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Business formation process requires cybersecurity due diligence

On Behalf of | Nov 8, 2018 | Business Formation

When starting a business in Oregon due diligence requires that issues of data privacy, cybersecurity and the risk of data breaches be thoroughly researched and accounted for. The same applies in the business formation process that accompanies mergers and acquisitions. The problem of finding security weaknesses and even breaches after the acquisition of a business is common but sometimes disastrous.

When a significant post-acquisition security problem is discovered, it may bring a variety of negative consequences for the transaction and the companies involved. This may include shareholder lawsuits, securities fraud charges and other financial and operational risks. Some of the threats that must be confronted and handled during a merger or acquisition include ransomware threats, phishing schemes and the hacking and release of sensitive emails.

Checking for privacy protection for consumers is also important. However, some professionals dwell too much on privacy protections and not enough on cybersecurity risks. They may tend to ask general template-driven questions without understanding the practical workings and business of the company being purchased. They may also lightly tread on the potential problems regarding the theft of trade secrets and intellectual property.

Those latter risks are not simply unique threats posed by aggressive employees; instead, they can represent a fatal setback for a company, especially where the information contains key elements of the business’s intended long-term plans for future success. Advances in technology are helping the criminal elements as well as legitimate business ventures. Some new technology makes it easier for criminals to track, monitor and steal data. This may include important and sensitive proprietary information.

The process of providing state-of-the-art protective mechanisms and security protocols during the merger or acquisition phase is important in Oregon as well as elsewhere. Experienced and knowledgeable law firms are involved in protecting companies from taking on business acquisitions that may be fraught with cybersecurity issues. Always check the credentials and expertise of all professionals who participate in due diligence procedures during business formation, including during mergers and acquisitions.