What is a Virtual Data Room and Why Does it Matter in 2023?

According to pundits, document management security and digitalization will be considered one of the global business trends in 2023. No wonder virtual data rooms (VDR) designed to handle such tasks are in high demand. Currently, there are many solutions on the market. As a result, it is easy to get lost in the choice. Therefore, before choosing the right one, it makes sense to understand what a VDR is and what functions it can perform, including data room due diligence. Below, you will also find tips on how to select a suitable online document storage platform.

Virtual Data Room – Key Points of Usage

A virtual data room or so-called ‘dealing room’ represents an online platform that stores, distributes, and shares documents. It can differentiate document access rights and organize convenient file exchange, creating a transparent document repository structure.

Typically, virtual data rooms offer a standard set of convenient tools, including:

● document viewing;

● downloading of files;

● sending files to print;

● shared access to documents;

● other functions.

Usually, the work process in VDR is very straightforward: you only need to upload documents and define access rights for them. Files protection is ensured by the user’s access right differentiation, document lifetime management, and event logging. Moreover, the program creates a personally marked file copy whenever the document is exchanged or downloaded. As a result, each copy of the file has a unique and invisible marking that helps identify the source of data leakage when it occurs.

VDR Field of Use

Virtual data rooms have a wide range of applications, from mergers, acquisitions, and auditing to personal information management and copyright protection. Let’s take a look at the most popular ones.

M&A

While preparing for the merger and acquisition deal, the purchasing companies access a large amount of financial information, which is often confidential. In the past, parties traditionally used a physical data room due diligence for document disclosure. However, with the emergence of online venues for document storage, virtual data rooms have supplanted traditional physical data rooms as a cheaper and more secure place.

External Audit and Preparing for IPO

Collecting the data for an IPO is a very time-consuming process. It can take up to several months. And during this period, auditors, lawyers, regulators, and other interested stakeholders examined large volumes of company documents. The virtual data room is an excellent, secure, and convenient online platform for these purposes.

Important Business Events Preparation

During the organization of large business meetings, parties prepare numerous documents. Virtual data rooms allow editing files in real-time, no matter where the discussion participants are. Moreover, at the end of the final big meeting, all participants will immediately receive digital copies of the agreed documents.

Intellectual Property and Research Results Protection

Virtual data rooms can be used to restrict access to documents and track leaks. This helps prevent the theft of unique drawings, geological maps, critical developments, and project documentation.

Legal Proceedings

During litigation, attorneys, prosecutors, and court staff deal with a large volume of documents related to a case. Some of them are often very confidential. The use of virtual data rooms helps avoid the theft or loss of such documents. In addition, the ability to work remotely with all documents in “view-only” mode allows international experts to be involved without having to visit the country.

How to Choose the Perfect Data Rooms?

There are many reliable data room providers. And their products have much in common. Use the following criteria to pick out the most suitable one.

File Management

Give preference to virtual data rooms that make it easy to upload files and sort them into folders. Also, pay attention to the download process and the ability to view files online.

File Access Control

Be sure to check how versatile this file access control is, including the following features:

● creating joint work areas;

● establishment of multi-level status for participants;

● flexible system of user rights assignment;

● limitations for documents usage;

● ban on printing, copying, or downloading the document;

● document activity control;

● the ability to share a file or folder via the generated link with different limitations, such as link validity period.

Interface

The platform in question should have a user-friendly and easy-to-maintain interface.

Fortunately, many data room providers offer their customers demo versions of their products. Thus, they can test all the features of the considered VDR for free before making a purchase.

In addition to the functionality of the virtual data room, it is important to look closely at the reputation of the VDR provider. Check customer feedbacks and expert reviews to find out if the company is reliable and trustworthy.

Conclusion

With all mentioned above, it is safe to say that the number of companies using VDR as a relatively cheap and secure document management tool will only grow.