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What is Due Diligence in Cybersecurity?

Cybersecurity due diligence involves the identification and remediation of the cyber risks that your third and fourth-party vendors and potential acquisition targets present to your network.

When you acquire a company or choose to work with a vendor, you also undertake the responsibility of caring for their data, their users, and their security posture. For this reason, it is important to conduct cyber due diligence so that you are aware of the cyber risks and vulnerabilities you may be inheriting from each vendor.

As you conduct due diligence, it is important to collect insights into your third-party and fourth-party vendors’ cybersecurity posture and IT ecosystem. This will reveal any issues that you may deem as a deal-breaker or those that may call for a restructuring of the terms of your business deal or acquisition. Cyber due diligence allows you to both identify and quantify any potential security issues so that the third-party can remediate them, or implement a system to address the vulnerabilities moving forward.

How to conduct cybersecurity due diligence prior to a business deal

Prior to entering into a business deal, whether it be a merger, acquisition, or a vendor agreement, it is important to cover your bases and perform due diligence to ensure your organization will be amply protected.

Below, we outline the most important due diligence activities to keep in mind:

  • Identify security risks and shortfalls in the third-party’s security posture, operations, and technology
  • Determine whether there are undisclosed or unknown security instances for each vendor
  • Assess the target’s ability to detect and respond to cybersecurity threats
  • Evaluate potential remediation costs from an operational, financial, and reputational standpoint based on previous cyber incidents experienced by the third-party

How SecurityScorecard helps maintain a healthy security posture

Even after completing cybersecurity due diligence, it is important to continuously monitor the cybersecurity posture of each vendor and company you choose to do business with. SecurityScorecard’s Security Ratings give your organization insight into the level of security maintained by your vendor ecosystem by providing a letter grade ranging from A-F. This enables you to understand organizational risk across numerous risk factors and highlights areas in which immediate improvements can be made. Security ratings help to maintain due diligence even after the acquisition and initial deal-making so you can feel confident that you have a holistic view of your entire enterprise security network.