It’s not that surprising that more distributors are offering their customers a brand new type of warranty, called a cybersecurity warranty. Data security https://www.toptechno24.com/how-to-connect-your-nintendo-switch-to-the-tv breaches will impact businesses every two seconds and cost businesses $265 billion by 2031. These warranties lower the economic risk of cyberattacks and shift the liability to the company providing the service. They’re typically a supplement to cybersecurity insurance and aid in filling the gaps that insurance won’t cover a decrease.

Warranties are a great option to transfer financial risk however, they aren’t a complete risk management solution. A cybersecurity warranty could be substituted for cyberinsurance. However both should be used in conjunction to decrease the risk.

It is important to limit the liabilities that aren’t covered under the warrant when you are negotiating one in an M&A deal. For instance legal proceedings for regulatory violations typically have lengthy limitations periods that may not allow the right to indemnification under a warranty.

Manufacturers also need to ensure their warranty covers how they intend for their products to be used. For instance, machine learning tools that analyze walking signatures could be warrantied for a variety of purposes such as helping people choose the right shoes or diagnosing chronic pain. If the tool is used to monitor or intercept communications, a warranty disclaimer could stop manufacturers from taking any liability.