A warranty is a guarantee from a manufacturer or seller that the item purchased is free from defects or flaws for a specific length of time. In the context technology M&As warranties are frequently used to address cybersecurity and data availability risks.
Data security guarantees are becoming more popular with distributors. With ransomware set to cost businesses $265 billion in 2031 and an increase to attack every 2 seconds, it’s not surprising that they provide this new guarantee to their clients. These guarantees reduce the economic risk of cyberattacks and breaches by transferring legal liability to the vendor and are usually provided in conjunction with cybersecurity insurance, helping fill the gaps when insurance coverage might not be sufficient.
Security guarantees vary in their terms and typically include the loss of revenue for a business and the additional expenses that are incurred and reputational damage resulting from an attack. They could also include a policy designed to protect legal responsibility, that covers the cost of letting the victims of an attack to be identified as as any fines or charges received from lawsuits that could be filed.
While the concept behind a data security warranty is an excellent one, many of them are flawed. Take the example of Rubrik, which offers the “Recovery Incident Warranty.” This warranty will pay for what they call “Recovery Incident Expenses.” However, it doesn’t mean that your employees will be paid for the time they spend on a recovery incident. In order for Rubrik to be able to pay they require receipts for these expenses which is a bit of an indicator.
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