The Federal Rules of Civil Procedure were amended 18 months ago, requiring that companies have the ability to access quickly an inventory of various electronically stored information in the event of litigation. Yet, a recent online poll, conducted by Deloitte, found that nearly two out of every five executives (39.7 percent) felt that data volumes in the organizations they've worked for are increasing in size and becoming unmanageable.

"Discovery is a very serious issue to business today. There are real stakes and real penalties associated with poorly handled discovery. In the past few years we have seen cases where defendants have faced jail time and millions of dollars in sanctions or penalties," said Bruce Hartley, a director in the Analytic and Forensic Technology (AFT) practice of Deloitte Financial Advisory Services LLP (Deloitte FAS). "As the volume of data continues to amass -- doubling in size every 18 to 24 months -- strategic steps should be taken so that electronic discovery can be handled correctly."

In fact, 17.5 percent of executives surveyed said their companies are not ready to handle complex discovery requests.

"If companies have systems in place, they can really help ease the pain associated with discovery requests," said Tony Reid, a principal in the AFT practice of Deloitte FAS. "By developing a wide-ranging, standardized written plan as well as processes that address all of the components of discovery from records management through evidence collection, preservation and production, discovery-related risks can be mitigated and costs managed."

Nearly 12 percent (11.8 percent) of companies surveyed have no policy in place to share clear guidance with the IT department and all other employees on document retention and destruction. Another 9.4 percent have no policy in place, but distribute specific directives when litigation arises.

"Courts appear to be appreciative of organizations and their counsel when the companies have implemented a standardized practice and written policies, practices and procedures that are utilized to govern discovery procedures," said Diane Barrasso, a principal in the Document Review Services practice of Deloitte FAS. "By implementing a policy of transparency internally, companies can effectively react to discovery requests, communicate with opposing counsel and significantly decrease errors when litigation arises."

Executive respondents' greatest concerns about document discovery included:

  • The expense of going through large volumes of files, due to vendor or in-house costs (47.5 percent
  • Damaged productions and exposure to sanctions, due to vendor or in-house error (16.3 percent)
  • Failure to meet deadlines set by the court (12.9 percent).

Some leading practices Deloitte recommends to help companies ease the process of litigation include:

  • Prepare and implement an e-discovery program
  • In conjunction with counsel create records management policies, procedures and retention schedules
  • Map the company's data system and data source catalog
  • Manage and remediate legacy data
  • In conjunction with counsel develop a legal hold strategy and process to preserve all forms of relevant information in the face of litigation
  • Establish discovery protocol with regulators

More than 520 executives from the banking and securities, financial services and technology industries responded to the polling questions during the webcast, which was titled "Strategic Discovery: Taking Steps to Avoid Litigation's Black Hole."