The rapid acceleration of digital transformation in a post-pandemic world has led to a rise of numerous new terms for companies to explore and understand. The “virtual data room” is just one such example.
While VDRs have existed for decades, they’ve become all the more important in today’s digital business environment. Created to store the world’s most “valuable resource,” virtual data rooms are becoming a critical investment for businesses from all backgrounds in search of secure ways to manage information and share it with only authorized stakeholders.
As data becomes a central component in how today’s companies thrive, the value of virtual data rooms is growing. For instance, around 97% of companies say they use data to power business opportunities, and 76% say data is integral to their business strategy.
The question is, what exactly is a virtual data room? What’s more, how does it differ from a standard solution for data storage, and when is it necessary for your business?
At its essence, a virtual data room is a storage service built in the cloud and designed to protect confidential business information. With virtual data rooms, companies can access unique feature sets and tools critical to keeping their information as safe as possible, often for due diligence situations.
VDRs can be used to store everything from competitive intelligence analyses to details about financial transactions, partnerships and equity.
So, how is the VDR any different to a standard cloud storage system?
At first, the two concepts might seem very similar. Cloud storage and VDR services both host your information in a flexible, scalable, and cloud-based environment. However, a virtual data room provides an additional focus on governance, encryption and security.
For the upload and management of confidential documents, a cloud storage system doesn’t provide the same level of access control or reporting technology. Alternatively, a virtual data room provides a wide selection of features specially intended to enable safer transactions, data sharing, and asset lifecycle management in the digital world.
Different virtual data room services can provide unique features. However, every provider will generally deliver an increased focus on security and privacy, to provide peace of mind for complex interactions online. Virtual data rooms are also regularly audited, to guarantee maximum security in line with the strongest security standards and certifications.
A virtual data room should provide advanced permissions, so you have complete control over which authorized people can gain access to your information and what they can do with it (such as print, download, or just read). Other essential features of a VDR include:
· Intelligent search functionality: Storing and managing information can be complex. In a VDR, the right provider will leverage metadata to create dynamic ways to search for and view information at speed. You can therefore improve productivity with a VDR.
· Smart tools: Leading virtual data rooms allow you to set up an environment within a couple of clicks, then leverage unique tools for data tracking. You can even create a comprehensive audit log and customizable reports to ensure you’re staying in line with your industry standards and national regulations.
· Ease of use: The majority of virtual data rooms are designed to be easy to adopt and use in any business environment. You should be able to upload, save, and manage files from your data ecosystem easily and securely. These files can range from legal documents to business letters and shareholder hierarchy diagrams.
Above all else, the most critical feature of a virtual data room is exceptional security. All documents and attachments uploaded to your room need to be encrypted according to the highest current standards.
Whenever a company begins looking for a virtual data room, their first priority should be ensuring the security standards of the ecosystem meet key international and industry-specific requirements for compliance, privacy, and security.
Virtual data rooms are most commonly used in financial transactions, partnerships, IPOs, and larger business deals. However, the use cases of these solutions have been rapidly evolving in recent years, particularly as companies become more concerned about how they manage their data for due diligence readiness.
What’s more, many virtual data rooms are becoming increasingly useful, with advanced features for managing and tracking data too.
One of the most common use cases for the virtual data room is in a merger or acquisition deal. These deals require the careful tracking and management of a significant amount of critical data. With a virtual data room, companies can unlock the secure landscape they need to track and finalize a deal. The data environment can be shared securely between the two companies engaging in the merger or acquisition activity, with comprehensive access controls and auditing capabilities.
The use of a virtual data room could also allow attorneys, accountants, and internal or external regulators to have a centralized point of access to essential information, without the risk of compromising on industry compliance. VDRs can even help companies working together on the production of a new innovative idea to share product development assets and data securely.
For any interaction where managing and sharing data is critical to a transaction, a virtual data room can provide companies with the peace of mind and security they need.