical safeguards. Use SPF, DKIM and DMARC to validate sender identity and reduce spoofing attempts. Pair these controls with behavioural tools that detect unusual communication patterns.
- Deploy behavioural monitoring. AI-driven tools can flag anomalies in email tone, frequency and behaviour, helping identify high-risk messages.
- Verify vendor requests. Confirm any request involving payments or sensitive data using secure portals or direct phone calls. Require vendors to follow secure communication practices.
- Monitor vendor security. Regularly assess vendor cybersecurity practices and track whether partners have been involved in recent breaches.
- Train employees. Provide role-specific training to help staff spot subtle signs of VEC attempts and encourage verification for unusual or urgent requests.
Insurance Considerations
Both cyber and crime insurance may respond to VEC-related losses, but coverage varies. Some policies only apply if a direct system breach occurs, while others require separate social engineering or fraudulent instruction endorsements.
Working with a knowledgeable broker can help organizations:
- Identify gaps between cyber and crime policies
- Add endorsements that address social engineering fraud
- Access support during claims and coverage reviews
This ensures financial protection aligns with the growing sophistication of VEC attacks.
As supply chains expand, so do the risks associated with vendor compromise. By strengthening technical controls, improving verification processes and reviewing relevant insurance coverage, organizations can reduce the likelihood of a VEC incident and safeguard key business relationships.
Did you know that 60% of small and medium businesses don’t survive after a cyber attack? Protect your business with Cyber Insurance, call us at 780.424.2727 or click here to get a quote.