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It’s no longer a hidden secret that the volume of data being created by humanity is quickly outpacing physical storage capacity. Personal file-sharing systems such as Google Drive and Dropbox periodically upgrade their service to offer higher storage capacities. This allows users to permanently back-up an increasingly growing collection of files, music, images, and video without having to rely on limited physical hard drive capacity. Similarly, virtual data rooms (VDRs) provide businesses with a comparable amount of information storage capabilities but add an extra layer of security in order to account for sensitive information such as customer details, inventory, and transaction history. Despite their marked similarity, it’s important to note that VDRs lack collaboration capabilities which are a defining feature of personal file-sharing solutions.

Being a large repository of information, VDRs have become a vital tool in business mergers and acquisitions as information required for due diligence (profitability, health, and company potential) is easier to discern digitally than with stacks of paper files in a physical storage room. Whether it is a pharmaceutical firm looking to acquire an upcoming player with a promising drug pipeline or a venture capitalist looking to invest in a startup, VDRs help to reduce the risk of decision-making during acquisitions. However, this doesn’t mean that a VDR’s sole purpose is to streamline the sale of a business. It’s also useful for audits, setting up joint ventures, and improving internal communication.

Run Quick and Efficient Audits

As with most public companies, audits represent the natural cost of doing business in order to ensure fair play in the marketplace. In such circumstances, having third-party auditors rummage through a physical data room is not only inconvenient but also inefficient. A VDR improves this process by letting your business provide online access to every document required by an audit team to perform their tasks. This also prevents auditors from having to visit their clients which cost valuable time and resources.

Partnering Up For Joint Ventures

If your business is in the midst of establishing a partnership for a specific project, a VDR serves as an ideal medium to equally share responsibilities of cost, upkeep, and maintenance. With a VDR, all parties involved will be able to add, monitor, and remove documents with time-stamped records. This aids in accountability, which can often be a common roadblock in finalizing partnership deals involving physical data rooms. In this case, a single partner deciding to host data on their site can alone increase risk of foul play and data tampering. Selecting a location that is uncommon to both parties can be a security disaster.

Organize Internal Work-flow

Not all functions of a VDR are defined to serve the needs of external third-parties. Rather, VDRs help refine internal work-flows so that the focus remains on your bottom-line rather than chasing down loose ends. Files related to business operations can be shared within teams and departments to provide an extra layer of context, leading to a more informed-decision making process which otherwise would not have been possible. Beyond team collaboration, VDRs also simplify the problems with remotely located high-ranked individuals who are required to sign-off on decisions. To do their job, they need to look at the proper documentation to justify how a certain decision was reached and a secure digital file makes this task easier and cheaper than having to ship these documents.

VDRs have been designed to help businesses reduce risk and burden of finalizing high stake decisions. Whether you’re trying to finalize an acquisition, or run your company more efficiently from within, the last thing you want is to have documentation and paperwork slow you down.



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