A warranty is a representation from a seller or a manufacturer that the item purchased is free of defects or imperfections for a specific length of time. In the area of technology M&A, warranties are a standard tool to manage risks related to cybersecurity and data availability.
Data security guarantees are becoming more popular with distributors. With ransomware https://www.toptechno24.com set to cost businesses $265 billion by 2031 and a move to attack every two seconds, it is no surprise that they offer this new assurance to their customers. These guarantees minimize the risk of economic loss caused by cyberattacks, as they transfer legal liability to the company. They are typically offered as a complement to cybersecurity insurance to cover gaps where coverage might not be enough.
The exact terms of a security guarantee vary significantly, but they typically include a lack of business revenue as well as additional expenses incurred, and reputational damage arising from the breach. The policy may also cover legal responsibility. This covers the costs of notifying people affected by an attack, as well as any penalties and fines resulting from potential lawsuits.
While the idea behind a security warranty for data is an excellent one, the majority of them are faulty. Take the example of Rubrik which provides a “Recovery Incident Warranty.” This warranty will pay for what they describe as “Recovery Incident Expenses.” But this doesn’t mean that your employees are compensated for the time they spent in a recovery incident. For Rubrik to reimburse you they’ll need receipts for these expenses, which is a red flag.