08 December 2010

Organisations Create Disclosure Policies, but Fail to Address ESI Challenges with Tools and Technologies

Kroll Ontrack’s Fourth Annual Electronically Stored Information (ESI) Survey Indicates that Companies are Under-Utilising Technology and Cost Control Measures Designed to Reduce e-Disclosure Costs

Survey Also Indicates a Broadening Gap Between IT and Legal and a Lack of Understanding about Social Networking Platforms

London, United Kingdom – 8th December 2010 – Over 50 percent of companies in the U.K. and U.S. have an Electronically Stored Information (ESI) Disclosure strategy in place, but very few of those organisations have revisited existing policies to address new communication methods such as social networking (30 percent in the U.K. and 21 percent in the U.S.) and new storage technologies such as cloud computing (28 percent in the U.K. and 16 percent in the U.S.).

More than half of companies in the U.K. (50 percent) and U.S. (63 percent) believe their ESI Disclosure strategy for responding to litigation or regulatory matters is repeatable and defensible. While 45 percent of the U.K. and 38 percent of U.S. companies have tested their policies, nearly a third of companies in the U.K. (32 percent) and half in the U.S. (45 percent) do not know if their policies have been tested. Nearly three quarters of companies (70 percent in the U.K. and 72 percent in the U.S.) have not used or are not aware of using ECA technology to reduce the burden of e-disclosure and get a better understanding of their data early on in litigation.

These are the key findings from the Fourth Annual ESI Trends Report, an independent study commissioned by Kroll Ontrack, the leading provider of information management, legal technology and data recovery products and services.

Creating and Testing Disclosure Policies
This year’s survey revealed that more companies are creating policies for ESI Disclosure to govern the process of locating, collecting, filtering, reviewing and producing ESI in preparation for or in response to litigation, investigations or regulatory matters. However, many companies are not taking the important next step of testing, modifying and implementing policies.

“Growing volumes of data is making the management of ESI increasingly complex and laden with risk and demand a proactive approach. With the new Practice Direction 31B for the disclosure of electronic documents effective since 1 October 2010 in the U.K., it has become imperative for organisations to be more aware of their existing policies surrounding ESI disclosure. The requirements of the new Practice Direction are mandatory so a more cautious approach to e-disclosure is required to ensure compliance and avoid court-imposed sanctions for failing to handle ESI properly. The Practice Direction introduces the Electronic Documents Questionnaire as a means for parties to obtain and exchange information about ESI in a structured way,” said Tracey Stretton, legal consultant at Kroll Ontrack. “It is important for companies to know where their information is located and to properly search and identify potentially relevant data to comply with disclosure obligations. The best way to do that is by having a disclosure response strategy in place that is periodically tested and updated.”

Addressing ESI Challenges with Tools and Technologies
Despite the disclosure industry’s attention to early case assessment (ECA) technology and new communication platforms such as social networking, this year’s survey revealed that companies are lagging behind in addressing these areas.

The 2010 survey results also showed a decline in the number of organisations that have updated their ESI Discovery policies to address new communication channels such as social networking, mobile devices and new storage technologies such as cloud computing and virtualisation.

“The emergence of new communication and storage technologies makes the accessibility, admissibility and disclosability of ESI very complex. It is essential for companies to revisit existing policies every six months to ensure compliance with regulatory requirements and disclosure obligations when they arise,” said Martin Carey, managing director, Kroll Ontrack. “Companies should also consider using ECA technology to have early visibility of their data, formulate defensible searching strategies and to reduce document review costs. In addition, implementing key information management tools upstream of litigation, such as an archiving platform and legal hold tool can ensure compliance with legal and regulatory requirements whilst reducing the cost of disclosure.”

Controlling Disclosure Costs
While economic conditions may have hindered organisations from revisiting proactive plans or testing them, the survey findings indicate that disclosure spend remained relatively constant from 2009 to 2010, despite tight budgets. The 2010 survey revealed U.K. corporations are on an average still spending almost £700,000 per organisation annually, with but less than half of companies (29 percent in the U.K. and 40 percent in the U.S.) budgeting for disclosure as a component of their overall litigation spend.

Despite this significant actual or potential expenditure, around half of organisations (43 percent in the U.K. and 51 percent in the U.S.) are not deploying or do not know if they are deploying disclosure cost control measures such as data mapping, litigation response planning and/or implementing a data archiving tool. In a climate where in-house legal departments are striving to do more with less, companies can and should be taking a more proactive approach to reducing their disclosure costs by utilising technology and best practice processes such as archiving technologies, data maps, ECA tools and other innovative new technologies like prioritisation technologies to reduce disclosure-related costs. The new Practice Direction 31B highlights the important role technology has to play in reducing the burden and cost associated with e-disclosure.

Closing the Gap Between IT and Legal Departments
Although corporations have created and implemented new policies around managing ESI, there is still much room for improvement. The 2010 survey exposed a gap between IT and legal departments. In the U.K., legal has shown more awareness of implemented company technologies such as an archiving platform, legal hold tool and ECA technology. They are also better aware if an ESI disclosure policy exists and if it has been tested in their companies. Since IT has operational responsibility for implementing ESI policies and for preserving and collecting ESI to respond to disclosure requests, they need to stay engaged with the legal department on these issues. In the U.S., it is IT that has shown more awareness in these key areas. This is a significant shift from the inaugural 2007 survey, when legal was primarily responsible for disclosure preparedness and management and in the last few surveys IT assisted in-house counsel with this task.

“Managing data and complying with policies is the responsibility of all employees in a company. Legal teams cannot lose sight of the value of their involvement in managing ESI for disclosure requests, which is a legal-driven process,” concludes Carey. “In the face of active judiciaries and widespread concern about the spiraling costs of e-disclosure and litigation, companies need to take every opportunity to improve their e-disclosure methodologies and technology tools. With increasing regulatory scrutiny such as the forthcoming Bribery Act in the U.K., it has also become essential for companies to actively manage their ESI to comply with regulations and use innovative technologies to carry out compliance audits.”

This survey was conducted by Echo Research Inc. and Research Plus Ltd. on behalf of Kroll Ontrack. A total of 200 online interviews were conducted among IT and in-house counsel at commercial businesses in the U.K. and 203 at U.S. corporations with 500-1000 individuals and 1000 plus employees were surveyed. Interviews were completed between June and September 2010.

The Legal Technologies & Consulting division of Kroll Ontrack provides corporations, law firms and government agencies with technology and consulting services for large scale paper and electronic discovery, computer forensics, and litigation readiness and incident response matters. Through the acquisition of TrialGraphix (September 2007), the leader in jury consulting and trial presentation services and technology, Kroll Ontrack now offers a wide range of trial services such as jury research; witness preparation; trial consulting; graphics; and presentation technology for mediations, arbitrations, and trial. Helping clients quickly and cost-effectively find, review, manage, produce and present relevant evidence, Kroll Ontrack has been recognised as the leading electronic discovery provider by the Am Law Tech Survey for eight consecutive years (2002, 2003, 2004, 2005, 2006, 2007, 2008 and 2009).

About Kroll Ontrack Inc.
Kroll Ontrack provides technology-driven services and software to help legal, corporate and government entities as well as consumers manage, recover, search, analyse, produce and present data efficiently and cost-effectively. In addition to its award-winning suite of software, Kroll Ontrack provides data recovery, data destruction, paper and electronic discovery, document review, computer forensics, secure information services, ESI and jury consulting, and trial presentation services. Kroll Ontrack is the technology services division of Kroll Inc., the global risk consulting company. Kroll is a subsidiary of Altegrity, an industry-leading provider of information solutions.