Due Care vs Due Diligence: The Critical Difference That Makes or Breaks Security

Last Updated on April 16, 2025

TL;DR:

• Due care vs due diligence are distinct but complementary processes in risk management
• Due care focuses on ongoing security measures and standard practices
• Due diligence involves thorough investigation during specific events or transactions
• Modern organizations need both to effectively protect assets and manage risks
• Virtual data rooms like SmartRoom combine security features with collaborative tools
• Key differences lie in timing, scope, and implementation
• Common misconceptions often lead to security gaps and inefficient processes
• Success requires balancing technology, procedures, and human factors

Think of the most robust security perimeter you’ve ever designed. Now imagine discovering it had been breached for months because no one was actively monitoring the system.

Note – the problem isn’t your security tools. Organizations spend months selecting top-tier security solutions and implementing best practices. Yet 78% of security breaches in 2024 happened to companies with “excellent” security ratings.

So what gives? How do you bridge the gap between security measures and actual security? How do you differentiate between maintaining security (due care) and investigating it (due diligence) when they seem frustratingly similar?

Whether you’re protecting sensitive data, managing vendor relationships, or conducting M&A investigations, the difference between due care and due diligence isn’t just academic – it’s the difference between real protection and the illusion of security. Let’s decode these concepts beyond the typical definitions and explore how they work together to create truly effective security strategies.

What is Due Care?

Due care represents the level of judgment and care that a reasonable person would exercise under similar circumstances. In the business context, it encompasses the basic steps an organization takes to protect its assets and meet its legal obligations. This concept goes beyond mere checkbox compliance – it’s about demonstrating genuine commitment to implementing appropriate controls and security measures.

When organizations exercise due care, they’re essentially showing they’ve taken reasonable steps to prevent foreseeable problems. For instance, a company that regularly updates its anti virus software, conducts employee training, and maintains clear cybersecurity policies is demonstrating due care in protecting its digital assets.

In the context of information security, due care focuses on establishing and maintaining fundamental protective measures. These typically include:

• Implementing baseline security controls aligned with industry standards
• Creating and enforcing comprehensive cybersecurity policies
• Providing regular security awareness training to staff
• Maintaining up to date documentation of security procedures

A practical example would be a healthcare provider protecting patient data. Due care in this scenario means following HIPAA guidelines, encrypting sensitive data, and ensuring staff understands their role in maintaining confidentiality. This illustrates how due care intersects with both regulatory requirements and practical risk management.

What is Due Diligence

Due diligence refers to the comprehensive investigation process organizations undertake to identify and mitigate potential risks before making significant business decisions. Unlike the ongoing nature of due care, diligence focuses on specific situations or transactions where detailed scrutiny becomes necessary to protect the organization’s interests.

The diligence process involves a thorough examination of various aspects of a business operation or transaction. For instance, when considering a merger or acquisition, companies conduct extensive investigations into the target company’s financial health, legal standing, and cybersecurity posture. This investigation helps senior management make informed decisions while managing risks effectively.

Think of due diligence as the deep-dive research phase. During this time, organizations scrutinize everything from known vulnerabilities in IT systems to potential security risks in operational procedures. This might involve examining a company’s incident response plans, reviewing their risk management frameworks, and assessing their security operations.

A key aspect of due diligence in today’s digital landscape involves evaluating cybersecurity measures. Organizations must verify that potential business partners or acquisition targets maintain robust security practices, including:

• Comprehensive vendor risk management policies
• Documented procedures for handling security incidents
• Evidence of continuous monitoring and threat detection
• Regular backups and disaster recovery planning
• Systems secure enough to prevent data breaches

The process often reveals new risks that weren’t immediately apparent, allowing organizations to implement appropriate controls before proceeding with major business decisions.

Due Care vs Due Diligence

The distinction between due care vs due diligence lies in their timing, scope, and application. While both concepts play distinct roles in risk management, they serve different purposes and occur at different stages of business operations.

Care focuses on ongoing, day-to-day activities that demonstrate reasonable steps to protect assets and meet obligations. In contrast, diligence refers to specific, intensive investigations conducted during particular events or transactions. This fundamental difference shapes how organizations approach each process.

Let me create a visual comparison to illustrate these differences clearly:

Aspect	Due Care	Due Diligence
Timing	Continuous, ongoing process	Event-driven, specific timeframe
Scope	General security measures and standard practices	Detailed investigation of specific areas or entities
Focus	Preventive measures and baseline protection	Risk assessment and detailed analysis
Purpose	Meeting standard obligations and preventing known risks	Identifying potential threats and hidden risks
Implementation	Regular security operations and procedures	Special investigations and assessments

Importance of Both in Risk Management

In today’s business landscape, the relationship between due care and due diligence creates a comprehensive framework for protecting organizational interests. Their combined implementation helps companies navigate both daily operations and special circumstances while maintaining strong security posture.

A practical example illustrates this relationship: Consider how tech giant Microsoft approaches security. Their ongoing cybersecurity practices demonstrate due care – they maintain regular employee training programs, update security measures consistently, and follow industry standards for data protection. However, when acquiring smaller companies like LinkedIn or GitHub, they conducted extensive due diligence investigations to identify potential risks and ensure compatibility with their security framework.

The cost of neglecting either component becomes evident through real-world failures. In 2019, a major financial institution faced severe consequences after maintaining strong daily security operations but conducting insufficient due diligence during an acquisition. This oversight led to the inheritance of significant security vulnerabilities, resulting in multiple security incidents and regulatory penalties exceeding $25 million.

Both elements serve distinct yet complementary purposes in risk management:

Due Care’s Role

Establishes baseline protection through continuous monitoring and regular security operations. Organizations demonstrate this through up-to-date cybersecurity policies, consistent employee training, and adherence to industry standards.

Due Diligence’s Impact

Provides deep insights during critical business decisions. Through thorough investigation, companies identify potential threats that might otherwise remain hidden, allowing for informed decisions about partnerships, acquisitions, or major operational changes.

The synergy between these processes helps organizations better manage risks by:

• Creating a comprehensive security framework that addresses both known vulnerabilities and potential security risks
• Ensuring compliance with regulatory requirements while maintaining operational efficiency
• Developing robust incident response capabilities for both routine and special circumstances
• Protecting sensitive data through layered security measures and thorough risk assessment

Integration becomes particularly crucial when dealing with third party vendors or considering major business transactions. For instance, financial institutions must now demonstrate both ongoing cybersecurity efforts (due care) and specific vendor risk management policies (due diligence) to meet regulatory standards.

Recent trends show that organizations successfully balancing these elements typically experience fewer security breaches and better outcomes during major business transitions. They’re better equipped to protect against new threats while maintaining strong security operations across their business ecosystem.

Due Care vs. Due Diligence in M&A Transactions

In mergers and acquisitions, the interplay between due care and due diligence becomes particularly crucial. The diligence process takes center stage during these transactions, while maintaining proper due care ensures the security of sensitive information throughout the deal lifecycle.

Due Care in M&A transactions

During M&A transactions, due care manifests through:

• Maintaining secure communication channels for deal-related discussions
• Implementing appropriate controls for document sharing
• Regularly monitoring access to confidential information
• Ensuring continuous compliance with relevant laws governing data protection

The Due Diligence Process in M&A

Its contexts involves several critical phases:

Initial Assessment: Companies evaluate basic security posture and identify potential risks before proceeding with deeper investigation. This includes reviewing cybersecurity policies, examining known vulnerabilities, and assessing overall risk management frameworks.

Detailed Investigation: Teams conduct thorough examinations of the target company’s:

• Information security infrastructure
• Incident response capabilities
• Compliance with regulatory requirements
• Historical security incidents and their resolution
• Employee training programs and security awareness

Risk Mitigation Planning: Based on identified risks, organizations develop strategies to:

• Address potential security risks before deal completion
• Plan post-merger integration of security operations
• Establish continuous monitoring protocols
• Define new security measures needed after integration

A practical example from recent years demonstrates these concepts: When a major healthcare provider acquired several smaller clinics, their due care practices ensured protected health information remained secure throughout the acquisition process. Meanwhile, their due diligence investigation revealed outdated security measures at two target clinics, allowing them to implement necessary upgrades before finalizing the deals.

Integration Challenges: The post-merger phase often presents unique challenges where both due care and due diligence remain vital:

• Merging different security policies
• Standardizing risk assessment procedures
• Unifying incident response protocols
• Harmonizing employee training programs

How SmartRoom Supports Due Care and Due Diligence

Virtual data rooms play a crucial role in modern business transactions. SmartRoom combines robust security with efficient collaboration tools to support both ongoing protection and thorough due diligence investigations.

Security Infrastructure

SmartRoom implements comprehensive security through multi-factor authentication, customizable access agreements, and advanced domain restrictions. The system’s sophisticated watermarking extends across all content types, including video streaming, with customizable positioning options to protect sensitive information throughout the due diligence process.

Document Management and Control

The Native File Viewer preserves document integrity by enabling work with original file formats, while SmartDrive ensures secure desktop synchronization. Real-time version control with timestamp labeling and SmartLock’s remote document expiration features provide precise control over document lifecycles and access permissions.

while SmartDrive ensures a secure desktop environment for document management

Collaboration Features

The Q&A module centralizes all transaction communications, replacing scattered emails with a structured system. Integrated @ mentions, document-level notes, and Office365 Online Collaboration display real-time user activity, ensuring transparent communication throughout due diligence proceedings.

Integration and Workflow Enhancement

SmartMove enables efficient content distribution, while bulk operations and customizable staging processes streamline reviews. The platform’s public API facilitates integration with existing systems, and advanced search functionality accelerates document discovery and analysis during due diligence investigations.

Best Practices for Implementing Due Care and Due Diligence

Effective implementation of due care and due diligence requires a systematic approach that balances security with operational efficiency. Organizations must develop structured processes while maintaining flexibility to address emerging risks.

Risk Assessment Framework

Successful risk management begins with a comprehensive assessment process. Organizations should establish clear criteria for evaluating potential risks, considering both immediate threats and long-term vulnerabilities. Senior management involvement ensures alignment with business objectives while maintaining appropriate controls over the assessment process.

Documentation and Standardization

Creating standardized procedures helps maintain consistency across investigations. This includes developing templates for common scenarios, establishing clear documentation requirements, and implementing version control systems for all relevant documentation. Regular updates to these procedures ensure continuous monitoring of evolving industry standards.

Training and Awareness

Organizations must develop comprehensive employee training programs that address both technical and procedural aspects. Staff should understand their roles in maintaining security measures and following established protocols. Regular updates keep team members informed about new threats and emerging cybersecurity risks.

Technology Integration

Modern risk management demands appropriate technological support. Organizations should:

• Select tools that align with their security posture
• Integrate systems to enable continuous monitoring
• Ensure platforms support both routine operations and special investigations
• Maintain up to date security measures across all systems

Vendor Management

Third party vendors require particular attention in risk assessment procedures. Organizations should establish clear policies for vendor evaluation, implement strong security requirements, and maintain ongoing oversight of vendor relationships to protect sensitive data and maintain compliance with regulatory requirements.

Common Misconceptions of Due Care and Due Diligence

Organizations often misunderstand key aspects of due care and due diligence, leading to potential gaps in their risk management strategies.

Due Care: Many organizations mistakenly view due care as merely following industry standards. However, due care extends beyond standard practices, requiring active risk assessment and continuous monitoring of security measures. Another frequent error is assuming that implementing basic security operations fulfills all due care obligations.

Due Diligence: The diligence process often suffers from timeline misconceptions. While organizations typically understand the need for thorough investigation, they may underestimate the time required for proper risk assessment. Some incorrectly treat due diligence as a one-time event rather than recognizing its recursive nature during complex transactions.

Security Implementation: A prevalent misconception involves security posture assessment. Organizations sometimes believe that deploying advanced technology alone ensures adequate protection. However, effective security requires a balanced approach combining technology, procedures, and human factors.

Process Integration: Many organizations incorrectly separate due care from due diligence processes. These functions should work together, with ongoing security measures supporting detailed investigations when needed. The misconception that these processes operate independently can lead to inefficient resource allocation.

Technology Adoption: Platform selection often suffers from misconceptions about functionality versus security. Some organizations prioritize features over security measures, while others focus exclusively on security at the expense of usability. The key lies in finding platforms that balance both aspects effectively.

Conclusion

Understanding the distinction between due care and due diligence is just the beginning. The real challenge lies in implementation – turning this knowledge into actionable security strategies that protect your organization.

What’s next? Start by evaluating your current security posture. Are you truly maintaining continuous protection, or just going through the motions? Look for gaps where standard security measures might need enhancement through targeted investigation.

Remember: Security isn’t about choosing between due care and due diligence – it’s about leveraging both to create a comprehensive shield for your organization’s assets. The most secure organizations aren’t necessarily those with the most sophisticated tools, but those who understand how to blend ongoing vigilance with thorough investigation.