Emerging Markets

The Role of Virtual Data Rooms in Business Confidentiality

virtual data room

Confidentiality of documents can often be important in a deal. However, keeping your documents secure can be tricky, because so many highly used data sharing and storing methods are not entirely safe. A potential leak of certain information could be fatal for your business, so keeping your confidentiality is critical. How, then, can you keep your data secure when so many methods are not trustworthy? Using a Virtual Data Room (VDR) is quickly becoming the most popular method of secure data sharing and storing in the corporate world. They are invaluable to businesses dealing with due diligence or any other information-intensive process. The security and data protection that come with VDR solutions can help you achieve optimal confidentiality, and we’re going to tell you how.

First, it’s important to understand exactly what a VDR is before we can understand how it promotes confidentiality. Originally, physical data rooms were used in corporate processes, such as due diligence in M&A, as a way to share confidential documents with clients or investors while keeping them secure and maintaining access control. As cloud computing became more commercialized in the last fifteen years, VDRs were born and initially used for debt underwriting. Over time, they evolved into what they are now, with such features as data protection, encryption, and superior organization and access control tools. Replacing their physical counterparts, VDRs are populated with documents that are relevant to the transaction that a company might be undertaking. Access, often restricted, is then given to the other parties to the transaction to view the data. VDRs allow for a much smoother data transferal process, and in the end can lead to much faster decision-making and shorter transaction periods.

Quite obviously, the most important components of a Virtual Data Room that are relevant to data confidentiality are the security and data protection features. Other methods of sharing data, such as emails, just don’t quite cut it when it comes to security. They don’t have secure servers, nor do they encrypt the shared data. VDRs, however, do have such features. As for security, VDRs offer the highest commercial-grade 256-bit data encryption available. The servers that your data will be stored in are protected both physically and digitally, with security cameras and/or experienced personnel watching them 24/7, and firewalls protecting them from outside attacks at the same time. Furthermore, the top VDR providers do offsite backups of their data so that if the main servers are compromised in any way, your data will be safe.

When it comes to the data protection features that the online data rooms provide, they are second to none. One of the main features on offer is access control, in that you, as the VDR admin, can control who has access to which documents in the data room. On top of this, you can control whether they can download or print the documents, or both. Any document that is downloaded or printed will be watermarked with the user’s details; so if a document is leaked, you will know who leaked it. Another protection feature available with the use of a VDR is audit trail reporting. The VDR software will automatically keep track of who has viewed which documents and how many times they have viewed them. These reports can include the user’s name, the date, time, IP address and actions taken, and they can be exported to excel. Most VDR solutions also allow for online NDA forms to be signed, so if someone leaks information, you can take legal action against them. Finally, the last main protection feature comes in the form of a two-step authentication process. This entails a one-time-pin being sent to the authenticated user’s smartphone, which will then be used to access the data room.

These security and protection features that are offered by VDR solutions are invaluable when it comes to sharing your data in a secure environment. Additionally, they are very useful when it comes to performing due diligence as they allow the whole process to run much more smoothly and securely. The security is key in this as you would not want any of your company’s secrets being revealed to the world because you allowed other parties unrestricted access to your data while performing due diligence. In other words, if your company is not yet employing the use of a Virtual Data Room service, there is no reason for you not to make the change to the digital space.

Related topics:Advice for Dealmakers Advice for Investors
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