The governance of records management: attention granted now to document retention policies and systems will serve to significantly mitigate the rising tide of costly risks.

• Author: Barrett, Michael J.
• Position: Board Oversight

A MAJOR INSURANCE UNDERWRITER 15 asked to pull a digital file created in 1985 to settle a multimillion-dollar claim. But because of rapid technological advancements, no hardware or software exists to allow access to the document. The insurer pays.

A multinational financial institution has to produce exact copies of thousands of customer statements to defend against a class action lawsuit. But because the statements were printed "on the fly" by a new breed of one-to-one digital printing presses, the only records that exist are data streams in disparate databases, and are not considered evidentiary The court awards a substantial sum to the plaintiffs.

A well-known Internet service provider has hundreds of thousands of customer records altered by a malicious overseas hacker. With no way to restore the information with assurance of one hundred-percent accuracy, 10% of its subscribers begin receiving error-laden billing statements. Shortly thereafter, the company faces a financial shortfall from the exodus of frustrated customers.

A manufacturer must prove that a buyer ordered 100,000 parts through its electronic order system, not the 1,000 as the buyer claims. But because no physical record exists of the actual online order form, the manufacturer cannot prove its position. It's left with an abundance of inventory and no buyer in sight.

Chaos and confusion

Few corporate leaders are aware of the liabilities intrinsic to their document retention policies -- or lack thereof. Moreover, even a smaller number are cognizant of the risks associated with various archival processes, preferring to let technology staff -- who have little interest in the corporate-wide ramifications of critical information management -- drive these decisions. The result can lead to chaos and confusion when business-critical information turns up missing or inaccessible, presenting a broad range of regulatory, legal, economic, reputation, and operational crises.

What role can senior executives or corporate directors be expected to play in such a technologically driven arena? By having a general knowledge of the risks and costs associated with document retention policies and systems, and the options available to mitigate such exposures, they can and should act as the chief policymakers.

Just as cash acts as a tangible storehouse for monetary value, documents act as a storehouse for corporate knowledge. Contracts, customer records, transaction statements, e-mails, claim forms, research and development logs, et al. are the lifeblood of business. Losing control of such items can have severe ramifications on an organization's ability to function.

While few standards have ever existed for records preservation, one widely known process was paper-based retention. Every quarter, vital documents would be indexed, packed into filing boxes, and warehoused off-site. Should the need arise to review a document, it would be retrieved in a matter of days or weeks.

However, the rapid rise of digital origination, in which documents are "born" electronically and rarely reach the paper world, has ensured that the hard...