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Sarbanes Oxley : Governance : Documentation
Can Your Records Management Program Withstand Litigation?
By
Brian Murphy
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Brian Murphy
Senior Vice President
Iron Mountain
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A sound and consistent records management program can easily prove to be a company's greatest defense, or its greatest weakness in the event of litigation. Some view records management programs as a purely administrative or procurement function. In reality, managing company records, its intellectual property and information trail, is a risk management concern. Each and every record created by a company can be used against it as evidence.
A tactic often undertaken by attorneys in litigation proceedings is to attack the credibility of the records program as a means to undermine presented evidence. If the evidence supports a company?s case, opposing counsel will often attack the source of the evidence by discrediting a company's record keeping system.
So the question becomes: do you know how your records management program can hurt you?
Traditionally, there have been two main records related risks facing companies. Firstly, documents may exist that opposing counsel can use to suggest wrongdoing or liability. Secondly, companies may not be able to locate records that prove that they are innocent of wrongdoing. These concerns are still relevant, but have been compounded by recent corporate events and legislation.
Today, companies face the added risks associated with inconsistencies in their records management system. Irregularity or inconsistency in a company's records program, or the absence of a credible records program can splinter the court's initial assumption of good faith on the part of the company.
In order to prepare a sound records management program, companies must ensure that they are maintaining the records the law requires. A Retention Schedule complete with legal citations and record codes is the cornerstone of a records management program. Retention Schedules are policy documents that dictate the legal and compliance records requirements of a company according to their industry and functions.
Consistency is key, meaning that records management policies and retention schedules should be applied company-wide. Document destruction should occur consistently throughout the company and be regularly scheduled, as opposed to being performed on an ad hoc basis. If destruction procedures are not consistently followed, opposing counsel may portray destruction as selective or designed to conceal evidence. The possibility of litigation puts the burden on a company to create and maintain a legally defensible records management program, and this includes timely presentation of documents during the discovery phase. Without such a program, opposing counsel can easily portray delays in presenting discovery documents to the court or inconsistent records destructions as suspicious.
The lack of a legally credible retention schedule can result in significant expense to a company. The most apparent cost for any company is the financial cost of paying unfavorable settlements and financial judgments. Beyond this are the potentially overwhelming costs of discovery itself. Discovery costs have substantially increased for the average company in recent years, due to a parallel expansion of media types and volume of records. It is very common that considerable time and effort must be spent locating records to bring forward to the court.
Without a legally compliant and robust records management program, a company may not be able to locate all seemingly relevant records, and may also unintentionally withhold required documents. In addition to this, the effort of locating required documents relying on a records management program with poor indexing capabilities could be immense. It could also mean that the actual cost of discovery may be greater than the court?s judgment. In some cases, companies have paid exorbitant fines rather than undertake the cost of discovery.
In our current business and regulatory climate, the best defense is a good offense. A solid records management program should be viewed as part of a risk management strategy. Why chance significant legal and financial liability and a damaged name in the marketplace, when your company can begin the process today of realizing a legally credible and consistently implemented records management program.
Brian Murphy
Senior Vice President
Iron Mountain
Brian Murphy is a senior vice president of Iron Mountain and leads the company's Records Management Consulting Services, a professional service organization that helps businesses implement compliant and legally credible records management programs. Engagements are customized to each client's needs and include: records retention program development and implementation for both paper and digital records, inventory cost reduction, records management gap analyses, benchmarking, and business process re-engineering.
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