Navigating Legal and Regulatory Risks:  Advanced Recordkeeping in Businesses

Published on: June 2, 2024

Last Updated on: June 14, 2024

Navigating Legal and Regulatory Risks:  Advanced Recordkeeping in Businesses

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In the midst of rapid technological progress, the growing advantages are accompanied by a rise in responsibilities, especially in the field of maintaining records.

Although, it is easy to believe that with all the automation it is indeed easier, but with that comes legal complication. The more you start saving over the cloud, the more chances of your information theft or malware attack. Since the days of saving online rather than hard drives, the potential dangers to our data have been a concern for everyone.

Although technological progress makes it easier to create and share information, it also brings challenges in protecting and securing data.

Organizations struggle with the double duty of producing and protecting digital records, made more challenging by increasing legal and regulatory demands.

The Evolving Regulatory Landscape

Regulatory bodies globally have increased standards for information management, acknowledging data as a crucial asset similar to physical resources in recent years.

Not meeting these changing standards has resulted in serious consequences for not following rules, emphasizing the crucial importance of proper records management in protecting organizations from various risks.

As organizations grapple with these heightened standards and the consequences of non-compliance, it becomes imperative to delve deeper into the specific legal and compliance risks associated with inadequate recordkeeping practices.

  • Inability to Defend against Legal Claims: Incomplete or inaccessible records leave organizations vulnerable, potentially resulting in substantial financial penalties and reputational damage.
  • Non-Compliance with Legal Mandates: Violations of specific regulations, such as those delineated in the Sarbanes-Oxley Act, can lead to fines or even the revocation of licenses, undermining organizational viability.
  • Data Privacy Breaches: Failure to adhere to stringent data privacy laws exposes organizations to legal actions and hefty fines, jeopardizing trust and integrity.
  • Contractual Disputes: Lost or misplaced documents impede the enforcement of legal rights, precipitating disputes and eroding stakeholder confidence.

Compliance risks involve:

  • Failure to Adhere to Retention Periods: Organizations, especially in the financial sector, face heightened scrutiny regarding retention periods, necessitating meticulous adherence to regulatory guidelines to mitigate risks of non-compliance.
  • Ensuring Document Authenticity and Integrity: Maintaining document authenticity and integrity is paramount across industries to avert compliance breaches and uphold organizational credibility.
  • Meeting Regulatory Reporting Obligations: Inadequate recordkeeping practices can impede regulatory reporting, resulting in errors or delays that undermine organizational transparency and accountability.

Data Management Risk Factors To Consider (When Employees Are Handling It)

In general, managing data is an essential task in any organization. However, with the new technological innovation in data collection and storage, there could be many hazards, including employee involvement. 

Now, we are not saying that every employee’s involvement in risking data is deliberate. But you also must be aware of the mistakes they might make. Awareness of the threats and doing everything possible to minimize their occurrence will help an organization avoid such a situation.  

These include exposing its information to hackers, facing legal consequences, and jeopardizing its clients’ confidence in the organization. Here are some key risk factors to consider:  

1. Data Security 

A significant threat is the security and protection of personal data. Employees can leak such information to external parties without even their knowledge. 

This can happen through sheer negligence or fake emails that they are clicking and releasing the programs. Other matters are saving the most obvious passwords or failing to adhere to the company’s security policies, which can even open up threats. 

Some measures that help to decrease this risk are the use of multi-factor authorization, the application of security training constantly, and the application of rigid access protocols. Security rules can also be an important component of these measures. 

One should face serious consequences if one does not adhere to the company’s security policies. 

2. Data Privacy 

Personal and sensitive information requires proper handling by employees, as the law states in the GDPR and the CCPA. Security lapses that compromise privacy can attract huge fines and eventually lead to complicated legal procedures. 

However, you cannot always ambush them with a legal case the moment they make a mistake. They have the right to information before they make a mistake. Leaders and management must ensure that their employees receive proper education on legal frameworks regarding data privacy and guidelines. 

They must also lay down specific standards on how data can be accrued and managed. Plus, maintenance could involve periodic checks to ensure they follow the rules. 

3. Data Accuracy 

Cloud data protection is important because it is not definite. You might need to make changes in your data regularly. The chances of data breaches are the highest when you are changing them. 

This can be due to an employee keying in wrong information or an employee needing to update some data as and when it is supposed to. To combat this phenomenon, you need strict measures regarding data checks and quality control. 

You can also review the data frequently to address any possible errors your employees might make. 

4. Insider Threats 

This is the most dangerous kind. People are working internally with your company’s confidential data. They also know all the security weaknesses of other employees’ computer networks and systems. 

Cases have shown that employees who have an opportunity to work with confidential information can misuse it for individual benefits. One of these instances could also be misusing it as a revenge tactic for their grievances against the company. 

This risk is almost impossible to identify and can be nearly impossible to prevent. This should be your sign to improve organizational data security by giving strict access controls. Limiting data on what the employees need to work on and access. 

Plus, keep checking for any out-of-character behavior over the systems. Remember, solving the problems of people’s threats can reduce the risks of insider threats. 

5. Data Breach Response 

An organization must handle a data breach in the best possible way. If you miss out on the proper contingency plan after being hit by any data threat, that can further the damage.  

As important as the protocols are to safeguard data, the organization’s employees need to know what to do if there is a breach. Situations that take too long to fix can also aggravate them.  

Organizations should create an outline of actions to take in case of a data breach and update it occasionally. 

This ensures your employees are prepared to respond appropriately whenever a breakthrough occurs. You can practice drills whenever possible, creating a step-by-step plan for common threats. 

6. Third-Party Risks 

Readers occasionally engage with individuals outside the organization, and these subordinates may require access to privileged information. Third parties themselves can pose some other threats.  

One should regularly check third-party vendors, who might be more relaxed with the data than your organization would be. This gives them enough chances to make mistakes, putting your data in danger. 

Incorporate data protection measures that third parties must follow. You should also require them to sign contracts and review them periodically.

Risk Mitigation Strategies to Help You Stay Compliant

In light of these risks, relying solely on a check-the-box approach to recordkeeping and compliance is no longer sufficient.

In fact, 70% of corporate risk and compliance professionals have observed a transition from check-the-box compliance to a more strategic approach over the past two to three years.

Thus, mitigating legal and compliance risks requires the adoption of comprehensive record keeping strategies, which entail implementing the following practices:

Establishing Clear Policies and Procedures

Organizations need to create and continually revise strong policies and procedures that clearly outline the recordkeeping standards and the responsibilities of employees at every level. 

These guidelines need to cover the whole life cycle of records, from when they are first created to when they are disposed of, to maintain clarity and consistency in record management practices.

Investing in Archiving Solutions

Organizations should explore the option of implementing archiving solutions, especially email archiving solutions, to improve their recordkeeping abilities. 

These solutions allow for the organized storage and handling of emails, guaranteeing that important communications are safely saved and readily available as required. 

Through the utilization of email archiving solutions, companies can successfully meet regulatory demands, reduce legal vulnerabilities related to email communication, and simplify their recordkeeping procedures. 

Additionally, these solutions provide enhanced search and retrieval features that allow organizations to easily find and access specific emails for compliance audits or legal purposes.

Continuous Employee Training

Continuing training programs are essential to make sure employees are knowledgeable in the best practices of recordkeeping and comprehend their obligations for compliance. 

Training sessions need to include discussions on data classification, retention policies, secure handling procedures, and regulatory compliance to help employees effectively manage recordkeeping challenges and reduce risks.

Regular Monitoring and Audits

Regularly monitoring and conducting audits is crucial to proactively detect and rectify compliance gaps in recordkeeping procedures. 

Regularly assessing compliance with established policies and procedures allows organizations to identify areas for improvement, address non-compliance issues, and improve overall record keeping efficiency.

Implementation of Record Retention Protocols

Organizations need to establish strong procedures for retaining and disposing of records that comply with regulations and industry standards. 

This involves setting retention timeframes for different record types, creating procedures for safe storage and disposal, and guaranteeing consistent documentation of retention choices.

Enhanced Data Security Measures

In order to protect confidential information and reduce the chance of data breaches, companies need to put in place strong data security strategies. This involves implementing access controls, encryption protocols, and other technological measures to safeguard records from unauthorized access, alteration, or disclosure. 

Moreover, it is essential for organizations to give prominence to maintaining data integrity and confidentiality in order to uphold trust and meet regulatory requirements.

Monitoring Third-Party Compliance

With the increasing use of outsourcing and dependence on third-party vendors for different services, organizations need to closely oversee vendors’ adherence to recordkeeping requirements. 

This includes performing due diligence evaluations while choosing vendors, setting contractual obligations for record management, and carrying out regular audits to ensure adherence to agreed standards.

Over to You

As companies struggle to balance utilizing technological progress and keeping up with growing compliance requirements, the significance of efficient records management cannot be emphasized enough.

The changing regulatory environment emphasizes the important function of strong recordkeeping practices in reducing legal and compliance risks. Organizations confront diverse challenges that require strategic solutions, ranging from protecting against legal claims to meeting regulatory reporting obligations and ensuring compliance with data privacy laws.

Organizations can strengthen their ability to withstand challenges and uphold regulatory standards by putting in place thorough risk reduction tactics, such as well-defined policies, ongoing staff education, consistent supervision and audits, solid record-keeping procedures, improved data protection measures, and careful monitoring of third-party adherence.


Deepanwita Dey

Deepanwita has always considered writing as the ultimate weapon to share every thought an individual ambles through. For her writing is not just an activity it’s a motivation for the scarred mind. She loves writing in genres like fashion, lifestyle, literature etc.

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