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CYBER AND INFORMATION SECURITY
Cyber and information security
Due diligence scope
Reviewing cyber and information security in a technology due diligence is essential for several reasons:
Risk assessment
Cybersecurity review helps identify potential risks and vulnerabilities that may pose a threat to the target company's technology infrastructure, data assets, and operations. It involves assessing the effectiveness of the company's security measures, policies, and practices. Understanding the cybersecurity posture allows potential investors or acquirers to evaluate the associated risks, liabilities, and potential impacts on the investment decision.
Data protection and privacy
Evaluating cybersecurity measures helps assess the target company's ability to protect sensitive data and maintain customer privacy. This includes reviewing data encryption practices, access controls, incident response protocols, and compliance with relevant data protection regulations. Understanding the data protection and privacy practices is crucial to mitigate legal and reputational risks associated with data breaches or non-compliance.
Intellectual property protection
Cybersecurity review also encompasses evaluating the measures in place to protect the target company's intellectual property assets. This includes assessing the protection of trade secrets, proprietary algorithms, source code, and other confidential information. Understanding the cybersecurity controls helps assess the risk of IP theft or unauthorized disclosure, which can significantly impact the value and competitiveness of the technology being evaluated.
Regulatory compliance
Cybersecurity review involves assessing if the target company is compliant with relevant cybersecurity regulations and industry standards. This includes evaluating adherence to frameworks such as the General Data Protection Regulation (GDPR), Payment Card Industry Data Security Standard (PCI DSS), or industry-specific security requirements. Ensuring compliance with applicable regulations is crucial to mitigate legal and regulatory risks associated with cybersecurity practices.
Incident response and business continuity
Evaluating the target company's incident response capabilities and business continuity plans is important to assess its readiness in handling cybersecurity incidents. This includes reviewing incident response procedures, backup and recovery strategies, and disaster recovery plans. Understanding the preparedness of the target company to effectively respond to and recover from cyber incidents is crucial for mitigating operational disruptions and financial losses.
Reputation and customer trust
A strong cybersecurity posture is essential for maintaining customer trust and protecting the target company's reputation. A breach or security incident can have severe consequences, including loss of customer confidence, reputational damage, and potential legal actions. Reviewing cybersecurity practices helps potential investors or acquirers evaluate the target company's commitment to cybersecurity and its ability to safeguard customer data and maintain a trustworthy brand image.
Cyber and information security
High-level scope
Security policies and procedures
Review the company's cybersecurity policies and procedures to understand the frameworks and standards they follow, and if they are regularly updated to respond to evolving threats.
Security infrastructure
Assess the company's security infrastructure. This includes firewalls, intrusion detection systems, anti-malware software, encryption, and other security measures in place.
Incident response plan
Does the company have a well-documented incident response plan? Check if it includes procedures for identifying, responding to, and recovering from security incidents.
Data protection
Evaluate how the company protects its data, both at rest and in transit. This includes the use of encryption, secure storage solutions, and secure communication protocols.
Access control
Review the company's access control policies. This includes user authentication methods, role-based access control, and procedures for managing accounts.
Security training
Check if the company provides regular cybersecurity training to its employees. This can help prevent many common security incidents.
Third-party vendors
If the company uses third-party vendors that have access to its data or systems, evaluate the security measures those vendors have in place.
Past breaches
Look at the company's history of security incidents. How were these incidents handled, and what steps were taken to prevent similar incidents in the future?
Vulnerability management
Does the company conduct regular vulnerability assessments and penetration testing? Review the results of these tests and the company's process for addressing identified vulnerabilities.
Physical security
Evaluate the physical security measures at the company's facilities. This can include access control systems, surveillance cameras, and policies for securing sensitive areas.
Compliance
If the company operates in a regulated industry, check if its cybersecurity practices comply with relevant regulations, such as GDPR, CCPA, or HIPAA.
Cyber insurance
Does the company have an appropriate cyber insurance policy in place to cover potential losses from cyber incidents?