by David Weedmark
For years, VDRs have been the standard for mergers and acquisitions. The same qualities that make them ideal for organizing, accessing and sharing sensitive information in a secure and confidential manner during M&As have also made them ideal for investment banks to manage their own information and banking transactions (M&A transactions).
Why Banks Use VDRs Today
Most of the business, financial transactions, investment transactions and processes used in banking and finance today are already being done virtually. Virtual data rooms are the next logical technological step in this progression. This has been fueled by the increasing need to have confidential documents available anytime and anywhere, while putting most of the onus of making this happen on a team of highly trained specialists, rather than straining internal resources.
Getting Down to Business with Virtual Data Rooms
While some of the needs of the banking and finance sector overlap with other business sectors, they have many unique requirements that make VDRs a perfect fit. Some of the ways commercial banks and investment banks use virtual data rooms include managing the following:
- Sell-side and buy-side M&A transactions
- Capital Raising
- Strategic partnerships
- IPOs
- Loan syndications
- Secure confidential document collaboration and exchange
- Debt and equity fundraising
- Bankruptcy and restructuring
- Preparing investment proposals
- Facilitating cooperation between investors, potential buyers and sellers.
- Conducting due diligence
- Defining and controlling transaction times
11 Key Features For Investment Banking Data Room
To be effective for the stringent requirements of modern banking systems, a virtual data room must be safe secure, fast and effective. Fortunately, in our age of digital commerce, none of these requirements negate one another. When comparing virtual data room software to other storage systems, as well as when comparing one VDR solution to another, here is a checklist of eleven features to consider:
- Secure document storage
- Secure data transmissions
- Compliance with regulations and certifying agencies
- Reliable uptime of data access
- Real-time document collaboration
- Restricted access by user permissions
- Restricted access by time and date
- Task assignments that are easy to set and to read
- Real-time analytics and monitoring of financial transactions
- Accurate tracking of when sensitive documents were accessed or modified, by whom, where and when
- Secure data backup and recovery
Document Exchange and Collaboration
VDRs are optimized for secure document exchange and collaboration. Caplinked, a virtual data room provider uses the latest technologies for secure document access and digital rights management so your organization has complete control over documents.
- Document versions are synchronized in one secure location.
- Customized permission settings allow you to share confidential information with internal stakeholders, while limiting access to outside interested parties to only what they need during specified time periods.
- Sensitive documents can be accessed from any device you need, 24/7, provided it has a secure internet connection.
- Digital watermarks allow you to identify who accesses specific documents using their username, email address and IP address, as well as the time and date of access.
- Risk mitigation: with full control of documents and access to them, the risk of sensitive information loss is minimal.
Banking transactions can be completed with lightning speed due to data being readily available when it’s needed, regardless of where the participants are located. As well, the transparency and simplicity of process make assigning tasks effortless and eliminate duplicate requests and duplication of efforts.
Data and Infrastructure Security
Security is obviously a vital concern for investment banks. Data security needs to be addressed at all levels, including the hardware (servers) and software storing the data, the technology connecting to that data and methods in which that technology can be used. In order to maintain their own security certifications with independent agencies, organizations using a VDR require that the VDR itself is also certified.
Certification Requirements
Examples of some of the certifications banks and other financial organizations may need to be concerned about include the following:
- ISO 27001: international standards for implementing, maintaining and continuously improving information security management systems, including data storage servers.
- AICPA SOC 2: international Service Organization Controls (SOC) standards for securely handling financial data. SOC security principles cover organization, communication, control monitoring, physical data access, system operations, risk management and change management.
- EU-US Privacy Shield Program: standards and requirements set by the U.S. Department of Commerce and the European Commission for the collection, use and retention of data from EU member states.
- PCI SAQ-D: Servers should be compliant with the payment card industry (PCI) data security standard (DSS). This helps ensure that your organization qualifies for PCI certification for processing credit card payments and for using compliant data controls to reduce the exposure of sensitive data to compromises that lead to credit card fraud.
- FISMA-NIST compliance: The National Institute of Standards and Technology (NIST) guidelines ensure compliance with the Federal Information Systems Act (FISMA) requirements for information systems security to prevent unauthorized access to data and its host systems.
Data Encryption
All data should be connected using only HTTPS. Hypertext transfer protocol secure combines the standard hypertext transfer protocol (HTTP) used on the internet with the secure socket layer (SSL)/transport layer security (TLS) protocol.
While at rest, all sensitive data should be encrypted using 256-bit advanced encryption standard (AES), AES 256. When in transit, data should be encrypted using SSL/TLS-encrypted endpoints employing current-grade TLS v 1.2 cipher suites.
Other Security Features
Caplinked is a leading virtual data room solution that provides its clients with best-in-class security features for storing and hosting data. Caplinked is also a member of the Cloud Security Alliance. Additional security features include the following:
- Multi-layer security firewalls: to protect data at each point of transit between network segments.
- No software plugins: Unneeded plugins require frequent updates and pose unnecessary security weaknesses.
- Real-time virus protection: protects data from viruses, trojans, malware, ransomware.
- Secure storage: CapLinked is SOC2 Type II certified under SSAE18 and all data is hosted on Amazon Web Services (AWS) using Amazon OpsWorks for increased security and SLA-level 99.9 percent uptime.
- Disaster recovery: VDRs implement robust data backup and recovery measures to ensure the integrity and availability of stored documents. Regular backups and redundant storage systems help prevent data loss and ensure business continuity.
Perhaps the best way to determine whether or not a VDR solution fits your needs is to try it out. To discover the ease of use and the security precautions utilized by Caplinked virtual data room software is to simply log in and start your free trial today.
David Weedmark is a published author and ecommerce consultant. He is an experienced JavaScript developer and a former network security consultant.
Sources:
https://corporatefinanceinstitute.com/resources/knowledge/deals/types-of-due-diligence/
https://www.datarooms.com/industries/investment-banking.aspx
https://dataroom-rating.us/banking-and-finance/
http://ospreycapital.ca/wp-content/uploads/2015/09/Osprey-VDR-White-Paper.pdf
https://corporatefinanceinstitute.com/resources/knowledge/deals/data-room/
https://investmentbank.com/deal-virtual-data-rooms/
https://www.govinfo.gov/content/pkg/CHRG-115shrg32753/html/CHRG-115shrg32753.htm
https://www.fdic.gov/regulations/laws/rules/2000-6500.html#fdic2000part345.42
