A study released by the Ponemon Institute determined that the average cost of a data breach is $3.8 million globally, and $6.5 million for companies located in the U.S. That’s a record high, and the number keeps growing from year to year. The importance of corporate-wide cyber security measures has never been greater, and this applies as much to consumer-facing operations as internal and inter-corporate communications. Just think of Sony's e-mail breach in 2014, which cost the company at least $35 million.
Impact of Data Breaches on M&A
But while Sony’s data breach made international headlines and helped raise awareness of growing threats from hackers, what gets far less attention is the everyday dangers that data breaches pose to M&A. In 2014, the law firm Freshfields Bruckhaus Deringer polled 214 dealmakers on cybersecurity risks and their effects on deals. The results were shocking: 90% of respondents predicted that data breaches would reduce deal value in the coming year, while 78% said cyber security isn’t currently analyzed in depth during due diligence. This approach not only hurts deals, it also creates longer term risks that can hurt companies down the road.
Two of the Phenom Institute’s top recommendations for preventing data breaches are: 1. Purchasing insurance; and 2. Having the board of directors take a more active role in developing a company-wide security strategy. This shows that cyber security is no longer a matter of setting up firewalls and passwords - it’s a multi-faceted issue that needs to be a fundamental part of a company’s operations. This is where the necessity of virtual data rooms (VDRs) becomes clear. Where generic cloud storage like Dropbox and Google Drive puts your data behind a couple layers of security, VDRs hold documents in a way that makes sense for business and goes a long way toward preventing both hacking and human error.
Secure Information During the Sales Process
While services vary by provider, VDRs on the whole offer more customized options for securing documents than generic cloud storage. Instead of just creating folders and controlling who can see them, VDRs let administrators set specific security settings for individual documents and tailor them to specific viewers. For example, an administrator could put an expiration date on a document for one user, and make it available indefinitely to another; he or she could also add watermarks for tracking documents and limit screen shot capabilities to ensure no one can walk away with privileged information. Generic cloud storage can help with securing access to documents, but it often doesn’t do enough to protect the documents themselves, and often offers a one-size-fits all solution for accessing folders.
Find an M&A Specific Solution
Cloud storage has a lot of uses - and because of this, it can’t do everything well. VDRs are specially designed to meet the needs of M&A, and contain an interface and tools that make the deal flow easier. Cloud storage providers let you exchange folders full of documents, but VDRs organize documents in a way that makes sense at every part of the M&A process. This lets deal makers do their jobs without having to learn new systems, applications, or workflows, and without worrying about making a mistake that leads to leaked information.
Develop a Corporate Security Strategy
When used regularly across a whole company, a VDR subscription serves as a fundamental part of a corporate security strategy, and not just a place for storing documents. Many VDR providers offer the option to interweave their services into a company’s IT infrastructure, supplying a rock-solid foundation for secure communications. Companies also gain the VDR provider’s expert customer service and development expertise, meaning everything stays up to date and works smoothly without any extra work on the part of the client company. In that sense, using a VDR provider is an efficient and dependable way to add top notch security expertise to your team.