Securing sensitive information: The role of virtual data rooms

Wasted Time, Lost Revenue, Less Customers

Did you know that there were over 1800 data breach cases in the United States, which affected over 422 million individuals in 2022? It isn’t hard to imagine how much sensitive data is being stolen or hacked worldwide. Then why are data breaches increasing despite revolutionary advancements in the field of cybersecurity?

There are many factors that affect corporate cybersecurity, but the use of outdated security solutions is one major cause. Businesses, especially startups, and SMEs, often overlook the importance of investing in secure data management solutions and end up paying hefty prices.

Is there any solution to that? Can businesses minimize data breaches in an economical way? Yes, they can. Modern-day virtual data room solutions are the answer to data protection woes.

What is a virtual data room?

Virtual data room software is a digital data storage repository designed to facilitate safer and more controlled data sharing and storage.

It is a complete business solution that allows businesses, professionals, nonprofit organizations, service providers, the corporate sector, dealmakers, and public institutions to transfer, exchange, or distribute confidential information in a highly controlled and secure environment.

With the passage of time, data rooms have evolved. Modern-day virtual data room services provide various tools for:

  • Online meeting management
  • Data analytics
  • Board management
  • Digital communication
  • Project or deal management

One thing that separates virtual data rooms from other information management tools is their ability to tackle all types of cyber threats. Here is a detailed overview of virtual data room security and how it prevents data breaches or leaks.

Role of virtual data rooms in digital data protection

According to Statista’s survey, 20% of the respondents said that almost 15% of data breaches in their organizations were facilitated or caused by insiders. In plain words, internal threats are as deadly as external factors. Here is how virtual data rooms protect your data.

Data room protection

VDRs tackle both external and internal factors alike. For starters, any high-end virtual data room is at least ISO-certified, which means the data room implements the latest security measures. Following are some common VDR security features to minimize external threats:

  • Multifactor authorization. It is an entry barrier that requires the users to pass all multiple login steps with the correct credentials.
  • IP address restrictions. Data room administration can block a login (even with the correct credentials) from a new or unregistered IP address or device.
  • The device removal or purging feature. It allows the VDR management to revoke any user’s access at any time. The data browsed or downloaded from the VDR will be deleted too.
Note: Security features may vary depending on the vendor and the package plan you choose. Advanced security features are usually a little pricier, thus, pay attention to virtual data room pricing when choosing advanced packages. Making a virtual data room comparison may help you to choose the best option for your business.

Document protection

Virtual data rooms have a wide range of document protection features to minimize risks when sharing documents with third parties. For example, the VDR administration can define document access levels for internal and external users according to their needs. Additionally, such vendors as also offer in-built redaction, that allows to blacken out certain parts of the document keeping them private.

In addition to that, data rooms usually allow you to:

  • Encrypt documents and the data inside them, which only authorized users can access
  • Restrict anyone from sharing, editing, printing, downloading, saving, or annotating a document
  • Revoke access to any document at any time without prior notification
  • Hide contents from any document with the help of the fence-view feature

Some of the best virtual data rooms in terms of security include iDeals, Merrill Datasite, DealRoom, and Firmex.

How do data breaches affect businesses?

On the other hand, what if a business doesn’t invest in strong data management solutions? What can they possibly lose? If a company loses its marketing plans, success secrets, product prototypes, or similar data, it may lose its competitive position in the market. Other outcomes include the following.

Credibility loss

Brands and businesses are built over customer trust, which they win over a long time. Data breaches, even if they aren’t directly linked to customers, impact a business’s credibility. Imagine if a company can’t protect its data, how can customers trust that company? In fact, data breaches also raise concerns among investors and stakeholders.

Financial losses

Data breaches are not just a loss of valuable information. They often prove to be heavy on corporate financial health. The average cost of a data breach was $4.35 million in 2022, and it could reach $5 million in 2023.

A company may have to compensate customers, pay legal fees, and settle regulatory penalties. What’s more, a company may lose its membership in an association or regulatory setup.

Final words

Virtual data rooms play an important role in protecting sensitive data during financial transactions. A virtual data room due diligence prevents external threats like unauthorized entries, gives businesses full control over information flow during data sharing, and minimizes the costs of transactions.

With the help of such services as built-in redaction, fence view, multifactor authentication, IP restriction, and remote purge data room virtual solutions prevent businesses from credibility harms and financial losses.

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