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As large companies have become more dependent on call centers, they have become equally dependent on the customer relationship management (CRM) systems that help them track customer issues and orders. This represents a risk to sales, revenue, and profitability. If this risk is realized?if the worst-case scenario comes true?the harm done to the business may be severe enough to propel it into bankruptcy.
INABILITY TO OPERATE Extreme data loss such as loss of an entire database, even temporarily, has been known to cause organizations to fail. A company may not be able to fulfill orders, update employee records, produce financial reports, manufacture goods, or provide services. It may not even have an operating phone system. Computer technology and the data associated with it are integrated into all aspects of an organization?s operations. Because of this dependence on information technology, there is a clear risk that data loss can make it impossible for an organization to perform properly.
Even partial data loss can disrupt business operations and produce negative effects. Employees may be idled for long periods of time while data is re-created or recovered, reducing productivity. Applications may fail unexpectedly when referencing data that is no longer available. Essential reporting may be incomplete because component data is not available.
Loss of data also makes it difficult for managers to measure company operations.
Most modern businesses rely on financial, market, and manufacturing metrics. Without the ability to gather and report on key business indicators, managers are running blind as to the health of the business. Destroyed, damaged, or altered data skews metrics and disrupts decision-making. The overall effect of this type of disruption is reduced revenue and higher expenses, leading to loss of profitability.
LAWSUITS AND FINES There is potential for lawsuits and fines when a company experiences data loss. With shareholder lawsuits fairly common, failure to protect data could easily lead to litigation, especially if data loss can be tied to a negative change in the share price of the company?s stock. A more likely scenario is that data loss will affect operations and sales, causing the business to underperform. This can then trigger shareholder suits.
Other types of legal action can result in adverse judgments for companies. Companies may be sued for failure to perform duties outlined in contracts or the inability to produce goods and services that have been paid for. A lost order record may result in a customer?s suing for direct and collateral damages.
Regulators now have the power to impose data retention requirements on companies. Data retention requirements tell a company what data must be kept and for how long. Fines can be levied when these requirements are not met.
It is not enough simply to have good policies; the policies have to be followed up with good practices. In 1997, Prudential Insurance was fined heavily because it did not properly implement existing electronic document retention policies. This led to the destruction of electronic documents needed as evidence. There was no indication that employees willfully destroyed evidence?only that the company did not take sufficient action to ensure that it was preserved. Though Prudential had a good electronic document retention policy in place, its inability to implement it properly cost the company $1 million in fines.2
Damaging legal situations can occur when data loss causes financial information to be released late. Regulators, markets, and shareholders expect certain reporting to occur at previously announced intervals. When a company fails to meet these expectations, that failure often leads to fines, lawsuits, drops in price of the company?s stock, or even delisting from financial markets.
All these situations represent financial harm to the business. As such, steps need to be taken to protect the business against the risk of lawsuits and fines.
As large companies have become more dependent on call centers, they have become equally dependent on the customer relationship management (CRM) systems that help them track customer issues and orders. This represents a risk to sales, revenue, and profitability. If this risk is realized?if the worst-case scenario comes true?the harm done to the business may be severe enough to propel it into bankruptcy.
- Even Mother Nature Fears Data Loss
In the quarter ending March 31, 2000, Mothernature.com, an Internet-based retailer of health and beauty products, saw fit to mention the following in its U.S. Securities and Exchange Commission (the U.S. regulatory body for public companies and markets) Form 10-Q filing:
?If our existing technical and operational systems fail, we could experience interruptions or delays in our service or data loss, and could be unable to accept and fulfill customer orders.?1
In the paragraph that followed, the company outlined how the risk of data loss could make it impossible for it to meet customer expectations and fill orders. Clearly, inability to ship an order represents a major risk to a catalog or Internet reseller.
1. Mothernature.com Inc. Form 10-Q, filing date May 15, 2000.
INABILITY TO OPERATE Extreme data loss such as loss of an entire database, even temporarily, has been known to cause organizations to fail. A company may not be able to fulfill orders, update employee records, produce financial reports, manufacture goods, or provide services. It may not even have an operating phone system. Computer technology and the data associated with it are integrated into all aspects of an organization?s operations. Because of this dependence on information technology, there is a clear risk that data loss can make it impossible for an organization to perform properly.
Even partial data loss can disrupt business operations and produce negative effects. Employees may be idled for long periods of time while data is re-created or recovered, reducing productivity. Applications may fail unexpectedly when referencing data that is no longer available. Essential reporting may be incomplete because component data is not available.
Loss of data also makes it difficult for managers to measure company operations.
Most modern businesses rely on financial, market, and manufacturing metrics. Without the ability to gather and report on key business indicators, managers are running blind as to the health of the business. Destroyed, damaged, or altered data skews metrics and disrupts decision-making. The overall effect of this type of disruption is reduced revenue and higher expenses, leading to loss of profitability.
LAWSUITS AND FINES There is potential for lawsuits and fines when a company experiences data loss. With shareholder lawsuits fairly common, failure to protect data could easily lead to litigation, especially if data loss can be tied to a negative change in the share price of the company?s stock. A more likely scenario is that data loss will affect operations and sales, causing the business to underperform. This can then trigger shareholder suits.
Other types of legal action can result in adverse judgments for companies. Companies may be sued for failure to perform duties outlined in contracts or the inability to produce goods and services that have been paid for. A lost order record may result in a customer?s suing for direct and collateral damages.
Regulators now have the power to impose data retention requirements on companies. Data retention requirements tell a company what data must be kept and for how long. Fines can be levied when these requirements are not met.
It is not enough simply to have good policies; the policies have to be followed up with good practices. In 1997, Prudential Insurance was fined heavily because it did not properly implement existing electronic document retention policies. This led to the destruction of electronic documents needed as evidence. There was no indication that employees willfully destroyed evidence?only that the company did not take sufficient action to ensure that it was preserved. Though Prudential had a good electronic document retention policy in place, its inability to implement it properly cost the company $1 million in fines.2
Damaging legal situations can occur when data loss causes financial information to be released late. Regulators, markets, and shareholders expect certain reporting to occur at previously announced intervals. When a company fails to meet these expectations, that failure often leads to fines, lawsuits, drops in price of the company?s stock, or even delisting from financial markets.
All these situations represent financial harm to the business. As such, steps need to be taken to protect the business against the risk of lawsuits and fines.
Source...