Data loss is estimated to cost businesses $265 billion by 2031. It’s no surprise that more distributors are offering buyers a new kind of warranty called the cybersecurity warranty. Created to help mitigate the financial risks associated with cyberattacks as well as breaches These warranties are usually used in conjunction with cybersecurity insurance, and can fill the gaps where insurance cannot provide security.
However, these warranties aren’t all created in the same way. There are many that have strict terms and conditions which could lead to companies paying a substantial amount for data retrieval in the event of a cyberattack. These may include:
Incorporating this type warranty into a technology M&A deal can be an excellent way to make sure that the buyer has adequate protections against security risks that could arise, and that the vendor will take steps to prevent such attacks from happening in the near future. In addition to the typical warranties and representations contained in an asset or stock purchase agreement, these new warranties can be negotiated to address privacy concerns, data security, as well as other issues relevant to the transaction at hand.
A typical warranty will cover the cost to repair or replace hardware, the cost of IT labor, forensics, and the compensation of those affected by the breach. Some also cover the costs of legal expenses that result from lawsuits. A more comprehensive version might also pay for lost revenue and the cost of programming the software and also the cost to restore reputational damage that was caused by an incident of security.
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