Digitalization is mandatory for modern-day businesses, but it has drawbacks of its own, and cyber threats are one of them. Data breaches are a massive challenge for any business in any part of the world. Organizations from all sectors lose sensitive information due to cyberattacks every year.
What’s more concerning is that these cybercrimes are increasing despite strict security measures in place. For example, the healthcare sector in the United States recorded 2024 as the worst-ever year in terms of breached health records.
One of the major reasons why data breaches are common is that they do not adapt to changing cybersecurity demands. Organizations need to understand the importance of a compliant security system. They need to invest in data management tools that provide industry-grade protection. This is where virtual data rooms come into the picture.
What is a virtual data room?
Virtual dataroom (also known as VDR due diligence) is a cloud-based data management solution used to share and store sensitive business data. It is a multi-purpose digital document library that businesses and nonprofit organizations regularly use for secure data sharing in complex transactions like M&As, fundraising, and IPOs.
One important question that usually comes to mind is, why use an online data room when there are free cloud storage platforms like OneDrive? Or, why should businesses go for online virtual data rooms instead of traditional physical repositories?
Virtual data room software is immensely different and better as compared to the above-mentioned solutions. Here is how.
| Features | Online data rooms | Free cloud storage Tools | Physical data rooms |
| Security | Advanced 256-bit SSL data encryption, multi-factor authentication, access permission controls, audit trails | Basic security features, but lacks advanced, deal-specific protections | More vulnerable to loss, theft, damage, and unauthorized access |
| Compliance | Fully compliant with industry standards like FISMA, FINRA, GDPR and HIPAA | Requires enterprise upgrades for compliance | Very hard to track and maintain compliance |
| Access Control | Granular permissions for editing, sharing, deleting, viewing, downloading, and printing documents. Data rooms offer time-based access for highly sensitive information. | Basic sharing settings and it is hard to track files. There is no time-based access. | No or very limited remote access |
| Deal Readiness | M&A data room solutions are specifically designed for due diligence, M&A, and similar transactions | Good for daily use in small teams or for internal data sharing only. Not suitable for complex deals. | Outdated and impractical for modern-day data-sensitive transactions. |
| Collaboration & Tracking | Real-time collaboration, detailed audit logs and document versioning | Allows collaboration, but has limited audit trails and tracking | No collaboration features and it is difficult to track changes |
What makes a virtual data room secure?
We already had a glimpse of virtual data room security in the comparison table above. Here is what makes data rooms secure and how they help businesses keep cybersecurity risks away.
1. Barriers to unauthorized entries
Data rooms have multiple security layers that protect at different stages. Protection starts with ensuring no unauthorized user can access the VDR.
Multi-factor authorization is a common feature in data room technology that requires users to provide accurate credentials in different steps. The user has to provide the right password and then a one-time generated code, usually sent to the legitimate user’s email or personal mobile number. Apart from that, modern-day data room providers offer IP-based access restrictions.
2. Secure data sharing
Data encryption is a common feature used to secure the data-sharing process. The data is usually encrypted when shared, but virtual data rooms provide additional protection. VDRs come with banking-grade encryption features that protect the content during transit as well as at rest. Such strong encryption features are also used in the military to secure two-way communication and data sharing.
3. Controlled data access
Virtual data rooms are unparalleled when it comes to controlled document access. They allow you to control document flow just the way you want. Here is what you can do as a VDR administrator.
· Clearly define the access permissions/levels for data room users according to your requirements.
· Set documents on view-only mode to make sure that nobody can share, edit, remove, download, or print that particular file.
· Revoke document access from any user at any time. You can even purge the user’s device to remove data room files.
· Restrict users from accessing any file or folder in the VDR. You can even restrict users from viewing different parts of a single file (thanks to the fence-view feature).
· Set time-restricted document viewing. The file will be available for viewing only for a specified period and will automatically be removed after that.
4. Detailed user monitoring
Virtual data room providers give you every single detail about every user in your VDR with the help of audit logs. You can track their activities and take necessary action if needed. This allows the administration to track internal data leaks and identify the culprit. Audit logs ensure complete transparency and help win stakeholders’ trust.
Important things to consider when choosing a secure data room
Not all data room vendors come with the same quality and strong security. Consider the following when choosing a data room.
· Go for a detailed virtual data room review and look for important security features like multi-factor authorization, digital watermarking, and access controls. Read customer reviews to assess the vendor’s credibility.
· Make sure the vendor is ISO-compliant. If you are looking for industry-specific services, the vendor must comply with your concerned regulatory authority.
· Ask for a free trial before finalizing your purchase.
Some of the best virtual data room solutions include Ideals, Intralinks, and Datasite.
