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With data loss affecting businesses every second and estimated to cost businesses $265 billion by 2031 so it’s no wonder distributors are offering customers an entirely new type of warranty called the cybersecurity warranty. These warranties are designed to help reduce the financial risks related to cyberattacks, and they’re often a complement to insurance. They cover the gaps left by insurance.
These warranties aren’t all the same. Some have strict rules which could lead to companies paying the highest price for data retrieval in the event of a cyberattack. Those stipulations may include:
This kind of warranty could be included in an IT M&A agreement to ensure that the buyer is adequately protected from potential security threats and that the vendor takes steps to avoid future attacks. These new warranties along with the usual representations and warranties clauses that are included in an asset purchase agreement or stock purchase contract can be negotiated so that they deal with privacy, data security as well as other concerns specific to the deal.
A typical warranty may include the cost of fixing and replacing hardware and software, as well as the cost of forensics and IT work to retrieve data, as well as the cost of compensating people who are affected by a breach. Certain warranties also cover legal expenses that could arise from lawsuits. A more comprehensive version may also cover lost revenue as well as the cost of reprogramming the software and also the cost to repair reputational damage resulting from a security incident.