The Truth About Data Safety Warranties in Technology M&A

A warranty is a commitment from a manufacturer or seller that the products purchased are free from defects or flaws for a set period of time. In the area of technology M&A, warranties are a standard tool for managing risks related to cybersecurity and data availability.

With ransomware moves required to target a company each two seconds and estimated to cost businesses $265 billion by simply 2031, it’s not a surprise that more distributors are providing their customers with a brand-new kind of guarantee that includes a data security warranty. These guarantees help reduce the economic risk related to cyberattacks by shifting legal liability to the company. They are usually offered as a complement to cybersecurity insurance to fill in the gaps where insurance coverage might not be sufficient.

Security assurances vary widely in terms of their specifics but generally include the loss of revenue for a company in addition to the additional expenses incurred and reputational damage resulting from an attack. They could also include a policy meant for legal responsibility, which covers the expenses of allowing individuals impacted by an attack to be identified as as any fines or charges that result from lawsuits that could be filed.

While the idea behind a data security warranty is an excellent one, many of them aren’t as good. Consider the case of Rubrik which check this site out provides a “Recovery Incident Warranty.” The warranty covers for what they call “Recovery Incident Expenses.” However, this doesn’t mean your employees are paid for the time they spend in a recovery situation. Rubrik will only pay the expenses if they have receipts for the expenses. This is a little red signal.


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