Data security is a hot-button issue in the news. It's only natural that businesses would be wondering about data room security best practices and whether their information is being handled securely to protect it from data breaches. Keep reading to discover how secure the typical data room is and what features to look for to know that you have best-in-class protection.
The Importance of Data Room Security
Virtual data rooms are where teams exchange confidential business data and perform due diligence in advance of deals. A lot of sensitive information changes hands.
Just as you would want to have access control in place to prevent unauthorized users from reviewing these documents, you would also want to make sure that the data room itself is highly secure. Deals could be compromised if information got out that was supposed to be kept confidential.
You'll be relieved to know that the typical virtual data room (VDR) is extremely secure. Virtual data rooms use permissions to make sure that only authorized parties are able to access the data. There are also access control levels that let an administrator specify the precise level of access somebody can have. Using these access control levels, you can make sure that data cannot be copied or downloaded, just to name a couple of actions that protect privacy.
A secure virtual data room also has an audit trail. This shows the activity for a data room user during their session. The audit trail provides a high-level way to verify who did what inside the virtual data room should anything go wrong.
What Features Make Virtual Data Rooms Secure?
The features mentioned above go a long way toward keeping a VDR secure. But if you are comparing two different products, here are the details to home in on to know you are making the right choice:
- Industry-leading encryption technology scrambles sensitive information during transmission to protect its privacy.
- User restriction/permissions settings for documents/digital files allow executives to set granular controls based on employee status, so nobody has access to information they should not see.
- MFA (multi-factor authentication) is a way to double-check that a user attempting to access the VDR is who they say they are, protecting the organization in the event that an unauthorized actor gains a set of access credentials.
- User login monitoring to check IP, device and location also acts as a failsafe that no unauthorized user has gained access to the VDR.
- Audits and report logs show user activity so that any irregularities can be traced to the source.
- Artificial intelligence features can help with error detection, information organization and retrieval.
- SSO can reduce breaches by eliminating the use of multiple passwords being stored in multiple different databases.
- User support 24/7/365.
Certifications for Security and Compliance
Certifications are another easy way to compare VDR security. A few of the certifications that are related to data room safety are:
- SOC 2: A voluntary standard specifically designed to put guardrails around the use of customer data by organizations
- FINRA compliance: A securities industry standard developed to enhance transparency and streamline SEC reporting, among other purposes
- ISO 27081: The first ever standard developed specifically to support cloud computing security standards
If you see any of these certifications/standards on a company’s software and/or virtual data room products, you will know that they have taken steps to ensure that information is being held securely and that it may in some cases have been audited by an independent third party.
Using Virtual Data Rooms
Virtual data rooms can play a supporting role in the corporate markets at any stage of the deal making process. Let's look closer at a few of the most common use cases for the virtual data room cybersecurity.
- M&A deals: Virtual data rooms are extremely popular for M&A deals. These data rooms provide a safe and secure place for information to be exchanged and due diligence performed.
- Fundraising: Data rooms have a role to play in the fundraising process, including the series rounds funding that often preceeds an initial public offering or IPO.
- Communication: The security features of a VDR means that it can also be used to communicate information. For example, in advance of a shareholder meeting, information may be made accessible in a VDR so that it stays private.
- Collaboration: VDRs can also come in handy during research and development and collaborative projects. They provide a highly confidential place for parties to come together and iterate, and the access control features ensure that the environment remains truly private for the confidential collaborators.
As you can tell, with the right features, a virtual data room can be extremely secure and safe. This post helped explain some of the most frequently asked questions about data room security. If you are still in the discovery phase, consider this everything you need to know about virtual data rooms resource to dive deeper with the subject of virtual data rooms.