Secure data rooms are able to encrypt all documents as they transfer between servers and are stored, in contrast to storage and file sharing services such as Dropbox which only protect files during the uploading and downloading process. This is crucial to prevent hackers from accessing the information in the event of its loss.
However it is crucial to remember that the majority of data rooms are only as secure as the security measures implemented by the server hosting them – so although encryption of data in rest is critical, it’s not enough to guarantee total security. In addition, it is worth asking if a data room’s system is able to encrypt temporary files created when downloading documents to the browser – if it doesn’t, that could lead to thousands of documents that are not protected in the clear on a server which could easily be hacked.
A major feature is the ability to add notes to documents that can only be viewed only by the person who wrote them. This decreases the risk of third parties gaining access to confidential information and improves collaboration during due diligence. Also, the most secure data rooms include dynamic watermarks which update in real time, which prevents unsolicited file sharing and help to track file sources if there is a leak.
Finally, make sure that a virtual data room is compatible with industry-standard security practices by checking that it has ISO 27001 certification or other similar assurances. Find a data room that has strong encryption and detailed reports on access and activity.