What is a Data Room?

A data room is a storage option for electronic files that lets documents be kept in a secure environment. It also comes with a range of other features that aid in the due diligence process. These include annotation tools that allow for granular permissions, activity tracking and watermarking.

Data rooms are often used to share security documents with clients (SOC 2 documents or compliance certifications) to support due diligence. Sharing the information with other parties prior to the deal is closed is a great method to accelerate the due diligence process and reduce the risk.

Email has been used by businesses to share SOC 2 documents as well as other documents. This isn’t just inefficient, but also leads to problems with the control of version. It’s also not secure, with the increasing number of emails that are a result of compromised mailboxes, stolen credentials, and phishing attacks.

Many secure storage and file sharing solutions such as Box or Dropbox allow access to documents from any device and at any location. While they provide a high level of security most companies or individuals need more than this. Documents that are sensitive and are used to raise funds due diligence, negotiating contracts should be stored in software with higher levels of protection.

The most important thing to ask about any “secure data room” is whether it blocks authorized users from sharing files with non-authorized individuals. Unfortunately, the answer is usually “no”. The majority of “secure data rooms” do not limit the number of times same user credentials may be used to login to the system. It is simple for users to re-use logins they have created on their own devices, or copy and paste the URL into the browser of a friend’s computer.

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