New technologies for accessing, distributing, and sharing business data expand criminal opportunities. More than 80% of the corporate data of companies is stored and used electronically. Therefore, companies use data room solutions to organize efficient and transparent due diligence procedures. Here is more about it.
Due diligence – data protection vs. gaining information
The new data protection law has arrived in M&A practice, and the effects can be seen in the run-up to every corporate transaction, especially in due diligence. Gathering information about the potential partner or organization you intend to contact with your business should be the first intent in any business sale transaction. Through due diligence examination, one discovers the legal information, structuring, and other details about the target property. In addition, due diligence is necessary when assessing the risks.
Data rooms provide the process of creating, managing access, and distributing large volumes of documents in computer networks and ensure control over the flow of documents in an organization. Modern data room systems are designed to bring order to the company's work. They systematize the workflow and lay out clear, direct routes along which the flow of business documents moves. The possibility of distributed remote work and interaction with other branches – the main problems when working with documents arise in geographically distributed organizations, so the architecture of document management systems must support the interaction of distributed places.
To agree on a contract, a lawyer needs to launch a task in the data room, attach the necessary file, and send it to the responsible persons along the specified route. You can specify the deadline for completing the task for each participant in the approval chain. Then the employee can do other tasks, waiting for notification by mail. If the deadlines are not met, the system will notify you.
Virtual data room for secure and automated due diligence
The main advantages are the comprehensive analysis of the legal and financial situation and the prevention of risks. With the advent of digital data rooms, the process of conducting due diligence has become much easier. Now you can collect the needed information online and edit it with your colleagues.
There are many advantages of switching to electronic document management during due diligence. The main advantages of due diligence data room include:
- the speed of dissemination of information in the company increases. In large companies with a large volume of document circulation, even small delays in the movement of documents, multiplied by the density of their flow, are very significant;
- creation of more effective business communications between structural divisions of the organization and within the divisions themselves, integration of remote offices into a single information space of the company;
- faster and better decision-making through access to up-to-date information;
- significantly reduce the cost of maintaining paper workflow;
- increasing the speed of response to requests;
- the ability to control most business processes in real-time;
- all employees work following existing rules and laws;
- increasing the company's attractiveness to investors.
With the data room, you can create orders under a contract. To do this, the system user from the contract card creates instructions for the company employee (using the organizational structure reference book) indicating the task's deadline and priority. In addition, in the due diligence process, a situation often arises when you need to request or clarify missing information.