With data loss impacting businesses every second and estimated to cost businesses $265 billion by 2031, it’s no wonder more distributors are offering customers an entirely new type of warranty: the cybersecurity warranty. The purpose of these warranties is to limit the financial risk of cyberattacks and breaches They are typically a complement to cybersecurity insurance, and can to fill in the gaps when insurance doesn’t provide security.
These warranties aren’t all the same. Many experience rigid stipulations which could lead to companies paying the highest price for information retrieval in the event of a cyberattack. These may include:
Incorporating this type warranty into an M&A deal can be an excellent method of ensuring that the buyer is adequately protected against security threats and that the vendor will take steps to stop such attacks from happening these details in the near future. These new warranties along with the standard representations and warranty clauses in an asset purchase agreement or stock purchase agreement, can be negotiated in a way that they cover privacy, data protection and other issues specific to the transaction.
A typical warranty may cover the cost of repairing and replacing equipment and software, as well as the cost of forensics as well as IT labor to retrieve data, as well as the costs of compensating those impacted by a breach. They also cover the costs of legal expenses resulting from lawsuits. A more comprehensive policy could also cover lost business revenues and the cost of reprogramming software, and the cost of repairing reputational damage caused by a security event.