The Truth About Data Safety Warranties in Technology M&A

By April 14, 2024 No Comments

A warranty is a promise from a seller or manufacturer that the products purchased are free of defects or faults for a set period of time. In the context of technology mergers and acquisitions warranties are typically utilized to control security and data availability risk.

With ransomware moves required to strike a company every 2 seconds and predicted to expense businesses $265 billion by simply 2031, it’s not a surprise that more distributors are offering their customers with a brand-new type of warranty called a data safety guarantee. These guarantees reduce the economic risk of cyberattacks and breaches by shifting legal liability to the vendor and are usually offered in conjunction with cybersecurity insurance, helping fill the gaps where insurance coverage might not be sufficient.

Security guarantees differ widely in their details but generally include the loss of revenue for a company in addition to the additional expenses incurred and reputational damage that is caused by the breach. The policy may also cover legal responsibility. This covers the cost of contacting those affected by an attack and any fines or charges arising from lawsuits that could be filed.

While the idea behind a data security policy is an excellent one, the majority of them aren’t as good. Rubrik offers a “Recovery Incident warranty” which covers “Recovery Incident costs.” However, this does not mean your employees will be paid for the time spent in recovering. Rubrik will only pay the expenses if they have receipts for the expenses. This is a tiny red signal.


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