The potential repercussions of these new e-discovery mandates demand significant attention from executive management – as well as from their board of directors. Lawsuits and governmental investigations have been a reality in corporate America for a very long time. Now, they are more costly and impose a higher level of risk than ever before. The chances of being sued or investigated are so great for large companies today that it is no longer a matter of if, but when it will happen. Whether or not a company is embroiled currently in such a matter, it is now critical to be prepared.

It is not an easy task to design and implement an effective Records and Information Management (RIM) infrastructure. ESI management and retention policies and procedures, which both satisfy the requirements of the new rules and are not overly burdensome on business operations, may not be easy to design and implement, but clearly are essential. A company can best manage the litigation risks of discovery by taking early, proactive measures before a legal dispute arises. Clearly, no company can afford to ignore ESI management issues any longer.

Heads Buried in the Sand?

Currently, many organizations operate in a reactive, wait-and-see mode when it comes to litigation or official investigation and the concomitant need for e-discovery. Few have comprehensive RIM programs in place for such events.

Take e-mail, for example. As the primary medium for communicating and documenting business activity and decisions, electronic messages are a major focus of e-discovery requests. And yet, a 2006 survey by AIIM shows that for most organizations e-mail management is “usually something of an oxymoron, and at best more a wish than a business reality.” AIIM found that unmanaged e-mail creates “significant litigation and e-discovery risks,” yet most organizations take a very casual attitude toward it. More than one in three survey respondents (35 percent) reported that they have “not yet begun to address” key e-mail management issues such as archiving, life cycle management, retention and disposition. (1)

– Cohasset Associates, Inc.

Many companies take a similar “see no evil, hear no evil, speak no evil” attitude toward RIM in general – at least until they are hit with a subpoena or motion for discovery. Once companies find themselves the target of litigation or investigation, however, they begin to recognize that it is neither cost- nor time-effective – if even possible – to attempt to handle discovery requests from opposing counsel internally. Instead, this immense undertaking prompts them to outsource e-discovery activities to a vendor who specializes in the field.

In the process, the provision of e-discovery services has become a rapidly growing industry on its own. In fact, some may be surprised to learn that e-discovery is becoming the largest controlled cost in American business. According to Cohasset Associates, U.S. businesses currently spend between $2.5 to $4 million per year for e-discovery per billion dollars in sales. (2) That translates to $25 to $40 million a year for a $10 billion company. And these costs are not likely to abate any time soon. In fact, the total e-discovery vendor market is predicted to grow to around $3 billion by 2008.

(1) John F. Mancini President, AIIM, E-mail Management: An Oxymoron? AIIM Industry Watch Survey (2006).

(2) Cohasset Associates, Inc., The Eternal Charter: Improving Corporate Governance through Compliance and Assured Records Management, 2005, p. 11.