Technical Due Diligence is a recommended element during the process of company investments. It’s all exciting investing in new businesses that can open up further opportunities. However before all the opportunities arise there’s a lot of behind the scenes work to do, to make sure you are investing your time and money into the right business.
Behind the scenes work can get quite stressful regarding the legal financial side of things but you’ve got to hang in there. Hard work pays off!
Before committing to a transaction, the investor needs to fully understand what it is they are buying into and what obligation it is assuming, the nature and extent of target companies liabilities, litigation risks, problematic contracts, cyber security, tech infrastructure of the business and much more. The due diligence process will allow investors to see a true value of the business. Giving them a chance to negotiate deals depending on the outcome,
Here’s specifically a Tech Due Diligence checklist to make the process seem that little smoother. These are things that should be considered during Tech Due Diligence:
1. Software Code Audit
Conducting a software code audit will show how well the functionality of an application is these are usually split into a secure code audit and a code quality review . Development of code can either be strong or poor, which in turn will eventually lead to inconsistencies in the application for users and become a potential security threat to the business if it is poor quality.
A code audit will identify any vulnerabilities, common issues and guideline violations. It will identify if there are any risks from using the code. A report will then provide a list of issues and recommendations from the tester.
2. FOSS Audit
Businesses will use free open source software(FOSS) when creating their own product. As an investor you need to get this looked at to make sure you know what you’re buying and what FOSS is being used.
A FOSS Audit or open source audit will explore all of the open source software and look at licenses. This is to make sure that the licenses are implemented and complied with correctly. As a business grows it gets harder to keep track of all licenses and could end up infringing one license with another. Ultimately breaking the law.
3. Cyber & Network Security
It’s important that the cyber security of a business is thoroughly looked at. A buyer needs to know how secure a business is. There are a number of entities to explore when focusing on cyber security.
- Looking for any security weaknesses that could expose a business to a cyber attack.
- How secure customer data is stored
- How secure payment systems are
- Network Maintenance
- Data encryption
- Password Management
- Any previous Data breaches
- Network firewall
- Plans for disaster recovery and data breach recovery
- Remote working policies
4. Development Team
An investor should get a review of how management works and how they operate their employee base. They should be made aware of the following:
- Development Team Overview
- Software Development Tools
- Project Management Methodologies
- Continuous Integration
- Quality Assurance Process
- Software Licensing
- Freelance & Remote Working
5. Penetration Testing
These audits can be undertaken as pen-tests for network or software. Most common are mobile application penetration testing, web app pen-testing, or network pen-testing.
If a business has a any online assets, a penetration test could be beneficial to prove how secure it is. It can uncover any weak points in your network and any vulnerabilities that can be exploited by criminals. If the business offering that you’re investing in as a significant digital product, pen-testing can really help understand what you are buying.
Here at North IT we offer Tech Due Diligence, we provide in-depth reports on all entities regarding cyber security and pen-testing, to ensure you are fully aware of any issues before your investment, merger, or accusation.