The Truth About Data Safety Warranties in Technology M&A

A warranty is a guarantee from a manufacturer or seller that the goods purchased will be free of defects for a specified period of time. In the context technology M&As, warranties are often utilized to control cybersecurity and data availability risks.

With ransomware threats requiring to strike a business every two seconds and estimated to cost businesses $265 billion by simply 2031, it’s not a surprise that more distributors are offering their customers a brand new kind of assurance: a data safety warranty. These guarantees minimize the economic dangers of cyberattacks and breaches by transferring legal responsibility to the seller, and are typically provided as an additional benefit to cybersecurity insurance, which helps fill the gaps where insurance coverage might not be enough.

Security guarantees vary widely in their details, but typically include the loss of revenue for a company and the additional expenses that are incurred and reputational damage caused by an attack. They may also contain policies that is designed to cover legal responsibility that covers the cost of allowing individuals impacted by an attack know as well as any fines or charges incurred from lawsuits that could be filed.

While the idea behind a data security guarantee is an excellent one, the majority of them aren’t as good. Rubrik offers an “Recovery Incident warranty” that pays for “Recovery Incident expenses.” However, this does not mean that your employees will get paid for the time they spend in recovering. Rubrik will only pay the expenses if they have receipts for the expenses. This is a red flag.

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