The Truth About Data Safety Warranties in Technology M&A

A warranty is a guarantee from a seller or manufacturer that the product purchased will be free of defects for a specified time. In the context of technology mergers and acquisitions, warranties are often employed to mitigate security and data availability risks.

Data security guarantees are becoming more popular among distributors. With ransomware predicted to cost businesses $265 billion by 2031 and a move to attack every two seconds, it is no surprise that they offer this new guarantee to their customers. These guarantees lower the financial risks associated with cyberattacks and breaches by shifting legal responsibility to the company, and they’re normally provided in conjunction with cybersecurity insurance, which helps fill the gaps where insurance coverage might not be sufficient.

Security assurances vary widely in their details and typically include the loss of revenue for businesses in addition to the additional expenses incurred and reputational damage that is caused by the breach. They could also include a policy that is designed to cover legal responsibility that covers the cost of letting those affected by an attack to be informed as well as any fines or charges incurred from potential lawsuits.

While the concept behind a data security warranty is sound, a lot of them have serious flaws. Rubrik offers a «Recovery Incident warranty» that covers «Recovery Incident-related expenses.» However it doesn’t mean that your employees will be paid for time spent on recovering. To allow Rubrik to cover the cost, they need receipts for these expenses, which is a red flag.

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