Using Virtual Data Rooms for Secure File Sharing
Virtual data rooms (VDRs) have come a long way from physical data rooms, but how good is the security in VDRs and how do organizations know if they have a good provider?
To begin, what is a virtual data room used for? A virtual data room is used for storing documents and information in a secure repository, so only certain parties have access to the information in the virtual room. A common use for VDRs is merger and acquisition negotiations.
What Is a Virtual Data Room?
Most consumers and enterprise users are familiar with file transfers and enterprise file sharing. There are dozens of providers that offer cloud storage services to share files through direct links or links to shared directories.
Most of these providers do not include high levels of security to protect stored data. Compliance regulations and rigorous security demands limit how enterprise organizations use these services. While that might not seem like too serious a problem, the truth is that collaborative, secure file sharing has incredible benefits for business users:
- It is simple: If you can email an invite or a link for a shared space online in the cloud, recipients need only to click the link to access files in that space. No hassle, no hang-ups.
- It is collaborative: The benefits of cloud storage allow users to access resources in real time. Some providers include editing and productivity applications as part of their solutions. Still, at a minimum, shared cloud space provides easy access and flexibility to data where multiple users are involved.
- It is expedient: Regardless of file size, type, or compatibility, a shared cloud space provides users with a way to upload and download data to and from any device they have. This means that they can access files wherever they need them on devices that can use those files.
In the past, the only alternative to an open and collaborative space to share information was a secure data room where access to information can be closely monitored and protected. In our modern digital age, it is clear that we need the best of both worlds: secure digital access to sensitive and timely information where permissions can be controlled.
This is where virtual data rooms (VDRs) come into play. A VDR serves as a digital “room” or space where private, confidential data may be kept and where access is closely controlled to maintain compliance or security requirements. These rooms are often used by leadership during business or organizational transactions where privacy is essential.
The Evolution of Physical Data Rooms to Virtual Data Rooms
Technological advancements have led to the evolution of virtual data rooms (VDRs), revolutionizing the way businesses manage their sensitive information.
One of the primary drivers behind the evolution of physical data rooms to virtual data rooms has been the need for increased efficiency and productivity in business transactions. Physical data rooms were typically associated with long wait times, extensive paperwork, and limited access. This often resulted in delays and increased costs. With VDRs, documents can be shared instantly, enabling businesses to complete transactions more quickly and efficiently.
Another significant advantage of virtual data rooms is their improved accessibility. Physical data rooms were often located in remote areas, making it difficult for individuals to access documents. Virtual data rooms, on the other hand, can be accessed from anywhere with an internet connection, allowing participants to review and share documents from any location.
Security is another critical aspect driving the evolution of data rooms. Physical data rooms were often considered secure, but they were also susceptible to breaches, theft, and damage. Virtual data rooms, on the other hand, are highly secure due to encryption, multiple levels of authentication, and other security features. This means that businesses can have peace of mind knowing that their sensitive information is safe and protected.
Overall, the evolution of physical data rooms to virtual data rooms has been a game-changer for businesses of all sizes. VDRs have streamlined processes, improved accessibility, and enhanced security measures, making them an essential tool for businesses that deal with sensitive information.
Why Use a Virtual Data Room?
A virtual data room (VDR) offers improved data security and access control compared to traditional document management systems. VDRs are used by organizations, businesses, and investors to facilitate secure collaboration on confidential documents related to due diligence, financial transactions, mergers and acquisitions, loan agreements, and other sensitive information. They provide a secure platform to ensure only authorized people can access and view confidential documents, while also providing a platform to facilitate collaboration on documents without risking security. Virtual data rooms are becoming increasingly popular due to their secure, efficient, and cost-effective features.
VDRs offer several advantages over traditional data rooms or file-sharing platforms:
- Compliance and security: The entire purpose of a VDR is to provide secure and compliant access to data. As such, a properly configured VDR will ensure that, at least as far as the technology is concerned, you are compliant. Ideally, a VDR will provide automated policy enforcement of data that is shared and stored.
- Exposing data to third parties: One of the significant benefits of a VDR is that they give tools for sharing files with specific people. In secure cloud and file-sharing environments, it can be hard to selectively expose files to the right people without also exposing your organization to noncompliance and/or a liability. With a VDR, that problem becomes much easier to manage.
- Quick response times: By the time a VDR is part of the business process, it is most likely far enough along that quick and accurate decisions are being made daily based on the files in that room. As such, a VDR ensures that all involved parties can quickly access files, comment on files, collaborate on file contents, and for certain platforms, provide signatures through secure services like DocuSign.
- Cost-effective: A secure file-sharing platform already costs a significant amount of money. Having one that comes with VDR capabilities helps save money in overhead and administrative costs due to its simplicity, ease of deployment, and reliability.
- Auditing and logging: A VDR can be a “choke point” for your file access. You can monitor any and all file access and management events in the room for audit purposes. That includes providing immutable forensic chains of evidence or due diligence reports for compliance.
Virtual Data Rooms vs. Cloud Storage—What’s the Difference?
Virtual data rooms and cloud storage are both tools used for storing and sharing digital information, but there are some key differences between the two. Let’s take a closer look:
- Security: Virtual data rooms offer a higher level of security than cloud storage. This is because virtual data rooms are specifically designed for secure file sharing and have features such as multi-factor authentication and granular access controls. Cloud storage, on the other hand, is generally more susceptible to hacking and cyberattacks.
- Collaboration: Virtual data rooms are also better suited for collaboration than cloud storage. Virtual data rooms allow multiple users to access and work on the same documents simultaneously, with the ability to track changes and receive notifications. Cloud storage typically only allows for basic file sharing and doesn’t offer advanced collaboration features.
- Regulatory compliance: Virtual data rooms are often used by businesses in heavily regulated industries, such as finance and healthcare, because they offer compliance features like audit logs and document watermarking. Cloud storage doesn’t typically offer these features, meaning it may not be suitable for businesses that need to comply with strict regulations.
- Customizability: Virtual data rooms offer more customizable options than cloud storage. For example, data rooms can be customized with company branding and include additional features like Q&A forums and voting polls. Cloud storage is generally a more one-size-fits-all solution with limited customization options.
- Cost: Virtual data rooms are typically more expensive than cloud storage, as they offer advanced security, collaboration, and customization options. Cloud storage, on the other hand, is generally more affordable and can be used for basic file sharing needs.
Overall, virtual data rooms are best suited for businesses that require a high level of security, collaboration, and regulatory compliance. Cloud storage is a good option for basic file sharing needs, but may not offer the advanced features needed by some businesses.
How Secure Are Virtual Data Rooms?
Virtual data rooms (VDRs) are designed to provide secure online storage and sharing of sensitive content. Specifically, VDRs are an effective way to facilitate the exchange of confidential and sensitive information between parties involved in a business transaction or project. VDRs utilize state-of-the-art security protocols to protect data from unauthorized access, theft, or data breaches. Some of the security features that make virtual data rooms secure include: encryption, access controls, audit trails, data backups, data centers, and regulatory compliance. Overall, virtual data rooms are highly secure and provide a safe and efficient way to manage and share sensitive data. However, it is important to choose a reputable VDR provider that has a proven track record of security and compliance. It is also essential to ensure that all users understand and follow best security practices to minimize the risk of breaches.
Most Common Uses for VDRs
- Data storage and backup: Virtual data rooms are great for backing up confidential data, as they offer a secure and reliable way to store information. With features such as data encryption and authentication, a VDR can ensure that all important data is properly stored and backed up.
- Mergers and acquisitions: Due to the sensitive and confidential nature of mergers and acquisitions, virtual data rooms can be instrumental in facilitating the process by providing a secure way to exchange important documents and information.
- Clinical trials and regulatory compliance: VDRs are also popular for use in clinical trials, compliance, and regulatory reporting. Companies must be able to provide secure access to confidential documents, such as patient data, for regulatory agencies.
- Investor communications: Companies and organizations can use virtual data rooms to provide secure access to important documents and records for investors. VDRs can help streamline the process of sharing data, such as financial statements and shareholder reports, with investors.
- Legal matters: VDRs can also be used for a range of legal processes, such as due diligence, litigation document review, and compliance with government regulations. These services can help streamline and simplify the legal process by providing secure access to confidential documents.
Who Are Virtual Data Room Services Providers?
Virtual data room services providers are companies that offer data room services, providing secure online spaces for the sharing of sensitive documents and data between parties. These services provide a wide variety of features, such as user management, audit trails, data encryption and security protocols, document versioning and tracking, and more. Commonly used by financial institutions and legal firms, these services can be used for due diligence and other confidential activities. Kiteworks is one such provider.
What Should I Look for in a Virtual Data Room Provider?
Like any other type of vendor, a virtual data room provider can bring several different benefits and costs. Not all vendors are created equal, and you need to understand some of the challenges in selecting one.
Some of the critical capabilities you should seek when looking for a virtual data room provider include:
- Security and compliance: This perhaps goes without saying, but if you have specific compliance requirements for your industry or market, your VDR must meet those requirements. In some instances, specific security protocols around encryption of data in motion and at rest are needed in order to employ a specific VDR (e.g., Cybersecurity Maturity Model Certification [CMMC], FedRAMP, IRAP, etc.).
- Integration: If the VDR comes as part of a more comprehensive platform, what features work between the platform and the VDR service? Understanding this relationship can help you select not only the right VDR but an entire cloud of file-sharing services.
- Audit control: Your VDR provider should have a clear and easy way to compile and display audit logs and reports related to room access, file access, and file changes. Tracking and controlling file access, maintaining a detailed record of that access, and then generating reports for compliance is crucial.
- Productivity applications: Organizations must understand how other applications such as those used for contract signing, document versioning, and online editing access, share, and store files in the VDR. These each present security and compliance risks.
- Chat or in-room communication: A solid VDR solution should also include an integrated way to communicate, typically through a chat or comment log.
How to Compare Virtual Data Rooms and Choose the Right One
We have established the value VDRs provide and what makes a VDR unique compared to other solutions. If you have decided a VDR would meet your secure content collaboration needs, consider these next steps as you start to shop around for a VDR solution.
- Identify your needs: Determine what your specific needs are for a virtual data room. Consider the size of your project, the number of users who will need access, and the level of security required.
- Evaluate features: Look for features such as ease of use, customization, scalability, data protection, accessibility, and collaboration tools.
- Assess security: Security is crucial in a virtual data room, so ensure the platform you choose has high-level security protocols and encryption.
- Check pricing and value: Compare pricing plans for different virtual data room providers and evaluate the value of their services.
- Customer support: Look for a provider that offers timely and effective customer support, whether it’s through phone, email, or ticketing system.
- Read reviews and ratings: Look for independent reviews and ratings of virtual data room providers from other users to gauge their experience.
- Check for compliance: Consider whether the virtual data room is compliant with industry standards such as ISO, SOC, GDPR, HIPAA, or other regulations that may be necessary for your particular industry.
- Trial period: Take advantage of any free trial periods offered by virtual data room providers to test the system and ensure it meets your needs before committing to it.
- Reputation: Look for providers with a good reputation and a track record of successful transactions and satisfied customers.
Leverage Virtual Data Rooms and Secure Transfers With Kiteworks
Virtual data rooms are critical parts of a fast-paced business world where secure environments, fast decision-making, security, and compliance are all crucial to the processes and deals that drive commerce. A properly configured VDR can support secure file sharing and editing between parties inside and outside your organization without compromising compliance, security, or user experience.
The Kiteworks platform supports secure VDRs for enterprise users across industries such as government, finance, manufacturing, legal, pharmaceuticals, healthcare, and life sciences. Key VDR capabilities in the Kiteworks platform include:
- Security: Kiteworks uses a defense-in-depth approach that includes AES-256 encryption for data at rest and TLS 1.2+ for data in transit, a hardened virtual appliance, granular controls, authentication, comprehensive logging, auditing, and reporting, as well as various security integrations.
- Compliance: Kiteworks is compliant with a long list of different governmental and industry standards like SOC 2, General Data Protection Regulation (GDPR), Payment Card Industry Data Security Standard (PCI DSS), Health Insurance Portability and Accountability Act (HIPAA), FedRAMP, Cybersecurity Maturity Model Certification (CMMC), National Institute of Standards and Technology (NIST) 800-171, among others. The platform’s extensive tracking and control makes it simple and fast to demonstrate compliance through virtual real-time reporting.
- Audit logging: With the Kiteworks platform’s immutable audit logs, organizations can detect attacks sooner while ensuring that they maintain the correct chain of evidence to perform forensics. As Kiteworks merges and standardizes entries from all the components, its unified syslog and alerts save SOC teams crucial time and help compliance teams to prepare for audits.
- Consent documentation: With many frameworks like GDPR calling for documented consent for the collection of data and any data subject access request, organizations need a platform to automate that process. The Kiteworks platform provides extensive reporting and logging of all consent forms and data requests so that organizations can consistently demonstrate compliance.
- Single-tenant cloud environment: File transfers, file storage, and access occur on a dedicated Kiteworks instance, deployed on your premises, on your Logging-as-a-Service (LaaS) resources, or hosted as a private single-tenant instance. That means no shared runtime, shared databases or repositories, shared resources, or potential for cross-cloud breaches or attacks.
- Seamless automation and MFT: The Kiteworks platform supports managed file transfer (MFT) automation to facilitate streamlined file management, batch file transfer operations, and conditional operations triggered by user and system events.
- Visibility and management: The CISO Dashboard gives organizations an overview of their information: where it is, who is accessing it, how it is being used, and if it complies. Help your business leaders make informed decisions and your compliance leadership maintain regulatory requirements.
To learn more about Kiteworks’ VDR capabilities and how Kiteworks can help you share information securely, schedule a custom demo.
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