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The Truth About Data Safety Warranties in Technology M&A
A warranty is an assurance by a manufacturer or seller that the item purchased will not have defects for a specific period of time. In the context of technology mergers and acquisitions warranties are frequently used to address security and data availability risk.
With ransomware attacks expected to hit a company every 2 seconds and predicted to expense businesses $265 billion by 2031, it’s no surprise that more distributors are offering their customers with a brand new type of warranty that includes a data security warranty. These guarantees lower the financial dangers of cyberattacks and breaches by shifting legal responsibility to the vendor, and they’re normally provided in conjunction with cybersecurity insurance, assisting in filling the gaps when insurance coverage might not be enough.
Security assurances vary widely in terms of their specifics however, they typically cover the loss of revenue for a business and the additional expenses that are incurred and reputational damage caused by a breach. The policy may also cover legal liability. It covers the cost of notifying people affected by an attack and any fines or charges arising from lawsuits that could be filed.
While the concept behind a data safety warranty is good, many of them have serious flaws. Rubrik offers the “Recovery Incident warranty” which covers “Recovery Incident costs.” However, this does not mean your employees will be paid for time spent in a recovery. Rubrik will only pay only if they have receipts of the expenses. This is a tiny red signal.
