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The Truth About Data Safety Warranties in Technology M&A

A warranty is a guarantee from a manufacturer or seller that the goods purchased will be free of defects for a specific time. In the case of technology M&A warranties are an effective tool for managing risks related to cybersecurity and data availability.

Security guarantees for data are becoming more popular among distributors. With ransomware expected to cost businesses $265 billion in 2031 and the potential to attack every 2 seconds, it’s no surprise that they offer this new guarantee to their clients. These guarantees reduce the economic risk of cyberattacks and breaches by shifting legal responsibility to the vendor, and are usually offered as a complement to cybersecurity insurance, which helps fill the gaps where insurance coverage might not be sufficient.

Security guarantees differ widely in their terms however, they typically cover the loss of business revenue, additional expenses incurred, and reputational damage caused by an attack. The policy may also cover legal responsibility. It covers the cost of notifying the affected parties about an attack as well as any fines or charges arising from lawsuits.

However, while the basic concept behind a data security warranty is good, many of them have serious weaknesses. Rubrik offers a “Recovery Incident warranty” that covers “Recovery Incident-related expenses.” However it does not mean that your employees will be paid for the time they spend on a recovery. In order for Rubrik to cover the cost they exchanging business documentation require receipts for these expenses which is a bit of an indicator.

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