What is a Virtual Data Room?

Wednesday August 4, 2021

What is a Virtual Data Room?

Every way that we do business is changing on what seems a daily basis. In just the last year, we have seen a public health crisis push everyone into their homes to work in the interest of public safety. Along with that change, there was also a change needed in the IT departments to ensure that remote connections were secure. What we have seen in the time of the pandemic is that cyberattacks have increased as remote access has created openings. We have seen two notable attacks already this year, one on Colonial Pipeline and another on the South Korean Nuclear institute, KAERI.

 

However, this is not to say the whole world is doom and gloom on the cybersecurity side, as there are ways to protect yourself, especially as companies continue going virtual. Previously, in the event of an M&A transaction, loan syndication, or private equity and venture capital transactions, the actors in these transactions would meet in a physical, secured room to do the due diligence process and access important documents. In this physical room, extensive surveillance and logs track who has been in and out and what they viewed, costing money and time. In addition, parties outside the company that owns the documents would need to arrive at the physical location to view them, again, costing time and money. 

 

The answer to this, as the business world tends to find, is a move towards virtual storage options called a virtual data room. Virtual data rooms have become a widespread solution to the problems detailed above. Through an extranet or a virtual private network (VPN), these systems are secure by limiting access via the internet to specific users at specific times. If a deal falls through or a specified task gets completed, access can easily be revoked.

 

Highly sensitive data usually gets stored in a Virtual Data Room, a level of protection necessary as cyber threat numbers escalate. Beyond the security, these data repositories generally include a log that details each person’s activities with the sensitive files. Like the move to remote work, which has increased the availability of skilled employees, virtual private rooms open up a business to a global market of potential deals. No longer are businesses limited by their ability to feasibly transport a person and their team to a physical room and then have a place for them to stay while discussing a deal. 

 

The main goal of a Virtual Data Room is to provide a centralized access point to a large volume of sensitive and secure documents needed for the most paperwork-intensive processes. While a physical room removes the chances of a cybersecurity attack completely, it also poses certain disadvantages that contrast the wealth of opportunity created by a Virtual Data Room.

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