The Importance of Virtual Data Rooms for Financial ReportingAuthor: Joe Gamse
Financial reporting is an integral part of the upkeep of your business and is often required by shareholders. Creating these reports can involve compiling financial statements, quarterly or annual reports, and prospectuses. It is required by auditors, government agencies and, in the case of listed companies, stock exchanges. Financial reporting can also secure your business funding and shareholders, as it aids in the analysis of your business’s performance. However, creating these reports is often a tedious process and can involve sensitive information, which if leaked could have serious consequences. Virtual data rooms (VDRs) are useful tools that can help overcome these challenges. VDRs are cloud-based intranets that facilitate the storage and distribution of documents.
Compiling financial reports involves handling, transfer, and analysis of large amounts of data. Currently, data is stored in physical data rooms or on servers on site. This often means that the process becomes unnecessarily long and drawn out. Bulk upload, good speed, and systematization options are important features. They make virtual data rooms much more favorable over the conventional physical ones. Creating well-organized searchable folders means that you can easily find and access the necessary data rather than manually search it through in a physical data room.
If your company operates from numerous locations, whether it be regional or multinational, virtual data rooms can significantly add to the efficiency of your financial reporting. This is because they can be accessed remotely from anywhere with an internet connection. The alternative would be mailing physical copies or emailing large numbers of files in small increments; both are very time-consuming. It also means that people can simultaneously work with the same files, allowing the team to reach shorter deadlines.
Security in Financial Reporting
Security is important when dealing with the financial information of your business as some of the data may be confidential. This is one of the main advantages of virtual data rooms. VDRs have an access control function that allows the owner or administration to restrict certain users’ access to files. This is particularly useful when junior employees or a third party, such as officials conducting due diligence, require access to a data room. You can create groups within the data room who can only enter specific folders. An extra advantage of this function is that the administrator can revoke this access at any time if need be.
Having control over what the users of your data room can do with the files is also important, especially if sensitive financial information is at question. VDRs have functions allowing to prevent printing, downloading or copying of documents. An audit trail record all VDR activity and lets the administrator track and restrict certain user actions if the need arises. Every user is assigned a unique watermark that is displayed on each page of the viewed secure document. This means that if data is leaked via screenshot or photos, it is easy to identify who leaked the information. “Fence view” is another extra security feature. It allows the administrator to restrict viewing a document in portions – a user sees a part of the document where they hover their cursor. This feature prevents unauthorized viewing and taking screenshots.
Protecting Virtual Data Room’s Content
Additional features for securing your data include encryption and virus scanning. They ensure maximum security in the event of a hack and guarantee that your data is not damaged or altered by a virus. Moreover, your data is not only protected by digital security means but also physical ones. Many data breaches happen because of poor access control to data storage rooms. VDRs store data on servers often located in a number of locations with professional security companies and cameras monitoring the facilities 24/7. For emergency cases, server rooms are equipped with backup generators and if worse comes to worst backup servers in a remote location ensure protection of your data from physical damage.
Therefore, sharing and collaborating on documents and company data via virtual data rooms significantly facilitates and helps secure financial reporting.