The Importance of Cybersecurity Due Diligence

Updated: Aug 18


Businesses are at risk every day, not just from cyberattack but also from within. Third-party and fourth- party vendors are becoming an important part of running a successful organisation, which brings with it a number of hidden risks.

In order to monitor these risks, organisations are performing thorough due diligence reviews of all associations, partners and prospects to protect themselves against cyber threats and to reduce liability should sensitive information be compromised.

Cybersecurity due diligence is particularly important when it comes to mergers and acquisitions as it helps discoverers make informed decisions regarding cybersecurity and related responsibilities. It also comes in handy when dealing with cyber insurance, and when forming a security risk rating score and how to mitigate the risks.


What is cybersecurity due diligence?

Cybersecurity due diligence has been defined as “the review of the governance, processes and controls that are used to secure information assets.” It is fundamentally the process of monitoring, identifying and protecting against the cyber risks of third-party vendors.

During the due diligence process, cyber security firms collect insights into an organisation’s third-party vendor cybersecurity posture and IT security efforts. The client is then aware of the risks and vulnerabilities that can occur from associations with the third-party vendors and can take action.

As previously stated, cybersecurity due diligence is particularly important in mergers and acquisitions, where it can reveal issues that might be considered problematic, or that call for a restructuring of the price or terms and conditions of a deal. Any risks that are identified are then remedied to ensure that the organisation is in full compliance and any cyber threats are kept to a minimum.


Why does cybersecurity due diligence matter?


Conducting cybersecurity due diligence is extremely beneficial to organisations right across the world. Not only does it accurately assess risk before taking on liability in mergers and acquisitions, but also identifies any issues that might call for a restructuring of a deal. What’s more, it helps organisations understand the cyber threat landscape and identifies the threats. It also allows for the quantification and identification of an associate’s entire cybersecurity posture. Let’s take a closer look at why cybersecurity due diligence is important:

Third-party risk factors


Cybersecurity due diligence provides a more precise look at a third-party vendor’s existing security network, the threats and vulnerabilities, plus what can be done to mitigate the risks. How it begins


The first due diligence step is to measure and assess the cyberhealth of third-party vendors, fourth-party vendors or acquisition targets so you can understand the risks involved. Examining their cybersecurity posture, ability to quickly address cyberattacks and compliance status are key to determining the viability of any association you wish to make. Cybersecurity risk ratings


RiskXchange’s cybersecurity risk ratings enable better management of an organisation’s cyber risk, including: • Insight into risks associated with third or fourth parties and supply chain relationships. When a security rating is in place, it can significantly aid the effective management of cyber risk from external parties. • An up-to-date rating allows for better transparency to assist insurance underwriters in the assessment, calculation and risk management of security process and performance. • Cybersecurity due diligence is hugely important during periods of business growth, including the acquisition of or investment in a company. Organisations must be able to access enhanced information and continually review any investment; a security rating enables this. • Security ratings help governments to gain better insight and understanding into Critical National Infrastructure (CNI), ultimately enabling better management of their cyber security performance. Adopt an easy-to-use platform


To best monitor and identify threats, a detailed but easy-to-use cybersecurity management platform will enable an organisation to monitor their third-party vendors and to get a holistic view of their network. Any security threat will be pinpointed and clearly demonstrated on the platform, which will allow security teams to take immediate action to mitigate the risks.

Identify additional security measures


The next step, after establishing a monitoring platform, is to assess any threats or vulnerabilities that were identified during the due diligence review and to address the issues. These might include introducing: anti-malware mechanisms, multi-factor authentication, disk encryption and software patches. Continuously monitor risk


Giving organisations an objective and data-driven rating makes it much easier to monitor and evaluate performance of both short and longer terms. Companies with a security rating not only receive prompt alerts in the event of a change to their security performance but can also identify the issue that caused the shift in their rating. How RiskXchange can help


RiskXchange is an information security technology company, that helps companies of all sizes fight the threat of cyber threats by providing instant risk ratings for any company across the globe. RiskXchange was founded and is led by recognised experts within the security industry, who have held leading roles within companies such as IBM Security. As well as what’s listed above, we also provide the following:

• Assessments of internal security activity to be carried out on a rolling basis, helping to provide clarity to a range of stakeholders.

• Industry-wide benchmarking, including peer to peer and competitor.

• Greater customer confidence in the organisation’s digital presence and activities. This higher level of confidence touches others with vested interest including third parties, stakeholders and industry regulators.

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