Why Virtual Data Rooms are Used for Secure File Storage
Virtual Data Rooms (or VDRs) are secure, cloud-based storage systems for confidential information.
While they can be utilized for almost any data-sensitive application, such as litigation, medical research, real estate, hospital administration, and private equity, they are becoming more and more synonymous with M&A.
This is due to the fact that they greatly improve the flow of information between stakeholders.
Why managing documents in a VDR is the future
The VDR business is booming as sharing documents electronically is an effective and efficient replacement for the cumbersome method of transferring hard copies.
Moreover, most VDRs are intuitive and easy to use, and offer personal settings for sharing, tagging, and organizing documents. Perhaps most importantly, data rooms lower the risk of information theft by a third party.
How safe is to store confidential data in virtual data rooms?
The work and information stored within VDRs is sensitive, and not only are VDRs widely accepted, they are extremely secure. Almost all M&A deals incorporate VDRs and cloud storage in some capacity.
You just need to make sure that your VDR provider comes equipped with the necessary security features.
Virtual Data Room Security Features to Look For
Whether you are shopping for a VDR for M&A or for other data sensitive realms, security should be your first priority. A VDR is essentially a specially encrypted cloud-based web hosting service; therefore, you want a VDR that has top of the line security. Specifically, you want a VDR that:
1. Is ISO 27081 compliant – ISO compliant means the VDR follows the guidelines set forth to protect Personally Identifiable Information (PII) in storage clouds. ISO 27081 specifically is considered the premiere security choice for cloud storage systems (vs. ISO 27001).
2. Boasts strong encryption methods – Encryption is a method that encodes data before it is moved into a storage cloud. Traditionally in a cloud, data moving to and from the server is encrypted, but this does not mean the document is always encrypted and safe. VDRs, however, allow for the document itself to be encrypted.
3. Allows for digital watermarking – Digital watermarking is incredibly useful as it helps to stop the illegal copying of data. Digital watermarking can even be used on text, video, and audio). In addition, it allows you to track who is downloading or printing information, which fights against information leaks. The best VDRs have both dynamic and static digital watermarking.
4. Contains comprehensive document permission and view restriction settings – You want to look for a VDR that allows you to be specific with document permissions and restrictions. For instance, when collaborating, you might want a team member to have access to a portion of a document, but also to be restricted from another part of it. In addition, “view only” features can be helpful as you can limit who is downloading and saving data and content.
5. Utilizes two-factor authentication – Two-factor authentication reduces password theft and the chances the wrong person will enter the data room. In addition to entering a password, you might be asked to provide additional factional information about yourself or input an additional code. Studies highlight the power of two-step authentication to help keep data safer than a single password.
6. Check which IP, device, location user logs in with – Admins can check the IP, type of device, and locations of all users that log in and send email notifications if found suspicious data.
7. Audit Logs – The audit logs includes comprehensive reports and analytics on all user, file, and document activity from within the room.
8. Single Sign On (SSO) Integration – SSO is a user authentication service that allows a user to enter one set of login credentials, such as a username and password, and be able to access multiple applications with those credentials.
9. FINRA Compliance – The Financial Industry Regulatory Authority aims to protect investors by making sure the security industry operates fairly. It is the largest independent regulator for all securities firms doing business in the U.S. and offers regulatory oversight.
10. Maintains robust user support – Finally, you will want to consider the type of customer support and service the VDR company provides. Because many of the individuals utilizing VDRs are collaborating with stakeholders around the country or even the world, the work surrounding the VDR may never sleep – this means you’ll want to find a provider with 24/7 support.
Why You Should Avoid Free Software Providers for Data Storage
Nowadays cloud solutions become more and more popular. All thanks to the cloud solutions like Azure and companies that provide Azure consulting services helping companies to step into 21 century.
Some companies choose to store documents in free cloud-based services such as email or Google Docs; however, this can be a costly mistake when it comes to storing financial or litigation documents.
For instance, when one email account becomes compromised, the user’s contacts are more likely to be hacked.
In addition, if a third party thief is able to get into a company’s server, all of the information that has been shared on that server is vulnerable.
While security is the primary reason to select a VDR, other reasons VDRs are superior to free cloud-based storage options are the organizational and collaborative features many of them boast.
How to Choose a Secure Virtual Data Room
1. Study the security features and compliance on provider’s sites as mentioned above.
2. Check providers’ reviews and ratings – pay particular attention to any complaints about security from customers. Check this data room providers comparison to find out more.
3. Test customer support via internet and phone so you can gauge their response time and knowledge.
4. Review the interface of the software; is it clear? Does it help prevent user mistakes while doing things such as setting permissions or sharing information between parties?
5. Verify all security options are available without extra cost or additional charges.
6. Test the VDR by free trial.
How DealRoom can help
While there are plenty of VDRs on the market, very few are actually designed with the complexities of M&A security in mind. DealRoom is a VDR combined with a project management platform created by industry experts specifically for M&A. DealRoom boasts all of the aforementioned recommended security features.
In addition, thanks to its ability to eliminate redundant work, enhance collaboration, reduce distractions, and provide focused analytics, DealRoom has been proven to help deals close up to 40% faster.