Increase in corporate data causing e-disclosure problems, finds PwC

Corporate data volumes are growing at 40% a year, according to a report by PricewaterhouseCoopers (PwC). This is causing companies problems when they are asked for information that they hold as part of court proceedings, it said.

"Advances in technology, changes in employee ways of working and vast increases in data storage capacity are leaving companies open to a new era of governance and legal risk," said a PwC statement.

"Recent cases show how the courts have little sympathy with the increased effort and time it now takes companies to retrieve the right data," it said. "Recent judgements have included a 50% reductions in costs due to be awarded because of non-compliance in disclosure; the order to repeat £2 million of work due to improper keyword searches and a $8.5 million fine where documents were deemed to have been deliberately withheld."

Companies have difficulties storing, sorting and producing on demand the increasing amounts of data produced in daily business life, but this is exacerbated by legal proceedings, the report said.

"The inherent urgency associated with a legal or regulatory requirement to disclose information can often focus attention on broader information management issues," said the report. "These represent major potential risks capable of inflicting substantial financial and reputational damage on an organisation."

"At issue is the way that businesses manage the information they hold and manage the demands of stakeholders, regulators or counterparties to access that information," the report said. "Good information management is central to effective e-disclosure."

A survey conducted by PwC found, though, that companies with massive amounts of corporate data are most in fear of losing or exposing the portions of it that are stored with third parties, known as 'the cloud'.

In the survey 34% of legal and technical staff at the companies surveyed said that the storage of company data on third party servers was the issue of 'greatest concern' to them when considering the ease with which data can be accessed.

Respondents to the survey were worried that authorities that seized remote services to access data belonging to another company could also be seizing its data or that of its clients.

Companies also said that disclosure of records was difficult or impossible when business communication happened over social networks such as LinkedIn.

"The next time we get an insider trading case and we find that knowledge leaped out of the organisation via LinkedIn or web mail, it is going to very dramatically change the space that we are working in," said one contributor to the report.

“Companies are generally good at creating and storing data but struggle to catalogue and retrieve it effectively," said the leader of PwC's forensic technology solutions group Tom Lewis. "With employees increasingly being able to store information in perpetuity for little or no cost, this challenge will only become more acute."

"Pressure is building in this area and we fully expect a new in-house function to emerge with responsibilities for data creation, storage and retrieval - most likely under the aegis of the Chief Information Officer," he said.