A Recap Of How Virtual Data Rooms Work
Data room software is a product that combines elements of a web content management system and a document management system. It is a repository (archive) of certain sensitive corporate documents in electronic form and with a clear structure.
An electronic data room usually exists online, though it can also be software that must be downloaded onto your device. The central characteristic of VDRs is the principle of a fireproof safe: an increased level of protection from unauthorized access to confidential data, its transmission to external users, and its physical safety.
The distinctive feature of this tool is to provide secure storage and access to documents. Unlike the FTP protocol, through which information is transmitted in an exposed form, VDR data exchange occurs according to the principle of E2E encryption using protected SSL or TLS transport protocols, which guarantees complete safety when exchanging data between the agent and the server, shielding them from MITM attacks.
If you are interested in learning more about this technology, check the data room review to notice the pros and cons of different virtual data room providers.
Main Applications of a Virtual Data Room
1. Due diligence
Virtual data room due diligence is a procedure for a comprehensive independent assessment of a company at the initiative of an investor who plans to enter the authorized capital or an owner who wants to receive an expert assessment of assets and an analysis of the correctness of financial reporting. The procedure is usually applied for corporate transactions such as mergers and acquisitions, bankruptcy, loan syndication, real estate sales, etc. The online data room software allows you to store the documents necessary for such transactions – in one place, completely safe from unauthorized access, and with the ability to configure access.
2. Audit and compliance (compliance control)
Almost any incident in an organization means that internal control in a particular area is not formed or does not function properly. Accordingly, not only the one who committed the violation is to blame but also the one who did not take all measures to prevent this from happening. This may indicate the absence or insufficient effectiveness of a preventive mechanism that should counteract the formation of adverse situations. An internal audit allows an independent and accurate assessment of the effectiveness of the compliance control system, thereby increasing the company’s value and improving its image among stakeholders. A compliance audit is not just a measure that controls compliance according to the requirements but the professional implementation of a relevant internal audit.
Within the due diligence procedure:
- The best data room providers offer a protection component that hides the data from prying eyes throughout the document’s entire lifespan, even after it is exported from the virtual data room.
- Each action is recorded and controlled.
- Using the expertise module built into the VDR, it will be possible to determine the source even from a photo or screenshot of a fragment due to invisible markings.
3. Confidential business communications
You don’t have to worry about the security of communicating online with your partners, employees, and investors – all your messages are encrypted. When it is necessary to provide access to a single source of information to several users from any geographical location – VDR is your go-to solution. Access to viewing (downloading) documents can occur only after appropriate authorization (often two-factor).
What are the 3 Important Steps of Implementing a VDR in Your Organization?
#1 Choose a Virtual Data Room Provider
Today there are numerous suppliers. Some are more well-known, and others are hidden under the radar. In order to make an informed and objective choice, compare virtual data rooms presented on the digital market. However, reading reviews is also a good way to select worthy options and remove unsuitable vendors or names with insufficiently advanced products from the list of candidates, it is also a bright idea to examine the providers’ clients. Any well-known organization definitely would not choose low-quality software. Such information can often be found on the providers’ websites or in review articles.
Explore the pros and cons:
- Price/quality of the data room services
Analyze several providers, and if one asks for a higher price than others, but the number of features offered and their quality are the same, choose the most optimal one.
- The number of additional features
These can include increased customization, priority support for premium plans, etc.
This is one of the main features of virtual data rooms. While some devote most of their resources and time to modernizing data security and file access systems, others spread their attention and improve, for example, the number of features. Therefore, study the security protocols that a particular provider uses.
- Document marking and tools for determining the source of information leakage
This is a vital function when choosing a provider, especially if your company has already encountered cases of the unauthorized dissemination of corporate information, you share confidential data with a large circle of people, and there is a frequent flow of employees. Suppose the reason you want to implement a virtual data room in your organization is due diligence. In that case, the absence of the specified feature negatively affects the efficiency of the business processes.
- The number of supported languages
A sufficient list of supported languages is especially important if you deal with partners, customers, or other parties concerned from foreign countries.
#2 Prepare lists of parties concerned and the necessary documents
Prepare a list of all necessary documents that the parties concerned may require from you in advance. Make several lists corresponding to the category of parties involved (employees, clients, partners, investors, and contractors). According to the same lists, you will configure file access then. You can also add documents or new people during your interaction with business communication/dealing participants to your authorized viewing list along the way if needed.
#3 Add Documents/Files and Set Up Access
Once a provider and a suitable plan have already been selected, you have registered, familiarized yourself with the basic settings/functionality, and compiled lists of parties concerned and relevant documents – it is time to begin the intended use.
Once you have uploaded the necessary documents, you can set up access to these files according to the pre-prepared lists and apply the software accordingly to your business tasks.