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Surviving a legal minefield

Surviving a legal minefield

Proactively establishing an electronic discovery readiness programme will save a business time, money and resources.

The challenge, of responding to legal or regulatory requests for discovery, is one of the most complex legal minefields facing businesses today. Becoming increasingly common, it can be costly, time-consuming and a considerable distraction from the day-to-day business of making money.

Establishing a platform of discovery readiness not only helps businesses respond in a timely and complete manner to a discovery request, it can also help companies better understand their data and provide a granular insight into the way their business operates—creating significant opportunity for revenue enhancement and operational cost savings.

In Deloitte’s experience, more than half of all assignments in the electronic discovery readiness field have led to operational improvements in areas such as:

• Sales and marketing customer segmentation analysis

• Fraud and revenue leakage analysis

• Improving purchasing and strategic procurement through consolidation and leveraging economies of scale

• Talent and payroll management

• Shrinkage in inventory

Burden or opportunity?

The requirement to produce information (both electronic and paper-based) in possession of the company is often driven either at the request of regulators or as part of a dispute process.

Companies often have no real understanding of the extent of information they hold, where they will find documents that are relevant to the request, nor how best to capture and categorise all of the available data sources. This is particularly so when dealing with electronically stored information (ESI) as for many years, the volume of data stored has grown exponentially.

When an attempt is made to comply with a discovery order, companies often find it a very complex process that applies to a vast array of business data and as a result, it takes longer than expected, is very expensive and takes more effort by management than it warrants.

A discovery request also creates a business opportunity—the chance to look at the data from a business intelligence and analysis perspective.

Being discovery-ready

Managing requests for production of electronic discovery can be cumbersome, complicated and costly unless carefully managed.

As always, the key is preparation. The following steps are paramount:

STEP 1 – PLAN: Develop a proactive, organised, discovery response plan that will assist in minimising the risk and managing the cost of electronic discovery.

STEP 2 – MAP: Map or catalogue the current ‘data universe’ of electronically stored information including all sources, locations and volumes of electronic data and the individuals.

STEP 3 – POLICY: Establish a policy that guides storage, back-up and archiving processes along with document destruction directives.

STEP 4 – TEAM: Establish a discovery response team with representatives from the legal, records management and technology departments. Ensure they understand the electronic discovery process.

STEP 5 – PRESERVE: Take steps to capture and preserve all data sources for future electronic discovery processing. Ensure an incremental preservation policy is in place.

STEP 6 – PROCESS: Establish a clear methodology for electronic discovery processing i.e. identifying, preserving, collecting and producing responsive data.

Are you ready?

A 2009 survey of general counsel and in-house legal counsel conducted by Deloitte Australia

(http://tiny.cc/d8tC1) suggests there is an expectation of greater regulatory activity over the next 12 months, with 78 per cent of respondents expecting to see an increase in commercial and legal disputes.

However, the survey reveals that almost two thirds of Australian companies may not be ready for a discovery order. That is, 62 per cent of survey respondents indicated that they were not confident that they could identify and produce all relevant electronic documents in response to a legal or regulatory request.

The pressure to deal with legal and regulatory compliance typically falls on the shoulders of in-house counsel. Given the tight timelines for compliance, many find that they cannot meet deadlines nor suggest how long it may take for them to put forward their case.

The single greatest factor that can affect any electronic discovery readiness programme is the relationship between the IT team and the legal department.

IT professionals often don’t fully understand the clinical demands of legal discovery requests (nor the risk and impact of failing to adequately disclose information). Equally, lawyers rarely have an appreciation of the complexity of modern enterprise technology systems. Throw in the difficulty of running day-to-day business operations and the challenges only escalate.

Extracting Intelligence

Building a more complete understanding of potential data sources for the purpose of preparing for ‘discovery’ often brings with it the unintended benefit of providing access to oceans of data from disparate sources containing previously undiscovered gems of intelligence that will assist or enhance core business operations.

There is significant benefit to be extracted from leveraging and understanding the information contained within the data holdings—a level considerably more advanced than simply just identifying documents which respond to a request.Deloitte’s approach to discovery readiness combines the data sources into a single repository and creates the opportunity to apply innovative data analytics techniques to:

SOURCE & OPTIMISE the data to allow interpretation and broader business intelligence use;

ANALYSE & INTERPRET the information by creating rule sets or developing artificial intelligence models;

MODEL & PREDICT the outputs to gain greater insights into customer segmentation, cost savings, increased productivity, heightened market awareness and profit maximisation.

Whether it is observation of the prevalence and frequency of a particular activity, defining or understanding the behavioural driver’s events in the business or looking for anomalies or irregularities within the data, the effort to build an electronic discovery readiness capacity can provide tangible business intelligence opportunities.

An organisation benefits from a heightened capacity to respond to requests for discovery of information in the event of a legal, regulatory, civil or criminal challenge, and it should also be well-placed to take advantage of the oceans of seemingly unconnected data that exist within its technology holdings to drive smarter business behaviour.

MULTI-BENEFITS OF DISCOVERY

A multinational company, operating in a highly regulated and litigious environment, established a strategy to become electronic discovery ‘ready’ to avoid the risk of compliance failures and reduce the costs of responding to orders. It set in motion an extensive project to map data sources and discover relevant electronic data stores which were later extracted and merged to create a single store.

In parallel, the company applied sophisticated data analysis tools, such as self-organising maps, over the data store and successfully extracted business intelligence. Their resulting analysis provided insights into issues including anti-fraud and corruption programmes, operational efficiency improvement opportunities and a customer segmentation and pricing analysis, each, in turn, contributing to improvements in the firm’s bottom line.

MIS Asia

Tim Phillipps (left, tphillipps@deloitte.com) is the global managing partner, forensic & dispute services, Deloitte Singapore and Nicholas Adamo (nadamo@deloitte.com.au) is lead partner, forensic data, Deloitte Australia.

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