Blogs

E-discovery gets all the blog space these days because it is dramatic in terms of costs and legal implications.  And everybody is aware of the role that records play in e-discovery. 

But far more insidious problems lurk in regulatory inspections, product recalls and catastrophic mechanical failures.  The point is that records show what a company did or did not do, not just in the throes of the disaster itself, but in the normal, day-to-day operations leading up to the problem.  There’s a one-two punch here.

First, unlike legal adversaries, investigators can ask for anything, without legal wrangling over relevance. Once an investigation is underway, many documents become public.  In BP’s case, two U.S. senators lobbied for public release of video records of the Deepwater Horizon well. Recent news reports note the availability of 50,000 pages of BP documents such as emails, inspection reports, and engineering studies obtained from congressional investigators that indicate knowledge of problems with the well.

In the case of regulatory inspections, errors found in one location open the door for scrutiny of other sites as well.  When McNeil Labs recalled children’s Tylenol in April, the FDA expanded its inquiry beyond the company’s Fort Washington, PA plant to include those in Lancaster, PA and Las Piedras, PR, too. 

Then there are the public consequences.  For their part, reporters and journalists rely on state Right to Know Laws and Freedom of Information Act tenets to obtain records showing what a company knew, at what point, and what it did or didn’t do about it.  One enterprising reporter accessed County tax records and speculated that McNeil had apparently cut employees and may have tried to do more with less. The FDA finding was lack of proper training.

The point is that a company’s reputation can suffer real harm based on headlines and news stories, as the recent examples of Toyota, McNeil Labs and BP show.  Tarnished reputations, in turn, affect consumer confidence and even market capitalization, according to Nir Kossovsky, the CEO of Steel City Re, a consulting firm that studies the risk associated with bad publicity as reported in the May 2010 issue of CFO. 

Reputational risk is not normally part of enterprise risk management assessments because it is hard to quantify.  Yet, when the stuff hits the fan, the records hit the media, often without context or indication of how they were regarded within the company.

In the case of quality records, responsibility goes far beyond assuring proper retention and disposition. There is the need to assure that the right records are made and received according to regulations.  There is also the ethical responsibility to act when the records indicate that something is awry, an issue that reaches well beyond recordkeeping practices.