How to Mitigate Legal and Regulatory Risks Through Effective Recordkeeping

There is no question that technology has improved our quality of life in almost every regard, but it has also managed to multiply the number of things we need to put on our to-do lists. Nowhere is this more true than when it comes to recordkeeping. Technological advancements have made it easier to generate, copy, and distribute all types of information, something that is critical for operational survival in today’s business landscape. Simultaneously, however, the digitalization of data makes it more vulnerable and difficult to preserve and therefore makes protecting it a growing priority. It is easy for organizations to feel that they are caught in a loop of creating and protecting digital mountains of records. 

 

In recent years, greater legal and regulatory requirements have been imposed on organizations, and they now need to manage their information exactly as they would any other business asset – by knowing exactly what they have, putting safeguards in place to protect it, and ensuring it can be accessed and properly used when needed. There is plenty of evidence that organizations have already failed to meet the rising challenge of managing digital records in such a way that they remain compliant with legislation and industry regulations, as is evidenced by the number of record-breaking fines administered by government and industry bodies to violators. 

 

Records management is an increasingly critical part of organizational operations, particularly given the consequences of failure. Proper management of records can help protect a company from significant risks. Read further to find out more about legal and compliance risks associated with poor recordkeeping, and an overview of how to put an effective records retention program in place. 

Risks Associated with Poor Recordkeeping

Companies face both legal and compliance risks if they fail to implement proper recordkeeping practices. 

Legal risks include: 

• Being unable to defend against legal claims: Should there be a legal dispute or litigation, accurate records are a critical source of evidence to prove no wrongdoing took place. If records are incomplete or unavailable, organizations will be unable to defend themselves against claims or prove they were in compliance with their legal obligations. This can result in them being ruled against and possible financial penalties.
• Non-compliance with legal recordkeeping obligations: Lots of industries have specific legal requirements for recordkeeping, particularly the financial sector. For example, the Sarbanes–Oxley Act mandates strict practices in financial recordkeeping and reporting for companies in the sector and failing to comply with these can result in fines, sanctions, or the loss of licenses.
• Data privacy violations: Almost every country across the globe has privacy legislation that requires organizations to protect any personal information they collect or generate. Recordkeeping failures such as unauthorized access or inappropriate sharing of information can result in legal actions and hefty fines.
• Contractual and documentation issues: When it comes to contracts and other legal agreements, if you don’t have a signed copy of it, it may as well not exist. Lost documents, amendments, and correspondence can lead to disputes and can make it impossible for an organization to enforce its legal rights. 

Compliance risks include: 

• Retention period compliance: The financial sector, in particular, is subject to various regulations that dictate how long different types of financial records should be kept. Failing to retain certain documents for a long enough period, and in some cases keeping certain information for too long, can be a compliance risk. 
• Document authenticity and integrity: For many industries, being able to prove the authenticity of particular documents and the integrity of certain records is critical. Compliance risks can arise if original documents or significant metadata aren’t stored, or records are compromised or manipulated.
• Regulatory reporting: Organizations are obligated to submit various regulatory reports to industry authorities. Risks occur not only when the company has not kept or stored the required records, but when they cannot easily access them. Often specific data will need to be extracted from records, and inaccurate or incomplete recordkeeping can result in reporting errors or delays.

Reduce the Risk Associated with Poor Recordkeeping

Both legal and compliance risks can be mitigated through robust recordkeeping practices. This includes:  

 

• Ensuring you have updated policies and procedures in place that specify exactly what the requirements for recordkeeping are (from record creation through to storage, access, and disposal), as well as the roles and responsibilities of different employees. 
• Ongoing training of employees at every level in the organization on recordkeeping best practices, compliance obligations, and their personal roles and responsibilities. 
• Continued monitoring and auditing of processes and systems to ensure that policies are being effectively implemented and to identify gaps or areas of risk. Organizations can then proactively address non-compliance issues and take corrective actions.
• Creating record retention and disposal processes that make sure you are hitting the document storage sweet spot – keeping them for as long as you are supposed to, but discarding them when they are no longer needed. It is also important to dispose of records securely and thoroughly. 
• Ensuring all the mechanisms are in place to guarantee data security and privacy. This means controlling who has access to data, ensuring appropriate encryption, setting up firewalls, and other safety measures. 
• Keeping an eye on third-party vendors and making sure they also meet compliance standards is important and is often a legal or regulatory requirement. So make sure you do your due diligence and regularly monitor their recordkeeping practices.

 

In addition to these basic steps, it is also important to make sure you have the mechanisms available to authenticate documents and verify the integrity of records. It is also always important to stay updated on regulatory changes and developments in recordkeeping, particularly for your industry. 

Record Retention Programs And Why You Should Have One

 

Every organization needs a records retention program with the financial and manpower resources to run it efficiently. A records retention program is the framework that governs an organization’s management of its paper and digital records from inception through to disposal. The program aims at optimizing efficiency and ensuring compliance by regulating practices around record creation, use, handling, and disposal.  

 

There is no one-size-fits-all program, and each organization will need to follow some steps to tailor make a framework that meets their needs. 

 

• Step 1: Identify the different types of records in your organization and the media in which they are stored. 
• Step 2: Identify the business needs for those documents (making sure the ones you have are needed, and what you need you have) and set a retention period for those documents. 
• Step 3: Identify how documents are created, distributed, stored, and retrieved, taking into account your resources and hardware capabilities.
• Step 4: Determine how documents will be permanently deleted or discarded.
• Step 5: Once an organization has decided on its rules and procedures, it must officially document them so that they can be implemented. 
• Step 6: It must be the responsibility of someone in the organization to review legislative and regulatory requirements so that policies and processes can be updated as needed. 

Manage Your Recordkeeping Risks

By prioritizing effective recordkeeping, organizations can navigate the complex landscape of legal and regulatory requirements, setting themselves up for long-term success and risk mitigation. Effective recordkeeping is not just a legal and regulatory necessity; it is a strategic advantage that empowers businesses to operate with confidence in an ever-evolving business environment.

 

LeapXpert is a critical partner in the journey to full compliance. Our mobile communications platform maintains a complete record of all conversations between enterprise employees and customers to ensure that data privacy and governance standards are met. Integrated with leading third-party archiving, surveillance, and analytics platforms, all messaging records are securely stored and available alongside all the existing business data. Book a demo now.