Data loss is a problem for a business every second and estimated to cost businesses $265 billion by 2031 so it’s no wonder distributors are offering buyers a new kind of warranty: the cybersecurity warranty. These warranties are designed to minimize the financial risk associated with cyberattacks, and often serve as a complement to insurance. They cover the gaps left by insurance.
However they’re not all made to be equal. Many experience rigid stipulations that can result in companies having to pay a substantial amount for information retrieval in the case of cyber-attacks. These can include:
Incorporating such a warranty into a technology M&A deal is an excellent way to make sure that the buyer has adequate protections against security threats that could be a threat, and that the vendor will take steps to prevent such attacks from occurring in the future. In addition to the normal warranties and representations in an asset purchase or stock purchase agreement, these warranties can be discussed to address privacy security, data security, and other pertinent issues that relate to the deal at hand.
A typical warranty could include the cost of repairing and replacing equipment and equipment, the cost of forensics and IT work to retrieve data, and the cost of compensating people who are affected by a breach. Some warranties also cover legal expenses caused by lawsuits. A more comprehensive plan may also cover lost revenue, the cost of reprogramming the software and the expense to repair reputational damage that was caused by security incidents.
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