With data loss affecting businesses every two seconds and projected to cost businesses $265 billion by 2031 so it’s no wonder distributors are offering consumers the latest type of warranty which is called the cybersecurity warranty. It is designed to reduce the financial risk of cyberattacks and breaches, these warranties are typically used in conjunction with cybersecurity insurance and help to fill in the gaps when insurance doesn’t offer protection.
However, these warranties aren’t all made equal. Some have strict rules which could lead to companies paying a substantial amount for data retrieval in the case of a cyber attack. The stipulations can include:
This type of warranty could be included in the technology M&A agreement to ensure that the buyer is adequately secured from security threats and that the vendor takes appropriate steps to prevent future attacks. These new warranties in addition to the usual representations and warranties clauses that are included in an asset purchase agreement or stock purchase contract, can be negotiated so that they address privacy, data protection and other pertinent issues specific to the deal.
A typical warranty could include the cost of repairing and replacing hardware and software, as well as the cost of forensics and IT labor to retrieve data, as well as the cost of remuneration for individuals affected by a breach. Some warranties also cover legal expenses resulting from possible lawsuits. A more comprehensive version might also cover lost business revenues, the costs of reprogramming software and the cost of repairing reputational damage caused by an incident of security.