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Governance

Executives lack data policy ownership

Tuesday, 13 November 2007

CEOs and other business leaders are likely to bear business risk when their organisations lack policies on handling electronically stored information (ESI).

A new independent study commissioned by computer forensics firm Kroll Ontrack says that this is despite the fact that they are rarely involved in developing or enforcing that ESI policy.

The report finds that less than half of organisations (43 per cent in the US, 48 per cent in the UK) have a strategy or policy in place on how to deal with ESI in litigation or internal investigations.

In the US, 41 per cent of respondents said their organisations give responsibility for developing that policy to the in-house legal department.

Damage to reputation

Almost a fifth of respondents (19 per cent) said the CEO should be held accountable if that policy results in government fines, court imposed sanctions or damage to reputation.

A quarter of organisations (25 per cent) in the UK said their legal department was given primary responsibility for developing policy, yet 39 per cent said their CEOs should face the consequences of that policy.

Kristin Nimsger, president, Kroll Ontrack, called the statistics alarming but not surprising.

“The explosion of electronic information and the onslaught of new rules, regulations and laws have made it incredibly difficult for companies and counsel in the US and UK to keep up,” she said.

“There is no clear definition of who should be developing or enforcing ESI policies, which precipitates a lack of ownership. This issue has moved from an IT or legal issue to a threatening business issue for which today’s executives and boards need to be involved, however, with the size of fines and severity of sanctions possible” Nimsger added.

Not fully up-to-speed

Kroll Ontrack’s research also shows that only 25 per cent of in-house counsel say they are fully up-to-speed with case law, developments and regulations relating to ESI.

Less than half (43 per cent) believe they have a fairly good understanding but could benefit from more knowledge, and 31 per cent of respondents feel they have little understanding or have never heard of it.

The situation is even more serious in the UK, where only 17 per cent of in-house counsel report they are fully up-to-speed with case law, developments and regulations relating to ESI.

Less than half (42 per cent) feel they have a good understanding but could benefit from more knowledge.

More than a quarter (26 per cent) state they have a low level of understanding, while 14 per cent say they know little, if anything about ESI or have never heard of it.

Managing volumes of data

With the changes to the Federal Rules of Civil Procedure (FRCP) in the US regarding electronic discovery and the Practice Direction of the provisions relating to disclosure of electronic documents (e-disclosure) under the Civil Procedure Rules in the UK, in-house counsel that are not fully aware of the requirements and complexities risk putting their organisations in jeopardy if they do not rely heavily on outside law firms and or experts.

US legal teams are far more concerned than their UK counterparts about the reality of the ESI explosion, with over a fifth (21 per cent) stating that managing colossal volumes of data will be their biggest challenge over the next five years.

By contrast, the UK’s primary concern was the lack of training in legal trends. This statistic highlights one of the significant differences in the adoption and acceptance of technology and innovation in the legal practice in the US and UK.

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