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COMPLIANCE
Compliance
Due diligence scope
Reviewing compliance in a technology due diligence is important for several reasons:
Legal and regulatory compliance
Evaluating compliance helps ensure that the target company operates within the legal and regulatory frameworks relevant to its technology operations. This includes assessing adherence to laws and regulations related to data privacy, cybersecurity, intellectual property, consumer protection, industry-specific regulations, and any other applicable compliance requirements. Understanding compliance helps potential investors or acquirers mitigate legal and regulatory risks associated with non-compliance.
Risk management
Compliance review helps identify potential risks and vulnerabilities related to non-compliance. It allows potential investors or acquirers to assess the effectiveness of the target company's risk management processes and controls. By understanding the compliance risks, such as fines, penalties, legal actions, or reputational damage, the acquiring party can make informed decisions and implement appropriate risk mitigation strategies.
Contractual obligations
Evaluating compliance includes reviewing contractual obligations that the target company has with customers, vendors, partners, or other stakeholders. This includes assessing the compliance with service level agreements, licensing agreements, non-disclosure agreements, and other contractual obligations. Understanding the compliance with contractual obligations helps identify any potential risks, liabilities, or conflicts that may impact the value or operations of the technology being evaluated.
Data protection and privacy
Compliance review encompasses evaluating the target company's compliance with data protection and privacy regulations. This includes assessing if the company handles and processes personal data in accordance with relevant laws, such as the General Data Protection Regulation (GDPR) or other local data protection regulations. Understanding the compliance with data protection and privacy requirements is crucial to mitigate legal and reputational risks associated with data breaches or non-compliance.
Ethical considerations
Compliance review also involves assessing ethical considerations related to the target company's technology operations. This includes evaluating if the company adheres to ethical guidelines, industry codes of conduct, or corporate social responsibility principles. Understanding the ethical considerations helps potential investors or acquirers align their own values and assess any potential reputational risks associated with the target company's practices.
Due diligence and post-acquisition integration
Evaluating the infrastructure helps assess if the target company is compliant with relevant regulations and industry standards. This includes evaluating data privacy practices, cybersecurity measures, and other regulatory requirements. Ensuring compliance with applicable regulations is essential to mitigate legal and reputational risks associated with technology operations.
Infrastructure
High-level scope
Data protection and privacy
Compliance with applicable data protection laws such as GDPR, CCPA, PIPEDA, etc.; Procedures and policies for data handling, storage, and sharing; Data breach incident responses and any past data breaches.
Security compliance
Adherence to cybersecurity standards like ISO 27001, NIST, etc.; Regular security audits and their outcomes; Implementation of secure development practices; Cybersecurity training for employees; Implementation of encryption and secure access controls.
Intellectual property (IP) compliance
Protection of IP including patents, trademarks, copyrights, trade secrets, etc.; Legal ownership of all IP; Any IP disputes or infringements; Licensing agreements and their compliance.
Software licensing compliance
Licensing agreements for all software used; Compliance with terms of software licenses; Use of open-source software and compliance with their licenses.
Regulatory compliance
Compliance with industry-specific regulations (like HIPAA for healthcare, FINRA for finance, etc.); Record of any regulatory actions or penalties.
IT governance
IT governance framework and policies; Compliance with IT governance best practices like ITIL, COBIT, etc.
Third-party vendor compliance
Vendors' compliance with data protection, security, and regulatory requirements; Contracts with vendors including terms and termination clauses.
Accessibility compliance
Compliance with accessibility regulations like ADA, WCAG 2.1, etc.; Policies and procedures to ensure digital accessibility.
Environmental compliance
Compliance with environmental regulations for hardware disposal and energy usage; Green IT practices.
