The pensee that loss of life as well as taxes and ransomware attacks are the three definiteties of life isn’t only applicable to businesses. With data security breaches predicted to affect a company every two seconds and cost companies $265 billion in the first year, and that’s just for 2031, it’s no surprise that more distributors happen to be providing their customers with a different kind of warranty: cybersecurity warranties. These warranties reduce the economic dangers of cyberattacks and shift the responsibility to the provider. These warranties are usually used together with cybersecurity insurance to fill in the gaps that insurance policies leave.
Warranties can be a great tool for transferring financial risk, but they’re not an alternative to a comprehensive risk management solution. While a cybersecurity warranty could be used as a replacement for cyberinsurance, they must work together to reduce the risk of a cyberattack.
It is essential to limit the liabilities that aren’t covered by warrants when negotiating one in an M&A deal. For example legal proceedings for regulatory violations typically have long limitations periods that may not allow the warranty’s indemnification.
Manufacturers must also ensure that their warranties cover how they intend for their products to be used. Machine learning tools that analyze walking patterns can be covered under warranty to help users identify the correct shoes or diagnose chronic pain. But if the tool is being used to monitor or intercept communications, a warranty disclaimer can hinder manufacturers from acknowledging any liability.