A warranty is an assurance by a manufacturer or seller that the goods purchased will be free of defects for a certain period of time. In the context of technology M&As, warranties are often used to address security and data availability risks.
Data security warranties are becoming more popular among distributors. With ransomware projected to cost businesses $265 billion by 2031 and the potential to attack every two seconds, it’s no surprise that they offer this new assurance to their customers. These guarantees reduce the economic risks of cyberattacks as well as breaches by transferring legal liability to the vendor and are typically provided in conjunction with cybersecurity insurance, which helps fill the gaps wherever coverage may not be sufficient.
The actual details of a security warranty vary in a variety of ways, but they generally contain a shortage of revenue for business along with additional costs incurred and reputational damage due to the breach. They may also include policies meant for legal responsibility, which covers the expenses of allowing individuals impacted by an attack to be identified as well as any penalties or fines resulting from potential lawsuits.
While the idea behind a security warranty for data is a good one, many of them are faulty. Consider the example of Rubrik which provides an “Recovery Incident Warranty.” This warranty will pay https://toptechno24.com/what-should-you-know-about-amazons-digital-currency/ for what they call “Recovery Incident expenses.” However, it doesn’t mean that your employees are paid for the hours spent on a recovery event. In order for Rubrik to be able to pay they must have receipts for these expenses which is a bit of a red flag.