In Issue 1, we discussed the audit committee agenda for the next 12 months. This issue of The Bulletin provides further observations regarding one of the major topics on that agenda. Other audit committee agenda items were discussed in prior issues.
Electronic discovery (or e-discovery) refers to the process by which relevant electronically stored information (ESI) is produced when an organization faces legal or regulatory action. This process is important because parties in a lawsuit can now demand from each other word processing documents, e-mails, voice mail and instant messages, blogs, backup tapes and database files – in other words, everything. Failure to comply with these electronic production obligations can lead to serious sanctions – sometimes to the tune of millions of dollars – and increased compliance costs. The harsh consequences of non-compliance are growing exponentially. It is estimated that American businesses are spending more annually to locate, retrieve and produce required documents and ESI than for Sarbanes-Oxley compliance. As an added complicating factor, document preservation and production processes must be defensible. In other words, if challenged, a litigant must be prepared to demonstrate that its policies, systems and procedures are sound in responding to three simple questions – Did you get everything, did you miss anything and how do you know? These are not questions limited to the United States. We see evidence of similar issues in Canada, the United Kingdom and other countries.
ESI requests can span multiple geographies, ranging from desk files in Shanghai and Sydney to back-up tapes in a Manila data center as well as financial data from a Beijing operations center. The challenge of responding to court-ordered evidence requests within a short period of time can present a logistical nightmare. This issue of The Bulletin provides ideas for companies to implement practical approaches in proportion to their litigation risk exposure and ongoing operations that will significantly reduce the cost, burden and time associated with records retention and electronic discovery.
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