Where today’s fast-growing and interconnected business environment unlocks an endless pool of opportunities for businesses, it also adds the responsibility of protecting sensitive and private business data.
A lot of us might think that digital information storage and sharing is a piece of cake. However, this is far from reality, as there were over 4000 publicly disclosed data breaches in 2021. These breaches affected over 22 billion records.
Although data breaches are common in almost every business sector, the financial industry was affected the most; there were 566 data breaches in the financial sector in 2022.
How to minimize data breaches in the financial industry?
Everybody knows the problem, and still, data breaches continue to grow. The question stands; how to minimize these data thefts in the financial industry, save businesses from losing their reputation, and avoid hefty penalties?
It is not hard to understand that only powerful security mechanisms can prevent data breaches. Businesses undertaking financial transactions like IPOs, mergers, acquisitions, fundraising, etc., must comply with regional or international data protection laws and employ strong data-sharing solutions like virtual data rooms.
Virtual data rooms services are a cloud technology product that has gained immense popularity in business spheres, especially in the financial industry. Here is how a virtual data room makes data sharing secure and efficient in financial transactions.
What is a VDR (virtual data room)?
A VDR or virtual data room is a secure cloud-based data management and storage solution for businesses, professionals, organizations, and government/regulatory bodies.
The tool allows the above-mentioned entities to safely share, store, edit, exchange, or distribute information in massive quantities with ease.
In addition to that, virtual data rooms come with the latest digital communication solutions to facilitate online business meetings, Q&A sessions, group communication, and one-to-one conversations. The best thing is that both data storage and communication take place in one platform.
Role of virtual data rooms in the financial industry
The financial industry owes a lot to virtual data rooms; here is why.
1. Data protection
A secure VDR is a combination of different security features employed to protect information from internal as well as external threats.
For example, any standard virtual data room gives you control over how you want your information to be accessed, shared, viewed, or distributed. The administration in the VDR can restrict or allow anyone in the data room to share, edit, annotate, print, save, or download files from the VDR.
Although these features help internal data sharing, they become vital during financial deals. For example, the view-only feature in the data room software makes sure that potential investors don’t copy or share highly confidential information during an IPO.
2. Streamlined data sharing
Financial transactions and voluminous amounts of data sharing go hand in hand. Whether it is a merger, acquisition, or joint venture, interested parties share hundreds and thousands of documents before and during the due diligence stage.
Virtual data rooms make the data-sharing process way more efficient, faster, and safe. For starters, businesses can share encrypted versions of their sensitive documents, which only destined users can open and view.
Almost all high-end virtual data room services provide due diligence checklists to businesses. These templates allow them to organize data in the right order, which is easily accessible to other parties.
Also, many data rooms allow users to share an unlimited number of files in one go — a luxury rarely available in other data-sharing platforms. Features like drag-n-drop and bulk uploads allow users to upload/share hundreds of files in one go.
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3. Faster communication
Where safe and fast data sharing is a core ingredient of financial transactions, two-way communication is also equally important. Communication barriers have proved to be a major factor in failed financial transactions.
Virtual data rooms make online communication during financial deals easier and safer. Users can communicate privately via end-to-end encrypted chats.
Online meeting management tools allow participants to streamline meetings from beginning to end. They can schedule meetings, prepare and distribute meeting agendas, share/access files during meetings, cast votes, and sign documents within the data room.
4. Cost minimization
Last but not least, the cost-effectiveness factor in the usage of virtual data rooms in financial transactions makes them a top choice for decision makers.
Data rooms shrink the cost of paper, printing, and document distribution by a huge margin. On average, business in the US spends $400,000 on paper (and relevant) expenses which can be minimized with data rooms.
Final words
Whenever businesses face a need to improve their dealmaking, they opt for a VDR. Finance deals are no exception. During financial deals, data rooms o make data sharing way safer than other similar solutions. What’s more, the latest communication tools make data room software a complete project management tool, proving to be safe, both cost- and time-efficient, especially in the long run.
