The Truth About Data Safety Warranties in Technology M&A

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A warranty is a guarantee from a seller or manufacturer that the products purchased will be free of defects for a particular time. In the context of technology mergers and acquisitions warranties are frequently used to manage security and data availability risks.

With ransomware attacks expected to hit 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 a brand new type of warranty that includes a data security warranty. These guarantees reduce the economic dangers of cyberattacks and breaches by shifting legal liability to the vendor and are typically offered as a complement to cybersecurity insurance, helping fill the gaps when insurance coverage might not be sufficient.

Security guarantees vary in terms of their specifics, but typically include the loss of revenue for a company and the additional expenses that are incurred and reputational damage that is caused by the breach. They might also include policy meant for legal responsibility, which covers the costs of letting the victims of an attack to be identified as as any fines or charges received from potential lawsuits.

While the concept behind a data security warranty is good, a majority of them are prone to serious deficiencies. Rubrik offers an „Recovery Incident warranty“ that covers „Recovery Incident-related expenses.“ However, this does not mean that your employees will be paid for the time they spend on recovering. For Rubrik to reimburse you they’ll need receipts for these expenses, which is a red flag.