The Dark Side of Data
The Dark Side of Data
Ethical Considerations in Commercial Due Diligence
In today’s data-driven world, commercial due diligence relies heavily on vast amounts of information to assess risks and opportunities before a deal. But beneath the surface of spreadsheets and reports lies a complex ethical landscape that is often overlooked. The “dark side” of data in due diligence isn’t just about what’s missing-it’s about how data is collected, used, and protected, raising critical ethical questions that can impact the success and integrity of any transaction.
Understanding the Ethical Challenges of Data in Due Diligence
Data ethics involves principles like privacy, confidentiality, fairness, transparency, and accountability throughout the entire data lifecycle-from collection and storage to analysis and disposal. In commercial due diligence, these principles become essential because decisions are only as trustworthy as the data they are based on.
However, many organizations face challenges with “dark data”-unstructured, hidden, or poorly managed information that can include sensitive personal details, confidential business information, or security credentials3. This data poses significant risks because it is often invisible during due diligence yet can lead to serious breaches or liabilities post-acquisition.
The Risks of Overlooking Data Ethics
A striking example is the Marriott-Starwood acquisition, where millions of unencrypted passport numbers and credit card details went undetected during due diligence, resulting in one of the largest data breaches in history3
. This failure was partly due to traditional due diligence processes relying on manual reviews and legal checklists rather than automated, expert-driven data discovery.
Ethical lapses in data handling can also expose companies to legal penalties, reputational damage, and financial losses. Moreover, hidden unethical practices-such as concealed conflicts of interest or corrupt behaviors-may be embedded in data that is not properly scrutinized.
Best Practices for Ethical Data Use in Commercial Due Diligence
Comprehensive Data Discovery: Employ automated tools to uncover unstructured and “dark” data across all platforms, ensuring nothing critical is missed3.
Privacy and Confidentiality: Respect data privacy laws and safeguard sensitive information throughout the due diligence process.
Transparency and Accountability: Maintain clear documentation of data sources, methods, and findings to support ethical decision-making.
Cross-Functional Expertise: Involve cybersecurity professionals, legal experts, and ethics officers to provide a holistic review of data risks.
Why Ethics Matter for Long-Term Success
Focusing on ethical data practices is not just about avoiding risks-it’s about building trust with stakeholders, enhancing the quality of decisions, and creating sustainable value. A rigorous, ethics-driven due diligence process helps ensure that acquisitions are based on accurate, fair, and responsibly handled information.
References
U.
S. Department of Commerce, Commerce Data Ethics Framework, 2022
IT Security Guru, The Dangers of Dark Data in M&A Deals, 2020
Ethical Systems, The Ethics Case for Due Diligence, Law360 Expert Analysis, 2023
EthicsMonitor, The Ins and Outs of Conducting Due Diligence, 2019
Commercial due diligence, the dark side of data is a call to look beyond surface-level numbers and ask tough ethical questions. By embracing data ethics, companies can protect themselves from hidden dangers and pave the way for smarter, more responsible deals.
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