Virtual Data Rooms have traditionally been used for transactions like M&A, IPO's, asset sales and Joint Ventures. The widespread acceptance in the finance world is now helping data rooms move beyond the transaction space. A challenge that companies are increasingly facing is - How safe are our documents in office?. During mission-critical deals such as corporate asset sales, mergers or acquisitions, confidentiality is paramount. Corporations’ trade secrets and strategic data are too sensitive to store on shared networks or to be distributed via email to participants in the deal. Imagine how long KFC’s secret chicken recipe would remain secret if it was stored on flash drives or internal file-sharing extranets and forwarded in email messages? In this post we look at how a virtual data room can substitute your Network Shared Drives/Emails/Flash Drives method of storing confidential documents and exposes the risks that are attached to it
In the past, participants in a deal would meet for days and weeks in a sealed conference room sharing confidential documents and information. If the host company was located in a different centre from the prospective buyers, travel and accommodation costs could be extensive. That is all in the past. Data rooms now provide a secure and reliable repository for storing documents and making them available to users with the right permissions. The files are available 24/7 in a controlled environment, which is more accessible than file-sharing platforms and portable flash drives.
Storing confidential material on a shared network or distributing it via email is insecure and sets you up for a number of risks, including:
- Corporate espionage
- Corruption by malware or viruses
- Accidental loss or deletion
- Interception via backups or unlawful access to email
- Lack of functional control – documents can be printed, forwarded or copied
The use of data rooms provided by independent, neutral service providers combats these risks and reduces chances of your strategic trade secrets landing up in the wrong hands. Additionally, Virtual Data Rooms give you a complete control over your documents even when the user has downloaded them into his//her computer. If a deal ends or a user is removed from the project, any files that they might have on their desktop can remotely locked down.
Email can fail. Internal servers can crash. We’ve all experienced one or the other at some point, with the frustration of trying to recover critical information that we just know was there somewhere. Secure, virtual data rooms provide reliable storage, backed up securely with sophisticated data recovery options that can prevent this scenario from occurring. In addition, there’s no limit to the size of the files stored and accessed – unlike email which tends to restrict the size of messages, making it necessary to find alternative and less secure methods of distributing information.
Secure document exchange protocols require the ability to monitor who accesses the information and what they do with it. Virtual data rooms enable you to:
- Track user access to see which files were viewed by whom
- Check the number of times each file was viewed, and dates and times of viewings
- Ascertain what was done with the information, such as - Who accessed the document, When the document was accessed and how many times the document was accessed
- Control confidentiality through adding watermarks to documents before they are distributed in any format
- Version control of editable files to provide an audit trail of any changes made
It’s also possible to remotely restrict access to all documentation if you find suspect activity by a user that suggests a irregular activity.
The use of virtual data rooms provides an unprecedented level of convenience, too. Now you can prepare in advance for audits, collating the necessary documents required for the process and storing them securely until they are needed. One-click notification for the upload of new documents means your authorised users are kept informed at all times of what has been added to the data room. It’s no longer necessary to spend the time and incur the risks of making extensive photocopies of documents, which enhances the security of the process and reduces both your costs and your carbon footprint.
The use of virtual data rooms enhances not only your security and accessibility, but also provides extensive additional benefits for your deal process.
The SAS model of Virtual Data Room offers a number of cost benefits in addition to the security and convenience. These include: • Reduced software costs based on eliminating the need to purchase expensive programs and updates • Lower hardware costs – no requirement to purchase additional servers • Qualified software support from knowledgeable, professional vendors • Economies of scale – you pay only for the service you use, as opposed to implementing an expensive operation for minimal or one-time usage • Pay as you go – typically uses a rental model based on your usage requirements • Immediate access to the latest innovations without additional cost, through your data room’s service provider