The VDR is the product of combining elements of a web content management system and a document management system. It is a repository of certain confidential corporate documents in electronic form and with a clear structure.
It usually exists in the form of a website. A distinctive feature of the VDR is the principle of a fireproof safe: an increased level of protection for access and transmission of data to external users and their physical safety.
What Kind of Information Is Placed in the VDR?
Documents placed in data rooms are usually private and labeled as confidential and of high value to the owner. Along with uploading typical information that should always be protected, i.e., financial, personnel, legal, or strategic data, more and more companies pay more attention to security and use VDR-type services to protect the information in areas such as intellectual property or patents. This is also accompanied by the need to comply with the updated (and strict) GDPR requirements of the EU legislation – the protection of personal data.
When Should You Use a VDR?
Data rooms are most often used to complete financial transactions, including Mergers and Acquisitions. An essential component of any transaction is access to the company’s data by the investors and the consultants employed by them so that they can assess the profitability and the value of the risk related to the investment (Due Diligence). This process in its traditional form (a physical data room) is inconvenient and generates costs (each investor has to come to the company’s headquarters and analyze the documents in a dedicated room), consumes a lot of time (investors do not have to know about each other so they must be scheduled at different times “one after the other”), there is a high risk of “leakage” of sensitive information (employees divulge information that can lead to the blocking of the transaction, unwanted speculations can occur; important documents can be photocopied or even evaded).
Due to the advantages that electronic data cameras offer, they have replaced traditional one relatively quickly and have become a standard option in Due Diligence procedures.
Using VDR, gathering information, reading it, and evaluating it is more efficient than ever. The main advantages for each participant in the transaction are the convenience (everyone involved works from their own office) and the transparency of the process. For the seller, the ability to reach a larger group of investors around the world (investors work in a VDR at the same time but do not know about each other’s existence), information security, and control over the transaction (for example, you can know what information was shared with whom, when, to what extent or how long a particular document was viewed).
Apart from transactions involving Due Diligence procedures where the benefits of using VDR are obvious, data cameras are increasingly used by companies to implement projects that do not involve such procedures but involve the exchange of sensitive information with external partners ( consultants, financial institutions, companies they collaborate with). Most often, these are investment projects, complex construction projects, project financing, joint ventures, or consulting projects. The popularity of VDRs is also growing in sectors such as Life Science or banking, where the protection of the aforementioned intellectual property, patents, and personal data is essential.
What Makes a VDR Different From Other Systems?
Security is the heart of the VDR system. There is also a second factor worth noting – VDR, unlike other file-sharing systems, offers support from the service provider. Support is provided 24 hours a day and includes technical support available to all guest users in the data room and customer support in managing the system (for example, the data room provider can upload files or administer VDR for the client).
What Are the Key Functionalities o This Type of Application?
VDR is a software for business, a solution for controlled sharing of confidential files outside the company, not for document collaboration. Therefore, VDR is a read-only system. This means that it is not possible to edit documents in VDR, nor is the option to select text and copy it allowed. These are the key functionalities of this type of app. In addition, the system allows even more advanced constraints, such as blocking the option of saving documents to the hard disk, printing them, blocking the option of taking a screenshot (Print Screen), or imposing watermarks on files, which, in the event of the capture of the screen, helps to identify the person who might have committed abuses.
Are VDR Systems Secure?
When it comes to system access rights and communication encryption, VDR-type services have the same level of security as banking services. We recommend you to check out data room providers before buying one. This level includes encryption of communication with secure SS SSL 256-bit protocol, logging in using strong passwords and SMS codes, and enforcing periodic password changes or automatic logout after a specified time of user inactivity. Additional mechanisms that can be found in data rooms but not in banking systems are the ability to limit the number of IP addresses from which users can connect to the VDR or block simultaneous logins using the same credentials.