Risky Business, eDiscovery, and IT: How E-Mail Went from an Expedient Tool to an Archive of Record and a "Wild West of Records Management." What Steps to Take Now

[ILLUSTRATION OMITTED] When you, as a manager, think about the possibility of getting sued, the content in your company s e-mail system might not come flooding--flight or fright style--to mind first or even second in a mounting list of concerns. Then again, perhaps it should, because you might need to turn over specific e-mails in court. First, a bit of back-story for the unfamiliar: The year 2006 has e-mail-related significance to compliance officers and legal experts. This is because, generally speaking, it was when changes to the Federal Rules of Civil Procedure (FRCP) codified how those electronic missives flurrying among our Outlook, Entourage, and similar in-boxes should be managed in what experts refer to as both "pre-" and "post-discovery" condition. (Meaning, how, as a matter of general daily practice a bank should be storing and managing e-mails "pre" suit, and, how they should retrieve e-mails and documents should a suit occur.) Since the new eDiscovery rules, activity has jumped up. Indeed, among small businesses with less than 5,000 employees, the percentage of respondents who said that their company had been involved in a legal proceeding necessitating e-record search and retrieval rose to 64% from 56% from 2005 to 2007, according to Milford, Mass.-based Enterprise Strategy Group (ESG), which looks at storage and information management topics. Among enterprise enterprises with 20,000 or more employees, the effect was more pronounced, up 20 percentage points to 67% from 47%. It could be that employees are simply more aware of the steady state of litigation. However, Brian Babineau, a senior analyst at ESG, believes survey results point to an increase in discovery, that is, searching for e-mails, attachments, and related transaction detail in response to a request by attorneys representing private parties or governmental entities taking part in a legal proceeding. Since 2006, then, many in banking who have legal, IT, and compliance responsibilities have been thinking about how to make the communication tool less one of expedience and more of an archive. After all, e-mail has come to undergird business, become a kind of fingerprint of its activity. Blame it on Martha In some sense, e-mail's presence in the court is merely a sign of changing business habits and practices. "Today, e-mail is a leading source of documentation about transactions and work flow, and it stands as a key source of transaction commentary and validation," says eDiscovery expert and attorney Craig Ball. [ILLUSTRATION OMITTED] In another sense, the radical rise in the importance of e-mail can be explained directly by "Marthagate," Enron, and other cases that established precedent in recent years, says ESG's Babineau. "When e-mail proved to be so useful in court, more attorneys began using it. Now, it's use has become a norm," he adds. The ESG analyst says in the months ahead, subprime-related legal matters will force most institutions that lend--regardless of size--to begin rethinking how they handle e-mail. Basically, the "it's just too hard to manage" excuse won't hold (as it hasn't for Wall Street for some time). Stephen Ludlow, senior program manager, eDiscovery solutions at enterprise content management vendor, OpenText, based in Waterloo, Ontario, Canada, agrees that subprime litigation will be a driver both for more suits and for more types of organizations to adopt e-mail-specific management systems as well as improving their overall records-management strategies. Not that banks, particularly large ones, haven't been, in some sense, ready to rumble, prepared for e-mail's new legal exposures. As part of the general cost of e-mail management and preparedness for eDiscovery, companies generally have to figure out such details as whether to outsource the eDiscovery process, in effect, paying outsiders to search the electronic files in the event of a suit, which is costly. …