Every organization operating in today’s data-driven world is vulnerable to security risks, such as data leaks, breaches, hacks, cyber-attacks, and other threats. Meanwhile, as data privacy laws tighten, today’s businesses must direct more resources toward demonstrating due diligence in regulatory compliance.
What can organizations do in this pressurized environment, with so much at risk, to promote regulatory compliance and protect sensitive data? Virtual data rooms (VDRs) for legal compliance are a game-changing innovation offering manifold benefits.
How can virtual data rooms promote regulatory compliance? Which industries stand to benefit from VDRs? In which situations are VDRs particularly useful? First, let’s take a crash course on why virtual data rooms are critical in today’s regulatory climate.
As new technologies emerge, regulatory bodies continue to release and update laws and policies governing their use. In recent years, new legislation regarding data privacy has been released at the federal and state levels.
A foremost example is the California Consumer Privacy Act (CCPA). Additionally, data privacy laws instituted by regulatory authorities overseas, such as the European Union’s General Data Protection Regulation (GDPR), are changing the way organizations handle data, even beyond the EU’s borders. These regulatory regimes are subject to periodic updates, requiring that organizations make an ongoing effort to achieve compliance.
Consider, for a moment, a sampling of the data and assets that organizations must keep secure either to ensure regulatory compliance or to protect their own interests:
- Sensitive customer and employee data
- Intellectual property (trade secrets, patents, copyrights, trademarks, etc.)
- Scientific data
- Financial and tax information
- Supplier data
- Health records
- Business plans
- Investor data
- Legal data (contracts, litigation documents, agreements, etc.)
- Website and mobile application data
- And more
Organizations that disregard today’s stringent data protection laws leave themselves vulnerable to the risks of non-compliance, including hefty fines, legal and criminal consequences, and irrevocable damage to public relations.
Note these telling stats from Statista, a global data platform, revealing the lack of data protection regulatory compliance readiness and the risks of non-compliance:
- “As of the fourth quarter of 2022, approximately eight percent of U.S. companies legally expected to comply with the California Consumer Privacy Act (CCPA) were fully compliant with the legislation. Another 40 percent of companies provided manual processes to comply with CCPA, while over 52 percent were non-compliant.”
- “Between May 2022 and July 2023, the Federal Trade Commission (FTC) of the United States took law enforcement actions against 17 companies for data privacy and security violations. The latest updated case was with Amazon.com. The company received a 25 million U.S. dollar penalty for violating the Children’s Online Privacy Protection Act Rule (COPPA Rule).”
- “Since the EU’s implementation of the General Data Protection Regulation (GDPR) in May 2018, the largest fine issued in the United Kingdom (UK) was more than 22 million euros. This fine, received by British Airways in October 2020, was by far the largest in the country. Another fine received by Marriott International Inc. in the same month was the second-highest in the UK and amounted to over 20 million euros.”
Still, it’s not all doom and gloom. Organizations can successfully mitigate the risks of non-compliance by implementing the right tools. Enter: virtual data rooms.
VDRs are the veritable new best practice for securely storing, sharing, and managing organizational information. How do VDRs fit into various industries, and what situations can they be used for?
Industries and Organizations That Need Virtual Data Rooms – Real-World Use Cases
Virtual data rooms have an infinite number of practical uses in the private and public sectors. VDRs play a key role in promoting regulatory compliance, especially when conforming to data protection and handling laws.
Take the real estate industry, for example. Real estate agencies must share data between brokers, buyers, bankers, investors, and more.
“Many challenges arise in real estate projects,” says Technology.org. “For example, the inability to properly structure detailed financial records or to have real estate files readily accessible whenever needed. A data room software covers these challenges by offering a secure and efficient way to share, organize, and collaborate on real estate documents. Virtual data room solutions simplify and accelerate different processes in the real estate industry.”
What other industries can benefit from VDR technology?
Industries that need VDRs include:
- Finance, banking, and tax
- Insurance
- Real estate and property management
- Hospitality
- Retail
- Aerospace and defense
- Automotive
- Food and Agriculture
- Media and entertainment
- Biotech and life sciences
- Health care
- Global trade
- Manufacturing and distribution
- IT and data science
- Legal
- Energy and mining
- More
In reality, all modern organizations—startups, non-profits, government agencies, globalized corporations, corporate enterprises, etc.—can and should use virtual data rooms for secure document storage and sharing. Why? Because all organizations handle sensitive data and must comply with regulatory requirements on how data can be stored and shared. However, complying with data privacy laws is particularly critical for industries handling large volumes of sensitive personal data, such as the healthcare and finance industries.
VDRs help organizations comply with government regulations while streamlining operations and promoting profitability. Still, beyond general operations, what situations significantly benefit from using VDR technology to facilitate enhanced regulatory compliance?
Situations That Demand VDRs for Regulatory Compliance
Let’s examine a few specific situations in which virtual data rooms and legal compliance create business synergy.
Here are some common business scenarios in which a VDR is a must-have:
- Bankruptcy and restructuring – This situation can be complicated, rife with red tape, and full of inefficient iterations between departments and stakeholders. Using a VDR can help get everyone organized, uniting efforts toward the common goal of a beneficial outcome while keeping sensitive data under lock and key.
- Mergers and acquisitions – M&As are notoriously messy. From refereeing personnel clashes to navigating back-and-forth negotiations, the whole process is wrought with legal and financial risks. VDRs help to minimize stress and prioritize due diligence throughout the M&A process.
- Auditing and managing taxes – “Auditing company practices, compliance, and accounts is a common practice in all businesses,” says Investopedia. “The use of a virtual data room allows attorneys, accountants, internal and external regulators, and other interested parties to have a centralized point of access. Providing a central system reduces errors and time. Also, it provides for communication transparency.”
- Asset sales and purchasing – Whether selling a vehicle fleet or buying a trademark, buying and selling assets is a frequent, yet often complex, feature of business. Businesses on both ends of a deal can use VDR technology for secure communication and document sharing throughout the sale. Document tracking features prevent miscommunications that could sour a deal while facilitating auditing and other compliance workflows.
- Raising capital and securing financing – When raising capital, organizations need a secure portal to share sensitive business information with potential investors while retaining control of all documents. VDRs help investors speed up their due diligence process by giving them access to all the data they need in one accessible location, assisting organizations in securing financing faster.
From health care to M&A regulatory compliance, virtual data rooms effectively mitigate risks while improving the operational function of organizations representing any industry.
What VDR tool is worth your investment?
Virtual Data Room Legal Compliance Software
Caplinked has designed a virtual data room that is both easy to implement and robust enough to work at scale with enterprise-level operations. Our VDR software is a perfect fit for legal compliance and regulatory document management.
What makes Caplinked well-suited for managing regulatory compliance? Note these value-adding features:
- Extended digital rights management – Document owners can ensure that only approved parties can access, edit, download, or print their documents. Access can be revoked at any time.
- Complete audit trails – Track all document activity to ensure full transparency and keep all relevant parties informed. Document tracking equips you to demonstrate due diligence in case of an internal or external audit.
- Full customization potential – Easily customize the file structure of your VDR to match the unique needs of your industry. Our custom watermarking tool allows you to protect business-sensitive documents.
- Comprehensive security – Benefit from the peace of mind that military-grade 256-bit encryption and SSAE18-certified and ISO27001-compliant servers can afford. Our next-level security protects your sensitive data from threats while helping you comply with evolving data privacy laws.
- Extensive efficiency-boosting opportunities – Use our platform to upload, share, edit, view, and comment on documents. Our user-friendly portal will facilitate cross-department collaboration, reduce administrative and HR burdens, and help you seal deals with investors, buyers, and beyond.
- End-to-end document management – Compile all of your organization’s sensitive data and documents into one centralized portal that all authorized parties can access without any extra plugins or downloads. Our single dashboard display is easy to access and navigate from nearly any device.
When you invest in top-level VDR technology, you can expect a full return on investment. The time you’ll save, the risks you’ll mitigate, and the commitment to compliance you’ll demonstrate are compounded to make implementing our software worthwhile. Not to mention, Caplinked’s VDR solutions are competitively priced and flush with features. We’re so convinced that our VDR will be a ‘can’t operate without’ tool in your organization’s belt that we offer a 14-day trial for free.
