The Truth About Data Safety Warranties in Technology M&A

A warranty is an assurance from a manufacturer or seller that the products purchased will be free of defects for a specified period of time. In the area of technology M&A, warranties are an effective tool for managing risks related to cybersecurity and data availability.

With ransomware threats requiring to target a company each 2 seconds and predicted to cost businesses $265 billion by 2031, it’s no surprise that more distributors are offering their customers with a brand new kind of assurance which is a data security guarantee. These guarantees help reduce the financial dangers of cyberattacks and breaches by shifting legal responsibility to the vendor, and are typically offered as a complement to cybersecurity insurance, filling the gaps when insurance coverage might not be sufficient.

Security guarantees vary widely in terms of their specifics, but typically include the loss of revenue for a business and the additional expenses that are incurred and reputational damage resulting from the breach. The policy may also cover legal responsibility. This covers the costs of notifying the affected parties about an attack as well as any fines or charges arising from lawsuits.

Although the idea behind a data safety guarantee is good, a lot of them have serious flaws. Consider the example of Rubrik that provides a “Recovery Incident Warranty.” The warranty covers for what they call “Recovery Incident Expenses.” However, this doesn’t mean your employees will be paid for the time they spend in a recovery situation. For Rubrik to pay up they’ll need receipts for these expenses, which is a bit of a red flag.

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