How to Use Data protection Software during the Due Diligence process?

In the process of exchanging data between users of an organization and the outside world, networks can be affected by malware that destroys databases. In this case, using Data Rooms is a perfect solution.

Due Diligence: the purpose of the procedure

The modern development of world civilization is characterized by a significant expansion of investment processes in various areas of business, which require certain guarantees for the return on investment. The market economy is accompanied by waves of mergers and acquisitions (M&A) as a necessary element of business reorganization. Most of these deals are accompanied by due diligence procedures. In developed countries, Due diligence is an integral part of the investment process, which provides the investor with confidence in the correctness of his choice and determines the ratio of risk acceptance and expected return on the project.

Due diligence is an agreed audit procedure that facilitates the buyer’s decision to invest in a potential property. The basis of the due diligence algorithm is the identification and assessment of risks that a potential buyer may face when purchasing an investment object. Methods for assessing risks during due diligence include qualitative risk assessment by analyzing some issues and potential risk situations inherent in the analyzed indicators as well as a quantitative risk assessment.

The standard Due diligence procedure focuses on four aspects: 

  • management evaluation;
  • market analysis;
  • product valuation; 
  • financial analysis.

Carrying out the Due diligence procedure allows to avoid or minimize the existing business risks, in particular: 

  • the risk of acquiring the company at an inflated cost; 
  • the risk of default by the debtor company; 
  • the risk of corporate conflicts (seizures, lawsuits); 
  • the risk of dishonest actions of competitors (collusion with counterparties, lobbying);
  • the risk of non-receipt or loss of relevant permits, licenses, on which the further activity of the enterprise depends, etc.

Security measures of the Data Room

During the audit, large arrays of corporate information are analyzed and processed. Accordingly, the main priority in this process is data security. To provide a secure environment for data operations, most companies prefer using Data Room.

Virtual Data Rooms are based on virtualization technology, which involves the abstraction of computed resources or their logical grouping. This approach allows you to group computable resources from hardware implementation and which provides logical isolation of computational processes running on a single physical resource. The user of the service is provided with abstractions that do not reveal the physical side of data processing and storage.

Virtual data room providers use the following solutions for protection against information security threats;

  • Encryption. Encryption is a transformation process: the original text, which is also called plain text, is replaced by the ciphertext.
  • Consistency. A systematic approach to protecting an information system implies the need to take into account all interrelated, interacting, and time-changing elements, conditions, and factors.
  • Continuity of protection. Information protection is a continuous, purposeful process that involves the adoption of appropriate measures at all stages of the life cycle of an information system, from the earliest stages of design. The development of the protection system should be carried out in parallel with the development of the most protected system.
  • The openness of algorithms and protection mechanisms. The essence of the principle of openness of protection mechanisms and algorithms is that knowledge of algorithms for the operation of the protection system should not allow even the developer of protection to overcome it.
  • Isolation of users. Using an individual virtual machine and virtual network. Often providers isolate user information from each other by changing the code in a single software environment.
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