Cybersecurity incidents, including data breaches and system compromises, are increasingly common. For firms navigating Technology Due Diligence (Tech DD) with a history of cyber attacks, transparency and preparedness are essential. A prior breach can significantly impact the due diligence process, making it imperative to demonstrate accountability, corrective action, and ongoing security vigilance.
Why Prior Cyber Incidents Impact Tech Due Diligence
Discovering a history of cyber incidents is akin to uncovering a serious compliance violation; it prompts deeper investigation into operational security, internal controls, and risk management practices. In our experience, incidents such as downtime, data theft, or lost revenue are frequent findings during Tech DD. The reality is that cybersecurity issues often stem from internal vulnerabilities and human error, requiring a culture of accountability and proactive cybersecurity measures.
Common Cybersecurity Breaches We Encounter
In Tech DD assessments, we’ve observed these common types of cybersecurity breaches. These incidents often reveal gaps in security protocols, cloud management, and user practices:
- Bitcoin Mining Attacks: Malicious actors compromise cloud tenants, such as AWS or Azure, resulting in large bills from unmonitored cryptocurrency mining activities.
- Insecure Cloud Storage Break-Ins: Weak storage protocols allow access to sensitive data stored in the cloud, including intellectual property or financial records.
- Personal Data Theft: Compromised email lists or personally identifiable information (PII) lead to significant compliance and reputational risks.
- System Squatters: Hackers occupy the firm’s live systems, sometimes unnoticed, posing risks to operational stability.
- Ransomware Attacks: Files or systems are locked down, with hackers demanding payment for access restoration.
- Data Centre Wipe-Outs: Entire data centres, including backups, are erased, causing severe operational and data recovery challenges.
Key Information Required for Tech DD
To streamline the due diligence process, firms should prepare detailed responses to key questions about the incident, including:
- How and when was the attack discovered?
- What was the duration and scope of the attack?
- What business impacts, such as downtime or revenue loss, resulted?
- Which data, IP, or assets were compromised?
- Do you have visibility over where the stolen data may have ended up?
- Is the attack still active or ongoing?
- Is documentation available on the attack, responses, and preventive measures?
- What internal or external assistance was sought?
- What changes have been implemented to mitigate future risks?
- Have you taken steps to inform regulatory bodies, such as the ICO?
- Was the incident covered in media, and what was the public response?
- Have you initiated any legal proceedings as a result?
Proving Your Cybersecurity Posture
When preparing for Tech DD, it’s vital to demonstrate a robust, responsive security framework. The following actions can help alleviate buyer concerns and rebuild confidence:
- Increased Cybersecurity Investment: Show evidence of new or improved security protocols, training, and technology.
- Clear Accountability: Outline responsibilities within your team, with cybersecurity positioned as a priority across all levels.
- Smart MSP Partnerships: If a Managed Security Provider (MSP) is involved, illustrate how you’re an informed client, selecting, monitoring, and evaluating services that match your cybersecurity needs.
- Demonstrate a Strong Cybersecurity Culture: From board-level oversight to everyday practices, a proactive security mindset reduces the chance of future incidents.
Conclusion: Transparency and Trust
For sellers, disclosing a prior cyber incident early on builds trust and allows buyers to assess the firm’s cybersecurity maturity. The more information provided upfront, the less likely the discovery will delay or derail a transaction. A history of cyber attack doesn’t have to be a deal-breaker; it’s how you’ve responded and mitigated future risks that matters most.
