02 Oct What is a Data Room?
A data room is an electronic storage system that lets documents be stored in a secure environment. It also offers a variety of additional features that assist in the due diligence process. These tools include annotations, granular access permissions, watermarking, and activity tracking.
A common use for a data room is to share security documents (SOC 2 documents, compliance certifications, etc) with clients to assist in the due diligence process. This is a great method to my website speed up the process and reduce risk by sharing this information with other parties prior to the closing.
Email has been employed by companies to share SOC 2 documents and other documentation. While this is effective, it is inefficient and causes issues with version control. It is also insecure with email attacks increasing, resulting in compromised inboxes, stolen credentials and the phishing exploits.
Many secure storage and file sharing solutions, such as Box and Dropbox, offer document accessibility on any device or in any location. While they provide a good level of security most businesses or individuals require more than this. Documents that are sensitive and used for fundraising due diligence, negotiating contracts should be stored in software that has greater levels of security.
The most important question to ask any “secure data room’ is does it prohibit authorized users from sharing documents with non-authorized users? Unfortunately, the answer is almost always no. Most’secure data rooms’ don’t even limit how many times the same user’s credentials can be used to access the system. People can easily re-use logins on their personal devices, or copy and paste URLs into the browser of a friend’s PC.