What is a Data Room?

A data room is a kind of virtual storage solution that provides the security of a place to store documents. It also comes with a number of additional features to assist with the due diligence process. These include annotation tools that allow for granular permissions, activity tracking and watermarking.

Data rooms are frequently used to provide security documents to clients (SOC 2 documents or compliance certifications) in order to facilitate due diligence. This is a great method to speed up the process and reduce risk by sharing the information with third parties before the transaction is completed.

Traditionally, businesses have used email to share SOC 2 documents as well as other documentation. While this works, it is inefficient and causes problems with controlling versions. It’s also unsecure, with email attacks increasing, leading to compromised inboxes and credentials being stolen, as well as the phishing exploits.

Many secure storage and file sharing solutions, such as Box and Dropbox, offer document accessibility on any device or in any location. While they provide a good level of security, most businesses or individuals require more than this. Sensitive documents used to conduct due diligence, fundraising or negotiating deals should be saved and shared in software that provides more security levels than these personal file-sharing platforms.

The most important question to ask in any secure data room’ is, does it prevent authorized users from sharing documents with non-authorized users? Unfortunately, the answer is generally “no”. Most’secure data rooms’ do not restrict the number of times same user credentials may be used to login to the system. Users can easily reuse login credentials on their personal devices, or copy and paste URLs into the browser of a friend’s computer.


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