Navigating Secure Data Management: The Role of Virtual Data Rooms

The security of data is of paramount importance for modern businesses, no matter the level of data involvement in their affairs. Each company has large volumes of sensitive information to store and share: from personally identifiable information about employees to such confidential data as financials and contracts. 

Considering the rising costs associated with data breaches and the outcomes they can bring to business, modern companies take data security more and more seriously. According to Ernst & Young’s survey, 64% of board directors see cybersecurity as their top priority in 2023. 

In this article, we delve into the basics of virtual data rooms (VDRs) as an essential way of secure data sharing and the role of a secure virtual data room in secure data management. Read on!

What is a data room?

A data room is a secure repository for data storage and sharing. Usually, data rooms are used for storing highly confidential and sensitive information, such as company financials or contracts. Remarkably, data rooms are used during such complex financial transactions as mergers and acquisitions or initial public offerings. 

Data rooms were historically physical buildings where lots of paper documents were stored in file cabinets. Such data rooms are also often called traditional data rooms. 

However, with technological development, traditional data rooms turned into virtual data rooms.  

Now, there are many virtual data room providers that offer advanced features for secure and efficient data storage and sharing. With virtual data rooms, all the data is stored on the cloud and can be accessed at any time and from anywhere. 

Naturally, the variety of the best virtual data room vendors offer different features and come with different virtual data room pricing. Thus, there is a virtual data room for startups or an M&A data room, meaning each of them offers dedicated services that aim to streamline a particular project or deal.

  • Note: As of 2022, the global market of virtual data room solutions was estimated at $2.2 billion. By 2028, it’s expected to reach $4.8 billion at a compound annual growth rate (CAGR) of 13.9%

The role of a virtual data room in secure data management

The key role of virtual data room services in secure data management is the security they provide.

Modern virtual data room providers not only ensure streamlined and smooth collaboration on large volumes of sensitive data but also offer a variety of enhanced security measures that enable a high level of data security.

The list of exact measures modern VDR providers take is described further.

How virtual data rooms ensure the security of your confidential data

Generally, modern reliable virtual data room providers ensure high data security on several levels: 

  • Document security features
  • Access security features
  • Additional security features

Let’s briefly review what’s offered on each of these levels in more detail.

Document security features

Document security features ensure that all the files you upload to a virtual data room stay secure and confidential. This is possible due to such features as:

  • Dynamic watermarking. With this feature, every time a particular document is viewed, printed, or downloaded, a watermark appears on top of it. Usually, watermarks are customizable and can include the name of the user who interacts with the document, the IP address, or the time and data when the document is accessed. This helps to identify the source of a leak in case of data breaches.
  • Fence view. This is basically a digital fence that appears on top of the document every time it’s viewed. It means that the user only sees a part of the document, while the other part is hidden under the sliding barred screen.
  • In-built redaction. This feature blackens out certain parts of the text so that they remain hidden from unsolicited views. This is especially useful for situations where personally identifiable information is shared.

Access security features

A variety of access security features offered by modern virtual data room providers allow VDR administrators to take full control of who, when, and how can access sensitive data inside a virtual data room. This is possible due to such features as:

  • Granular access controls. Virtual data room administrators can set certain access rights to each user and each document. Possible access levels can include View, Download, Print, Download Original, Download PDF, Download Encrypted PDF, etc.
  • Two-factor authentication. With this feature enabled, each user is required to verify their identity every time they enter a virtual data room. For this, they typically need to enter a single-use code they get via SMS.
  • Time and IP restriction. Virtual data room administrators can restrict access to a virtual data room for certain IPs or for a certain period of time.

Additional security features 

Besides the basic security features mentioned above, VDR vendors also provide a variety of additional ones that ensure enhanced security. Below are some examples of such features/services:

  • Multi-layered encryption. This feature ensures that all the files you share via a virtual data room are encrypted at rest with 256-bit AES keys and transferred with high-grade TLS protocol.
  • Physical data protection. VDR providers also take measures to physically protect your sensitive data. For this, they have many data centers worldwide where such measures as biometric entry authentication systems and multiple layers of surveillance are taken.
  • Security compliance. All reliable virtual data room providers should be compliant with the latest security requirements. Such requirements are dictated by particular regulations, such as GDPR, SOC 1, 2, 3, HIPAA, or ISO 27001. Each of these security regulations aims to ensure users’ data is managed securely and privacy and confidentiality are protected.

Summing up

Virtual data rooms play an important role when it comes to security of the sensitive data. VDRs are focused on making data storage and sharing online not only streamlined and smooth but also highly secure.

This is possible due to the variety of dedicated features and measures taken by each VDR vendor. Among the most common security features virtual data rooms provide are granular access controls, dynamic watermarking, multi-layered encryption, two-factor authentication, and compliance with different security regulations.

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