For many businesses in the corporate world, sharing sensitive documents with a broad range of users is inevitable. This makes the security of data a topmost priority due to the amount of data-sharing traffic. While hackers are on the prowl, and with many online user privacy rules, the need for data security is a priority.
However, a virtual data room takes care of the problem of security, and we’ll be looking at the top use cases of a VDR in the following sections.
But first, let’s get a better understanding of what a virtual data room is and how it relates to data security in the corporate business world.
What makes virtual data rooms irreplaceable?
Even though document sharing platforms like Dropbox and Google Drive have similar features to a VDR, virtual data room software is much more advanced. Here’s why:
- Security. A virtual data room comes loaded with security features that can guarantee optimal security of all the information housed in it. These features include two-factor authentication, end-to-end encryption, activity controls, etc. The security goes further with the inclusion of electronic watermarks to track the movement of information out of the room, and the View As tool determines the kind of information anyone intending to visit the VDR will see.
- Activity tracking. In the virtual data room, the administrator can control what anyone who opens the room sees and can track what they see or what changes were made during the time a user had access to the VDR. You can use these capabilities to limit user access to the data room, granting permission to only authorized personnel.
- Ease of use and round-the-clock support. The virtual data room is easy to use, and you don’t need to be tech-savvy to find your way around it. There’s always 24/7 support whenever you need it from the data room provider — just in case you encounter difficulties.
All of these and more are hardly obtainable with other traditional document storage and sharing platforms.
Use cases of a virtual data room
M&A due diligence
This is one of the most popular use cases of the virtual data room. Merger and acquisition due diligence form the core of any business-to-business transaction in the global business world. With a VDR, businesses can carry out interactions or transactions remotely and securely. They can easily vet each other’s business and financial portfolios via document sharing. Sensitive and confidential data can be viewed using a secure cloud-based platform.
Whether it’s a startup being acquired by a larger company or two mega-companies deciding to merge, the VDR provides a haven for sharing documents, which are encrypted and controlled to avoid leakage. It also alleviates some of the risks of someone taking off with vital information because user access can be controlled, monitored, and restricted at will. The VDR can also restrict copying, duplicating, or printing of documents.
When a company is raising capital to start a venture or fund an ongoing deal, it needs secure cloud-based software to store sensitive financial records that investors will demand to see. It also needs to share this financial information with its potential investors or benefactors without letting it slip into the wrong hands.
Virtual data rooms are used in cases like this to ensure the security of data being shared. It also helps create a transparent process where everyone is on the same page while witnessing the traffic of information in and out of the organization and between its potential investors.
With some companies having offices in various locations, a virtual data room provides the most secure environment for the company to share data with its massive staff and office locations seamlessly. Management can grant access to the authorized employees while also limiting permissions to specific documents and files so that unauthorized personnel doesn’t view confidential files that are “above their pay grade.”
Suppose a firm is legally bound to submit to a financial audit or voluntarily decides to do so. In that case, a virtual data room provides the right cloud-based platform to share the company’s financial records with an external auditor.
A data room eliminates the need for the auditors to shuffle from one organization to another if they can do everything remotely. In the course of the audit, the Q&A section allows officials to interact with the company for clarification on hazy areas.
IPO due diligence
When a company performs due diligence leading up to an initial public offering (IPO), a virtual data room provides the right platform for the company to share its confidential data with the financial institution. The bank will then analyze the company’s data and ascertain its sustainability as a business model, among other indices to be measured during the process. Generally, the data room for due diligence makes for a transparent and efficient process void of errors or security challenges in the 21st century.
The virtual data room is one of the best things to happen to cloud-based document sharing platforms and businesses. It offers all the security needed by a company to protect its document privacy and sensitive information. It proves to be extremely valuable during due diligence and other transactions between a company and a partner or potential buyer.