In the digital age, cyber threats redefine business acquisitions. Mark Butler explores four reasons for prioritising cyber security due diligence, ensuring informed decisions and resilience
When considering the purchase of a business, it is essential to conduct a comprehensive assessment of potential risks.
Technology risks, particularly cyber threats, have become increasingly significant in today’s digital age. Therefore, prioritising cyber security as part of the due diligence process is crucial to gain a complete view of potential risks, allowing you to make informed decisions and plan accordingly.
There are four compelling reasons why a cyber security audit should be a priority in the due diligence process when buying a business.
1. Assessing the business’s technology infrastructure
The technology infrastructure of a business plays a vital role in its operations. Cyber security due diligence provides valuable insights into the robustness of the existing infrastructure, including networks, systems, software and hardware.
By assessing the vulnerabilities and weaknesses within the technology stack, you can better understand the potential risks and associated costs of upgrading or securing the infrastructure post-acquisition. This knowledge allows you to make informed decisions about the integration process and develop a strategic technology roadmap.
2. Safeguarding sensitive data
During a business acquisition, you gain access to the target company’s data, including client information, intellectual property, financial records and employee data.
Conducting cyber security due diligence allows you to evaluate the effectiveness of existing security measures that protect this sensitive information.
Identifying vulnerabilities and potential data breaches early on can help you implement necessary safeguards and protect the integrity and confidentiality of critical data assets.
3. Mitigating financial and legal risks
A cyber security breach can have significant financial and legal consequences for a business. By conducting due diligence, you can identify potential risks that may result in financial loss, such as data breaches, regulatory non-compliance or legal liabilities.
Understanding these risks beforehand enables you to negotiate appropriate terms in the acquisition agreement, allocate resources for remediation, and potentially even adjust the purchase price to account for any necessary investments in cyber security.
4. Maintaining business continuity and reputation
A successful business acquisition hinges on maintaining continuity and preserving the target company’s reputation. A cyber security incident can disrupt operations, damage customer trust and tarnish the brand image, resulting in financial losses and decreased market value.
You can identify potential threats and develop a robust incident response plan by conducting cyber security due diligence.
This proactive approach ensures that the necessary measures are in place to minimise the impact of any cyber security incidents and protect the business’s continuity and reputation.
Cyber security has become an essential aspect of business risk management in today’s interconnected world. When buying a business, prioritising cyber security within the due diligence process allows you to comprehensively assess technology risks, safeguard sensitive data, mitigate financial and legal risks, assess the technology infrastructure, and maintain business continuity and reputation.
The due diligence process is a critical time to ensure you fully understand all potential issues, especially technology, allowing you to address risks and, in turn, plan to deal with them proactively.
Mark Butler is Managing Partner at HLB Ireland
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