Due diligence is the basis of every business transaction between companies. The pandemic has accelerated the shift from in-person deals to online transactions. A virtual data room is a secure space where parties can review each other’s business models and financial portfolios. So, how does the system work?
Virtual data room software in due diligence
For an investor or a company that can become a buyer of a business to make sure that this operation will be beneficial for them, it is necessary to collect complete, reliable, and objective data on the company’s position in the market, its financial condition, production capacity, counterparties, and partners. Due diligence is carried out a special procedure to collect all this information. Due diligence is a comprehensive analysis of the entire set of relationships within the company and its interaction with the environment in which it operates.
The work results are based on the received internal information, legislative and internal regulations, and data provided by competitors and partners of the company – the object of the study and are drawn up in the form of relevant reports. As a result, large arrays of business-critical data are processed during the procedure.
Full digitalization of documents and accounting at enterprises is a prospect for the future. Most companies today are forced to use several information systems in their work to create, coordinate and process electronic documents. Important due diligence tasks are setting up integration between these systems and optimizing the process of exchanging electronic documents within the company and with contractors. To avoid the problem of piling up dozens of modules that interconnect corporate systems, the introduction of a single platform ensures a legally significant workflow. In this case, we are talking about a virtual data room. Thanks to this digital solution, the organization automates most of the business processes, including due diligence procedures that involve the exchange of electronic documents.
The functionality of the due diligence data room
Data room is a ready-made product that does not require large investments in the individual development of a solution from scratch. Thus, the company has the opportunity to automate most of the operational processes, adapting the system to internal needs and investing less in updating and maintaining its software.
Based on the data room, centralized storage of electronic documents is organized following high requirements for their protection and safety, combined with the most convenient and easy access from local and remote computers of any configuration. Access to the electronic archive of documents is carried out through a web browser. It can also be organized through the corporate portal of the enterprise, implemented on the Microsoft SharePoint platform.
Automation of the due diligence document approval process (including automation of agreement approval) in a virtual data room allows you to:
- Formalize the approval process, and make it manageable and transparent;
- Speed up the process, including by reducing the time for transferring documents and convenient access to the system from tablets and mobile devices;
- Increase the efficiency of the approval process by significantly increasing the approval speed by optimizing the process.
How secure is the software?
The extended functionality of the system provides effective tools to increase the productivity of the organization, transparency of operations, reduce costs and optimize the working time of employees. But the most significant feature determining its popularity in law is ensuring data security. A reliable provider that prevents data protection scandals and guarantees audit security must be chosen. Under these circumstances, keeping the content secret and forwarding secret bids to the seller is possible. Data protection is ensured by multi-level authentication, highly secure encryption, digital watermarks, and access data control.