From Risk to Requirement: Data Protection in Due Diligence

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The integration of data protection into corporate due diligence has become a defining feature of regulatory compliance and risk management in 2024 and beyond. With the implementation of the EU General Data Protection Regulation (GDPR) and the Corporate Sustainability Due Diligence Directive (CSDDD), organisations are now required to treat data protection not as an optional risk-mitigation strategy, but as a fundamental operational and legal requirement. This shift reflects the increasing recognition that the secure and lawful handling of personal data is essential for maintaining trust, safeguarding reputations, and ensuring long-term business sustainability.

Understanding Data Protection and Its Regulatory Context

Although the terms “data privacy” and “data protection” are often used interchangeably, they have distinct meanings in the context of modern regulation. Data privacy is rooted in the concept of individual rights and control over personal information, a principle that predates the GDPR and is closely associated with broader human rights frameworks. In contrast, data protection refers to the legal, technical, and organisational measures that organisations must implement to safeguard personal data from unauthorised access, loss, or misuse. Importantly, the GDPR does not explicitly reference “data privacy” but instead establishes data protection as a standalone right, requiring organisations to adhere to strict standards for processing, storing, and transferring personal data.

The regulatory landscape in 2024–2025 is shaped by two primary drivers. The GDPR remains the cornerstone of data protection in the European Union, with ongoing enforcement actions and substantial penalties for non-compliance. In 2023 alone, European regulators processed over 1,200 data breach notifications, and the average fine for violations reached €1.4 million. The CSDDD, which entered into force in July 2024, further expands the scope of due diligence by requiring large companies, both EU-based and those with significant EU operations, to identify, prevent, and mitigate adverse impacts related to human rights and environmental standards, including those arising from data protection failures.

The Imperative for Data Protection in Due Diligence

For organizations engaged in mergers and acquisitions, partnerships, or supply chain management, due diligence has traditionally focused on financial, legal, and operational risks. However, the regulatory environment now mandates that data protection considerations be embedded throughout the due diligence process. This integration is not merely a matter of compliance; it is essential for identifying and addressing potential legal, financial, and reputational risks associated with the handling of personal data by target companies, vendors, or partners.

A risk-based approach to data protection due diligence enables organizations to assess the maturity of data management practices, evaluate the adequacy of technical and organizational safeguards, and ensure that contractual arrangements with third parties meet regulatory standards. The CSDDD explicitly requires ongoing monitoring and public reporting of due diligence efforts, underscoring the need for continuous, rather than one-off, assessments.

Key Components of Data Protection Due Diligence

A comprehensive data protection due diligence process begins with a thorough review of all personal data assets held by the organisation or its partners. This involves mapping data flows, identifying sensitive categories of data (such as health or financial information), and documenting the systems and third-party processors involved in data handling. The next step is to evaluate existing data protection policies and procedures, ensuring that they align with the principles set out in the GDPR and CSDDD. This includes assessing lawfulness, fairness, transparency, data minimisation, and accountability in data processing activities.

Technical and organisational security measures are also scrutinised during due diligence. Organisations must demonstrate that they have effective access controls, encryption protocols, breach response plans, and staff training programs in place. Reviewing past incidents and the effectiveness of incident management processes can provide valuable insights into the organisation’s readiness to respond to data breaches and regulatory inquiries.

Another critical element is the assessment of third-party and supply chain risks. Contracts with vendors and partners should be reviewed for robust data protection clauses, and organisations must ensure that third-party processors are subject to adequate oversight and meet all regulatory requirements. The due diligence process should also verify that legal mechanisms are in place for international data transfers, such as Standard Contractual Clauses, and that appropriate safeguards are maintained for data transferred outside the European Economic Area or the UK.

Documentation and accountability are central to demonstrating compliance. Organisations are expected to maintain detailed records of due diligence findings, risk assessments, and remediation plans. This documentation not only supports regulatory audits but also serves as evidence of a proactive approach to data protection.

Embedding Data Protection into Due Diligence Workflows

To ensure that data protection is fully integrated into corporate due diligence, organisations should embed data protection checks into standard checklists and workflows. The use of Data Protection Impact Assessments (DPIAs) is recommended for high-risk processing activities, and the involvement of Data Protection Officers (DPOs) or compliance experts can enhance the rigour of the process. Modern tools such as AI-powered risk scoring, automated Know Your Customer (KYC) and Know Your Business (KYB) platforms, compliance monitoring solutions, and secure data rooms are increasingly being leveraged to streamline and strengthen due diligence efforts. CRiS intelligence is at the forefront of this movement.

It is crucial to recognise that due diligence is not a one-time event. The risk landscape evolves rapidly, and organisations must continuously monitor compliance, update risk assessments, and adapt their controls to address new threats and regulatory developments. Failing to do so can result in significant penalties, reputational harm, and operational disruptions.

Avoiding Common Pitfalls

Despite the growing emphasis on data protection, organisations often fall into several common traps. Treating due diligence as a one-off exercise rather than a continuous process can leave organisations exposed to emerging risks. Overlooking third-party and supply chain vulnerabilities is another frequent error, as is failing to maintain adequate documentation of compliance efforts. Relying on outdated or non-verified data sources can further undermine the effectiveness of due diligence and increase the likelihood of regulatory scrutiny.

The New Standard for Data Protection in Corporate Transactions

By 2025, the integration of data protection into corporate due diligence is both a regulatory obligation and a business imperative. The convergence of the GDPR, CSDDD, and evolving global standards means that organisations must adopt a proactive and comprehensive approach to data protection throughout the due diligence process. This not only ensures legal compliance and risk mitigation but also enhances trust and value in business operations, positioning organisations for sustainable growth in an increasingly data-driven world.

Framework

Aspect	Data Privacy	Data Protection
Core Focus	Individual rights, control over data	Safeguarding data from unauthorized access or loss
Legal Foundation	Human rights, pre-GDPR concepts	GDPR, Data Protection Acts, CSDDD
Main Stakeholder	Data subject (individual)	Data controller/processor (organization)
Example	Consent for data use	Encryption, breach notification, access controls