It’s not surprising that more distributors are offering their customers a brand new kind of warranty, a cybersecurity warranty. Security breaches to data will affect a business every two https://www.toptechno24.com/intensive-complex-performance-with-virtual-data-room seconds, and will cost businesses $265 billion by 2031. These warranties help reduce the economic threats posed by cyberattacks and eliminate the risk by shifting liability to the vendor. They’re usually a supplement to cybersecurity insurance and assist in filling the gaps where insurance might not cover a reduction.
Warranties are a great way to transfer financial risk but they’re not a substitute for a comprehensive risk-management solution. A cybersecurity warranty can be substituted for cyberinsurance. However, both should be used together to reduce the risk.
When negotiating a warranty in an M&A transaction, it’s crucial to know and limit the liabilities which are not covered by the warrant. For example, regulatory offences proceedings usually have long limitations periods that can make indemnification in a warranty impossible.
Manufacturers must also ensure that their warranty covers the intended use of products. For instance machine learning tools that analyze the walking patterns of a person can be covered by a warranty for a variety of uses for example, such as helping people find the right sneakers or diagnosing chronic pain. However, if the machine is being used to monitor or intercept communications, a warranty disclaimer may keep the manufacturer from recognizing any liability.
