Companies open to risk of litigation due to Web 2.0 technology

These new channels, Infosecurity notes, are social networking sites and other web 2.0 services - and, says Zylab, which describes itself as a provider of e-discovery and information management systems, almost a quarter (24%) of companies in the energy, travel and pharmaceutical industries were found to be `high risk.'

According to Zylab, energy companies in the FTSE 100 scored the highest risk rating, averaging 7.75 out of 10, closely followed by travel (7.5) and pharmaceutical companies (7.5), partly driven by the heightened risk of providing consumer services and products and operating in an environmentally sensitive area, which was only recently demonstrated by BP being sued £3 billion for the Gulf of Mexico oil spill.

Interestingly, the company says that finance firms also scored highly (7.0), which could be down to increased market volatility and heavy regulation, following the recent banking crisis.

Zylab claims that almost two thirds (62%) of the FTSE 100 have previously been sued or initiated legal action, highlighting the increasingly litigious nature of modern business, with 65% of the FTSE 100 having US offices and 88% global operations, this 'inclination to sue' could get worse in line with the highly litigious nature of the US and complexities of international legal requirements.

Zylab also says it's the complexity of the communication channels that are causing companies the most problems, with 92% of companies in the FTSE 100  found to have disparate information channels across the business; e.g. Twitter, email and paper.

And with the growing use of non-searchable multimedia platforms like YouTube and internet technologies which move data outside the organisation, such as cloud computing, Zylab says that organisations could be storing up a huge problem if they are ever requested to provide information to meet legal requirements.

Ronald Van Vuure, Zylab's director, said that it's shocking to see that so many FTSE 100 companies are now vulnerable to litigation.

"As these companies feel the ongoing impact of the recession, the last thing they need is to be faced with a lawsuit which they are ill prepared to handle", he explained.

The research also reveals that just 12% of FTSE 100 companies were judged to be `low risk,' with estate agents and retail companies amongst the lucky few.

And with international budget cuts affecting revenue opportunities and diminishing consumer spending power, Zylab says that these organisations could however find themselves rapidly moving into higher risk categories.

According to Van Vuure, major companies need to improve their investigative capabilities to better understand what information exists across their organisation,

This will, he says, ensure they are protected against costly reactions to discovery requests within court-imposed timelines, so potentially saving them millions of pounds on legal fees.

"In today's global business environment, poor information management practices are simply inexcusable", he said.

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