Information Security Risk Assessment

Information security risk management involves systematically identifying, evaluating, and mitigating information-related threats to an organization. This process entails pinpointing potential vulnerabilities (technical weaknesses, inadequate procedures, etc.), assessing their exploitation likelihood and potential impact, and implementing safeguards to minimize risk. M&A transactions often overlook key security risks, including:

• Information Security Maturity Levels: Analyzing the target company's information security program, encompassing policies, procedures, and controls. This comparison evaluates security reviews, assurance activities, and adherence to industry standards (ISO 27001, PCI DSS, etc.).

• Locating PII and Sensitive Data Across the Company's Infrastructure : By employing specialized scanning tools and techniques, such as data discovery and classification tools, the acquiring company should systematically identify and categorize sensitive information across various data repositories, including databases, file systems, and cloud storage. This proactive approach allows for a comprehensive understanding of the data landscape within the target company, enabling the acquiring company to assess potential data privacy and security risks and develop appropriate mitigation strategies as part of the acquisition process.

• Third-Party Risk Management: Assessing the robustness of relationships with critical vendors and suppliers, identifying hidden operational risks like procurement issues, data breaches, security incidents, supply chain disruptions, and exit strategies for key suppliers.

• IT Infrastructure and Strategy: Evaluating the target company's IT landscape, encompassing in-house/outsourced solutions, servers, databases, networks, and applications. This assessment identifies potential risks like outdated hardware, shadow IT, unsupported software, unencrypted data, and compatibility with acquiring organization's tools and technologies.

• Business Continuity and Disaster Recovery (BCP/DR): Reviewing the target company's BCP strategy, assessing its capability and approach to maintaining operations and recovering from disasters. This includes evaluating cyber resilience planning, ensuring the identification of critical assets, cyberattack detection and response capabilities, incident response plan effectiveness, and continuous improvement opportunities.

• People and Culture Compatibility: Investigating factors like employee engagement, retention risks, and cultural alignment. M&A strategies should consider employee acquisition or potential talent drain, as disgruntled or disengaged employees pose significant security threats.

Model

The model is based on a Quantitative Fault Tree Analysis that outlines the possible causes of unforeseen risk during acquisitions or mergers. This model in effect is a bunch of questions that should be asked and qualified during a merger or acquisition to help identify possible risks that would normally be missed.

Information Security Maturity and Compliance:

• An independent and continuous Information Security Management System (ISMS) is maintained.

• Change Control Procedures and Change Control Processes are implemented.

• Up-to-date Information Security Policies are readily accessible to all staff.

• The Information Security Organisation reports to the board level, via Legal or Finance as appropriate.

• Industry-recognized certifications are pursued where applicable (e.g., ISO, PCI, Cobit).

• Annual independent Internal Audits and External Audits are conducted for all business units that holds potential risk to the business.

• Information security objectives are documented, reviewed, and measured quarterly to ensure achievement.

• Board-level sponsorship for information security exists.

• A vulnerability management program is in place.

• Annual independent internal and external penetration tests are conducted.

• A company-wide Security Incident and Event Management (SIEM) tool is utilized.

Third-Party Risk Assessment:

• A formally documented Procurement process/policy guides acquisitions.

• All procurement undergoes Security and Legal review before completion.

• Records of past reviews are maintained.

• Purchase evaluations consider vendor, technology, and resource lock-in.

• Exit plans are established for insourcing, outsourcing, or procuring critical suppliers/products.

IT Infrastructure and Strategy:

• A documented and widely published IT strategy exists.

• Shadow IT presence is measured.

• The IT strategy is endorsed by information security.

• A documented Business Continuity plan is in place.

• Centralized procurement of IT resources eliminates departmental contracting needs.

• All IT procurements are assessed for efficacy, efficiency, and redundancy.

• An external data center service provider (IaaS) manages data storage.

• IT function hosting is outsourced to a service provider (PaaS).

• An SLA governs internal service requests.

• An annual Business Impact Assessment for cyber resilience is conducted.

Business (Cyber) Resilience:

• An incident response plan exists.

• Security training and awareness programs are offered.

• A strategic security plan is in place.

• Do you know which PII data you collect and in which domains it is stored/traversed?

• Do you know which laws apply to your PII data processing?

• Do you regularly assess the risk of PII data breaches?

People and Culture Processes:

• Regular people and culture audits are conducted to assess and improve workplace practices.

• A comprehensive wellbeing program is implemented to support employee health and well-being.

• A structured performance management program ensures fair and consistent evaluation of employee contributions.

• Exit interviews are conducted with all departing employees to gain valuable insights and improve retention.

Conclusion

This article presents a comprehensive information security risk assessment framework tailored for pre-acquisition evaluations in M&As. By incorporating these crucial security considerations, acquiring organizations can mitigate hidden vulnerabilities, enhance the due diligence processes, and ultimately make informed decisions that safeguard their investments and minimize potential risks.