The virtual data room (VDR), came about from needing a secure way for storing data online. With a physical data room that securely stores hard copy files, the door can be locked. But how could the same security levels be achieved for files stored online? To solve this problem, the virtual data room was developed.
The first virtual data room that was developed was utilized for securing debt underwriting documents. These days, practically every type of industry that can be imagined uses virtual data rooms. In this article we will be discussing the key benefits that virtual data rooms provide.
- A VDR makes it possible to securely share and store data.
It provides access to only approved entrants and keeps everyone else out. Virtual data rooms are used by high level projects to store and retrieve data that require sensitive information to be accessed and reviewed, including capital funding, medical field clinical trials, due diligence, mergers and acquisitions and more.
Inside a virtual data room, people can meet, collaborate, share and review information, work on projects, conduct due diligence and other activities all within a secure setting. At the same time, the VDR continuously creates archives of data activity, logs entry and exit times, maintains records of who is accessing data, along with when and for how long. Different privilege levels can also be set easily and at any point entry privileges may be revoked, which means that access is a lot more secure compared to other kinds of collaborative and file sharing systems.
- A VDR facilitates decision-making and time-sensitive projects.
A data room can be accessible to many remote users from all over the world at the same time. So geographic distance isn’t a barrier any longer to creating, editing and reviewing timely and sensitive documents.
Time zones are not a barrier any longer either, since a VDR can be made accessible to approved users on a 24/7 basis.
- Due diligence is facilitated by a VDR.
Due diligence, which are the steps that need to be taken in order to be in compliance with legal requirements before selling or purchasing an item, is significantly facilitated when a virtual data room is involved. Since a virtual data room system has been designed to meticulously document even the smallest change, edit, deletion or addition, it creates an automatic log that can used for proof of compliance for a legal process requiring due diligence.
Due diligence data rooms have recently become quite popular which illustrates just how essential and useful virtual data rooms have become to comply with legal requirements in today’s environment.
- Financial resources can be conserved by a VDR.
Companies started saving money as soon as the first VDRs were instituted. The overhead costs that come with physical file rooms, including powering office machines, printing, stapling, copying, paper files and file folders, monitoring on-site security – all of those costs are eliminated with virtual data rooms.
Hard copy files no longer need to be edited, audited or filed by office staff. Lawyers do not have to copy and mail endless reams of documentation for legal review and due diligence processes. The best thing of all is that thousands of trees are saved since file storage systems are online and paperless now.
- Full disclosure and transparency are facilitated by a VDR.
In particular, with mergers and acquisitions, there are a lot of details involved to make sure what is being sold or bought is fairly valued and clearly understood. Utilizing data ensures that instant updates will be received by all participants anytime new files get added and, they can be prompted automatically to review files that haven’t opened yet.
This can make it much easier for buyers to fill in any gaps in information. For sellers, it can make it much easier to identify early on in the process what the potential pros/cons are and gauge various buyers interest, in addition to ensuring that every prospective buyer receives equal access to the same data.
Since virtual data rooms were first introduced, over the past decade their influence has steadily been increasing. These days they are practically indispensable when it comes to the due diligence process. They are critical in facilitating deals across continents and oceans and faithfully log every step that is taken in the process.
Whether virtual data rooms are utilized along with a physical data room (PDR) or as a standalone tool, VDRs increase the ability of any company to share data simultaneously with many different prospects as well as expedite the process for time-sensitive deals to meet the best interests of everyone involved. Whether or not physical data storage is completely replaced by virtual data rooms, is is definitely a valuable tool that isn’t going anywhere.