How Outsourcing E-Mail Management Helps Financial Services Companies

By Harney, John | Business Credit, June 2005 | Go to article overview

How Outsourcing E-Mail Management Helps Financial Services Companies


Harney, John, Business Credit


Finandal service firms must be especially vigilant about how they manage their e-maiL traffic. Hosted e-mail management solutions are one way to keep out of trouble.

Here's the problem: Today, e-mail is the most widely used software application on the planet. For that reason, sensitive data that used to be conveyed in written documents between financial firms finds its way into e-mails. If these get into the wrong hands, firms could at the least lose some competitive advantage and at most get prosecuted for malfeasance or sued for sexual harassment.

So the consequences for financial services firms that irresponsibly manage their e-mail traffic can be steep indeed. E-mail management products protect them against the administrative, legal, and regulatory vicissitudes that accompany the explosion of email in corporate life.

Drivers Of E-mail Management

According to David M. Smith, Research Analyst, Messaging, Gartner, "legal discovery is the biggest driver of e-mail management." Discovery requires that organizations produce in a timely fashion all records relevant to a subject matter like an incidence of malfeasance for which they are being investigated.

Barclay Blair, Director, Technology Practice at Kahn Consulting, Inc. a legal consultancy specializing in information management, explains in concrete terms the possible consequences for a company if it sloppily maintains its e-mails. In a case involving Murphy oil USA, Inc. and Fluor Daniel, Inc., the discovery cost to the latter of searching through 14 months of stored e-mail tapes (about 20 million pages of messages) cost more than $6 million and took six months. So the company may have lost more in preparing for the suit than it did in fines resulting from possible loss of it. Unfortunately, this is not uncommon when corporations go to court.

Spending $20,000, $30,000 or $50,000 on an e-mail management system seems a small price to pay by comparison.

It also extends to requests for information that prove an organization, like a bank, has not violated SEC regulations. Some financial companies improvise solutions for discovery. For instance, once a user's PC e-mail cache has been exhausted, he might be asked to copy the archived e-mails into a separate file. Unfortunately, few people do. As a result, if not automatically managed, e-mails that could be critical to a discovery request could disappear.

Other regulations also govern practices like retention of records. According to Craig Olson, Vice President of Corporate Marketing, Zantaz, a major e-mail application service provider (ASP), under the U.S. securities and Exchange Commission Rule 17a-4, broker/dealers and financial exchange members must preserve all electronic communications relating to the business of their firms in a non-rewritable, nonerasable format for three years. This usually means storing them on WORM (Write Once Read Many) optical discs on which data cannot be changed once recorded. Furthermore, he says, the financial company must give a third party access to the retained e-mails so regulators can go through the third party if they need access.

The Sarbanes-Oxley Act of 2002 mandates that executives at financial companies are responsible for the financial conduct of the company and may need to refer to e-mails to verify employees have not participated in illegal practices. Compliance officers at brokerages even have to periodically review a 20 percent random sampling of e-mails between brokers and clients to police e-mails for violations in this regard. E-mail archival products vastly expedite these processes.

The Value Of An ASP

Hosted solutions often do so cheaper, faster, and better than installed ones. They require small upfront set-up fees and spread out subscription fees over extended periods. Suppliers can deploy them faster-sometimes in a few days. What's more, the service provider maintains and upgrades the application and provides all personnel for doing so. …

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