3rd party integration risks funds should check

Often 3rd party plug-in solutions seem a great choice for rapid development, but it comes with a catch.

Due to the increase in customer demands and ever-changing user behavior, all tech platforms these days, have to support the plethora of features on their platform; as simple as enabling live chat or chatbot features.

In most of our tech DD cases, our common finding has been less protected data sharing mechanisms; between the platform and 3rd party plugins/integrations. Tech teams tend to integrate with 3rd parties in the rush to take the feature life or in rush to respond to business needs, but areas like secure data sharing and data handling with 3rd party solutions/plug-ins get ignored.

Why is it important to check how data is shared with 3rd Parties?

• First and foremost, to protect my own interest. Yes, tech owners need to protect and secure their Intellectual Property Rights.
• Second, to protect user’s data privacy and data protection rights.
• To save the brand from misuse of data by 3rd parties.
• To ensure customer trust.
• To save the brand reputation.

How do I ensure secure 3rd party integrations?

• Identify features that would really need 3rd party integration vs being built from scratch.
• Identify what all vendors are available for providing this integration and incorporate the vendor evaluation process.
• Sign Non-disclosure and IP security agreements with such shortlisted vendors. Identify what all data points are required to be shared as part of this integration.
• Implement a secured handshake mechanism for data-in-transit workflows as part of this integration.
• Ask vendors to share details on how they are storing the data received from your platform.
• Get the security audit or VAPT cycles done by experts periodically so they can certify these integrations from an information security perspective.

Ensuring that that the entity or startup you are investing in has a strict framework to follow compliance and ensure security, is a key investigation for Investment Funds to mitigate potential risks - especially when technology is at the center of every business.

How are you ensuring a technology due diligence to secure your investment decisions?