Data loss is a problem for businesses every two seconds and expected to cost businesses $265 billion by 2031 So, it’s not surprising that more distributors are offering buyers a brand new type of guarantee: the cybersecurity warranty. These warranties are designed to minimize the financial risk related to cyberattacks, and are often Recommended Reading a complement to insurance. They cover the gaps left by insurance.
However, these warranties aren’t all created to be equal. There are many that have strict terms and conditions which could lead to companies paying a substantial amount for information retrieval in the event of a cyberattack. These may include:
This kind of warranty could be included in an IT M&A agreement to ensure that the buyer is protected from potential security threats and that the vendor is taking steps to protect against future attacks. These new warranties, in addition to the usual representations and warranties clauses in an asset purchase agreement or stock purchase contract, can be negotiated to ensure that they include privacy, data protection and other pertinent issues specific to the transaction.
A typical warranty may include the cost of fixing and replacing hardware and software, as well as the cost of forensics and IT work to retrieve data, as well as the cost of remuneration for individuals affected by a breach. They also cover the costs of legal expenses resulting from lawsuits. A more comprehensive plan could include lost business revenue, the costs of reprogramming software and the cost of repairing reputational damage resulting from an incident of security.