It is hard to maintain data security when hundreds and thousands of documents are shared, reviewed, and marked regularly. When a document goes through multiple hands, the chances of a data security breach increase, mainly due to human error and weak cyber security systems. This ultimately puts up challenges for legal and compliance departments in an organization.
The employment of virtual data rooms is one of the most effective ways to sort out compliance issues. That’s mainly because certified virtual data room providers strictly comply with international and local data protection and cyber security standards.
Today’s discussion is about how online data room software helps in your compliance process. Here is a brief introduction to data room software.
What Is Data Room Software?
Data room software, also known as an electronic data room, is a certified online data repository for storing and managing legal, financial, and corporate documents. If virtual data rooms are defined in broader terms, they are a mixture of multiple technologies that address three major areas of business.
#1. Data Storage
All virtual data room services are essentially document repositories where all types of professionals and businesses can store their data for temporary or permanent use. However, data room software is not just about data storage—the technology offers a complete data management solution. That said, you can share documents with other users in the data room, organize data as per your needs, and have complete control over data flow in the data room.
#2. Online Collaboration
Online data repositories usually don’t offer online collaboration tools, but a virtual data room does. A high-end electronic data room software possesses multiple collaboration tools, including chat messengers, audio and video conferencing tools, private or public annotations, group chats, Q&A modules, shared documents, and live polls.
#3. Project Management and Dealmaking
A major percentage of virtual data room usage comes from dealmaking. Corporations, organizations, and other businesses regularly use online data room software for activities like litigation, fundraising, real estate trades, due diligence, initial public offerings, strategic partnerships, and mergers and acquisitions.
5 Tips for Successful Compliance
#1. Define what to store, retain, and for how long
Knowing what to store, for how long to retain, and how to store data is the first big challenge for businesses. That’s because storing data unnecessarily can add a burden, and a minor mistake can prove to be very costly.
The most effective way to sort out this issue is to take legal counsel while developing a formal and defensible data retention policy for digital and paper data. Make sure the policy addresses what type of data should be stored and for how long. It may sound very simple, but it can reduce the chances of unsuccessful audits and inadvertent disclosure of confidential data.
Virtual data rooms not only help in digital data management but also minimize the need for paper documents.
#2. Incorporate digital solutions into your data management policy
If you are still sticking to paper documentation, then you are already exposed to risks. Paper documents are easy to steal, and they are more vulnerable to natural disasters. Also, if you maintain a digital backup, you are adding more expenses to your profits.
In this case, using digital solutions like virtual data rooms in your data management system can help you overcome two major challenges:
- Eliminate or minimize the need for paper documents.
- Reduce unnecessary expenses incurred on data backup.
That’s because VDRs are easily accessible from your mobile phones or other portable devices and data room vendors keep a backup of all your data for free.
#3. Develop a start-to-end data security
Data security is an integral component and a regulatory requirement, especially for public organizations and financial institutions that deal with sensitive customer data. A start-to-finish data security system is necessary for compliance. That said, the data protection process should start from data recording and must go through data sharing to disposition.
Data room software helps you maintain the highest levels of security from start to end. For example, you can prevent hackers from accessing the data room via multi-factor authorization and control data flow with the help of document access control. Beyond that, data rooms offer various document, access, and infrastructure security measures. The most important ones include end-to-end encryption, fence view, redaction, granular permissions, digital watermarks, and more.
#4. Keep up with new regulations and policies
Business practices are evolving, and so are compliance and regulatory policies. If you are not keeping up with the changing dynamics of compliance, you may end up facing adverse consequences.
This is where virtual data rooms are the best because of their strict compliance with internal and local cyber security and data management standards. The most common ones include ISO 27081, ISO 27001, FINRA, GDPR, SOC2, and more.
#5. Prepare due diligence checklist whenever needed
Preparing a due diligence checklist is very important in the cases of mergers, acquisitions, auditing, fundraising, or initial public offerings. Whether it is auditing (mandatory for public companies) or legal or financial due diligence, a due diligence checklist makes sure you don’t skip anything and make things easier for auditors or legal teams.
Some of the best data room providers for due diligence offer ready-made due diligence checklists. They can be adjusted according to your specific needs or used as they are. The companies offering due diligence checklists ready to use include iDeals, DealRoom, Merrill Data site, and many others.
Final Words
Adopting high-end data management solutions, developing a start-to-end data security mechanism, and keeping up with regulatory changes can make regulatory compliance easier. A virtual data room can help you with all the procedures mentioned above. Just follow our tips for successfully implementing virtual data room software, and reap the benefits of this technology for your compliance process!
