In 2024, the global average cost of a data breach hit $4.45 million, according to IBM’s Cost of a Data Breach Report. That number keeps climbing, even while organisations spend more on security tools than ever. The uncomfortable truth is that most incidents don’t start with “hackers breaking in” in a dramatic way. They start with everyday decisions: a rushed permission change, a shared login, or a folder that was opened a little too widely.
If you use an online data room for due diligence, fundraising, audits, or board reporting, you probably expect the platform to act as a safe container for sensitive documents. It can, but only when it is set up and managed with care. This guide is for M&A teams, legal advisers, private equity firms, compliance leaders, and startups preparing for investment. You’ll see the most common security mistakes teams make in a VDR, why they happen, and the quickest ways to correct them without derailing the deal timetable.
Why Security in an Online Data Room Is Often Overestimated
A VDR is built on strong foundations: encryption, permission controls, and detailed audit logs. The problem is that security features don’t protect you automatically. They protect you when they’re configured deliberately and maintained consistently.
International deal teams face an extra layer of pressure. Access requests arrive quickly, third parties multiply, and “what’s acceptable to share” may be interpreted differently across markets. When engaging with international stakeholders, particularly in Hong Kong or Taiwan, an online data room may be described as a 在線資料室, yet its security configuration should remain aligned with global best practices. The label changes, but the fundamentals do not.
Verizon’s 2024 Data Breach Investigations Report points out that the human element is involved in 68% of breaches. That includes misconfigured permissions, weak authentication, and poor document handling. In practice, the platform is rarely the weak point. The way it’s used is.
The Most Common Online Data Room Security Mistakes
1) Overly Broad User Permissions
In a live deal, speed matters. That’s why administrators sometimes grant wide access “just to keep things moving.” External bidders, consultants, or junior staff may end up with download, print, and sharing privileges that were never truly necessary.
What this can lead to:
-
Confidential documents copied onto unsecured devices
-
Files forwarded outside the controlled environment
-
Regulatory issues if personal or restricted data is shared too broadly
How to fix it fast
-
Audit user groups and individual access inside the VDR.
-
Apply least-privilege access: people see only what they need, nothing more.
-
Restrict download and print rights in high-sensitivity folders.
-
Turn on dynamic watermarking with user identifiers.
-
Split access by role (Finance, Legal, Investors, Advisors) so permissions don’t become “one size fits all.”
Most platforms allow bulk permission changes, so this clean-up can be done quickly, even mid-process.
2) Not Enforcing Multi-Factor Authentication (MFA)
Password-only protection is a weak barrier, especially when deal teams include external parties working across devices and networks. CISA continues to recommend MFA as a baseline control for critical systems.
If credentials are compromised and MFA isn’t enforced, an attacker doesn’t need to “break in.” They simply log in.
Immediate solution
Enable mandatory MFA for every user, including internal employees and third-party advisers. In most VDRs, the change is straightforward and can be rolled out in under an hour.
3) Poor Folder Structure and Document Hygiene
Not every security failure is malicious. Many are organisational. Teams upload large batches of documents in a hurry, then forget what’s actually visible to whom. That’s how outdated drafts, irrelevant files, or highly sensitive materials end up exposed.
Common hygiene problems:
-
Uploading entire internal drives without filtering
-
Leaving old draft agreements and marked-up versions in shared folders
-
Mixing high-confidentiality items with routine materials
Corrective action
-
Remove duplicates and outdated drafts before inviting external users.
-
Separate confidential subfolders clearly (for example, “HR Sensitive,” “Pricing Models,” “Litigation”).
-
Use naming conventions that reduce confusion during review.
-
Do a final visibility check before opening access to new parties.
A tidy VDR is easier to diligence and harder to misuse.
4) Ignoring Audit Logs and Activity Reports
Audit trails are one of the biggest advantages of a VDR, yet many teams never actively use them during a transaction. That is a missed opportunity because logs can reveal early warning signs.
What activity monitoring can help you spot:
-
Bulk downloads that don’t match the deal stage
-
Repeated failed login attempts
-
Access outside normal working hours
-
Unusual attention to specific high-value documents
Research on breach economics consistently shows that faster detection reduces the financial impact of incidents.
Fast improvement
Set a weekly schedule for log review during due diligence. If your VDR supports alerts, enable notifications for suspicious patterns.
5) Allowing Unrestricted Downloads Too Early
Early-stage negotiations often don’t require full downloads. If the deal stalls or a bidder drops out, documents already downloaded remain outside your control. That’s a practical risk, even if everyone involved is acting in good faith.
Instead, consider:
-
View-only access for early-stage parties
-
Time-limited permissions that expire automatically
-
Fence view features (where available) to limit copying
-
Watermarks that include the user’s email and timestamps
This approach keeps the process moving while protecting what matters most.
Human Error: The Persistent Risk Factor
Even a strong online data room cannot compensate for risky behaviour. People share logins to “save time.” They forward documents by email because it feels convenient. They work from public Wi-Fi during travel. These choices are common, and they are exactly what attackers and accidental leaks rely on.
Common user-driven risks:
-
Shared credentials across team members
-
Emailing downloaded files outside approved channels
-
Accessing confidential documents over unsecured networks
-
Uploading sensitive files without a second set of eyes
This is why governance and training matter. A secure tool without secure habits is still exposed.
Rapid Risk-Reduction Checklist
If you need a quick reality check, start here:
-
Enforce MFA for all users.
-
Remove inactive accounts immediately.
-
Restrict downloads in sensitive folders.
-
Enable watermarking for confidential documents.
-
Add document expiry dates where appropriate.
-
Review permission groups quarterly.
-
Check activity reports weekly during active deals.
For many teams, these steps can be implemented within one working day.
Compliance and Regulatory Oversights
In regulated industries, a leak is not only a security problem. It becomes a compliance problem.
Under GDPR, fines can reach €20 million or 4% of annual global turnover. Cross-border due diligence, in particular, can trigger additional scrutiny if personal data is exposed or transferred incorrectly.
Before you rely on a provider for a high-stakes deal, verify that the platform supports your obligations, including:
-
ISO 27001 certification
-
SOC 2 reports
-
Strong encryption standards (commonly AES-256 at rest)
-
Secure TLS protocols for data in transit
-
Data residency controls if your sector or jurisdiction requires them
A reputable provider should be able to supply this documentation on request.
Cross-Border Transactions and Terminology Differences
International deals bring real operational complexity. Different jurisdictions may interpret data protection, authentication expectations, and disclosure norms differently. Language differences can also create friction, especially when permissions are adjusted quickly under pressure.
Typical cross-border risk factors include:
-
Data transfer restrictions
-
Rapid expansion of third-party adviser access
-
Local compliance obligations
-
Misinterpretation of permission settings due to language and workflow differences
A centralised VDR with consistent global policies helps reduce fragmentation and “exceptions” that are hard to monitor.
Misunderstanding “Secure by Default”
Many organisations treat a VDR subscription as a security guarantee. In practice, governance gaps are what turn a secure platform into a risky one.
A VDR should be supported by:
-
Formal access approval procedures
-
Document classification rules (what is shareable, what is restricted, what is strictly internal)
-
Retention and deletion timelines
-
A designated administrator who owns the configuration and reviews
Without these, settings drift and risks quietly accumulate.
Real-World Lessons from Configuration Errors
High-profile exposures often trace back to misconfiguration rather than a vendor “failure.” Reuters has reported on incidents where corporate data was unintentionally exposed due to access mismanagement in cloud environments. The same principle applies here.
Even a strong online data room becomes vulnerable when internal controls are rushed, unclear, or left unchecked.
Conducting a One-Day Security Health Check
If you suspect weaknesses, run a focused review.
Step 1: Review user roles
-
Remove inactive users.
-
Eliminate generic shared accounts.
-
Limit external access duration with expiry rules.
Step 2: Inspect permission layers
-
Restrict downloads for sensitive folders.
-
Separate financial models and high-sensitivity disclosures from general documents.
-
Apply view-only access where possible.
Step 3: Verify security settings
-
Confirm MFA is mandatory.
-
Check encryption and session controls.
-
Enable watermarking globally for confidential documents.
Step 4: Audit activity logs
-
Look for unusual download patterns.
-
Investigate repeated failed logins.
-
Review after-hours access.
This process is compact, practical, and typically achievable in a day.
Conclusion
A VDR can give you strong technical protection, but the real security outcome depends on how you set it up, how often you review it, and how disciplined your team is under pressure.
Most incidents are preventable. They happen when default settings go unchallenged, permissions sprawl over time, and monitoring is treated as optional. If you are managing a transaction right now, or preparing for fundraising or audits, take the opportunity to tighten controls today. It’s one of the few risk reductions that can be done quickly, with a direct payoff.