With almost no discussion about IT in businesses concluding without a mention of ‘the cloud’, John Brazier asks when IPs are going to lose the paper and go digital.
You would be hard pressed to name many professions which generate more irreplaceable paperwork per working hour than the practice of insolvency. With so much resting on the orderly and safe stowing of huge volumes of paper, the sector might have a lot to gain from implementing digital storage solutions. But it is also an industry where old habits die hard; for many firms, filing cabinets, franking and fax machines are still everyday business tools.
However, insolvency practitioners also generate vast quantities of paper records just by adhering to legislation; according to the Insolvency Practitioners Regulations 2005, immediately upon taking on an appointment, all documentation relating to a case needs to be made available to creditors. If an insolvent company has 250 creditors, each one must be notified of all relevant documents, requiring the administrator to print out hundreds of document packages the size of screenplays and physically post them to each creditor.
Then there is the communication of progress reports, matters relating to remuneration, vacations of offices, and ultimately distributions to creditors, that must also be sent throughout the course of the administration. Such a process is not only costly, it can also have a detrimental effect on a company’s environmental footprint – a concern particularly for larger professional services firms with demanding corporate social responsibility policies.
Further to this hefty quantity of mailing, there is the issue of legacy. A firm must, in line with further legislation, retain records of every liquidation or bankruptcy case it has handled dating back a period of six years following the closure of each case. This is of course in addition to all other non-insolvency caseload documentation and internal records, such as accounting records, human resource records, or internal communications.
Six years’ worth of documents will soon stack up and cause a real storage headache. Storing on-site requires a huge amount of dedicated space that cannot be used for anything else, and raises the issue of accessibility. An intricate filing system needs to be implemented –and more importantly, adhered to – in order to provide IPs with easy access to documents as and when they are required.
In order to store such a quantity of paper records, many firms choose to utilise off-site storage facilities, which can rack up costs at a staggering rate – not only for the storage itself, but also for the retrieval of documents as they are required by IPs.
Then there is the issue of security to consider. Case documents must be stored in a location that is both secure from potential data theft and accidental destruction, such as fire or water damage (and water represents a much more realistic and damaging prospect to stored paper documents). Data security is a serious issue in an industry such as insolvency that must adhere to a raft of legislation regarding information sensitivity and storage.
So taking into consideration the issues of costs, storage, accessibility, security and compliance, is it practical for an insolvency firm in the 21st century to continue storing all its current and legacy documents on paper?
The paperless solution
The concept of a paperless office was first mooted by US magazine BusinessWeek in 1975, and promoted the idea of office automation replacing soon-to-be redundant paperwork such as record and book-keeping.
Nearly 40 years later, and the average office has changed almost beyond recognition. Personal computers adorn every desk, we communicate via email, and vital information that allows a company to function is often stored off-site on remote servers or online in ‘the cloud’.
The volume of data that companies acquire is growing faster than ever before, and so is the value attributed to that information. Greater value brings great risks – hence the evolution of business continuity solutions to mitigate the threat of technological failure.
As the role of technology has grown, business continuity has inevitably become a digital proposition that covers all critical business functions. Contemporary business continuity solutions will cove disaster recovery, Business Impact Management (BIM), document management, security management, audit management, and communications management.
Any paperless office should be able to incorporate these elements seamlessly. As business continuity systems are embedded within a firm’s infrastructure, the need to use paper communications theoretically becomes redundant. But are IPs moving with the times?
A number of companies are certainly utilising technology to cut down on the amount of paper they use and have found some easily implemented, cost-effective, practical and time-saving ways of doing it.
Several insolvency firms – including Wilson Field – have adopted a much more elegant solution to the problem of sending housebrick-sized document packages to creditors; mailing a one page document to creditors containing a link to an online portal through which they can access documents. Creditors are then able to read, download and print either individual documents or the whole lot as they please.
Some firms go further. Harrisons Business Recovery implemented a full paperless office plan in August. By converting to a totally digitised system, Harrisons has eliminated both the risk of data loss and reduced the physical space taken up by traditional storage by 20-30%. For Harrisons director Tony Murphy, the decision to move to a paperless office is “all or nothing.”
“You have to commit not only to the hardware, but to the idea behind not having paper files,” he says, “Some cannot do this easily and inevitably you always get someone sneakily printing off papers. It takes time to teach and encourage acceptance, mostly by showing the positives, such as more control, greater flexibility and lower costs.
“For us as a firm, there’s really no alternative. We are geographically spread and this allows us to instantly optimise capacity around all our offices, while retaining full and visible control. As a result, we can handle bigger, more complex cases.”
Harrisons has invested not only financially, but in terms of effort: each paper record must be scanned individually by a member of staff using data capture software, with the electronic document then stored on external servers.
As a result, the system has reduced security risks: as data is stored externally over a number of servers and accessed remotely, the threat of data becoming comprised is now almost non-existent.
Yet while it may sound easy enough, switching to a paperless environment can be challenging and, initially at least, costly. In order to adopt a paperless approach, a firm must source and implement, then train staff to use, a digitised system for document storage.
Once a system has been chosen, it needs to replace a firm’s existing information technology infrastructure, covering both software and hardware. The problem here lies with user confidence: by implementing new systems, users become disoriented, requiring more time to grow familiar with the new system and in the meantime are liable to make mistakes.
And as technology takes on a more dominant role in the modern office, so does it complexity, outstripping the knowledge of the casual user. Often even basic IT problems are not understood and are passed on to internal IT departments or third-party service providers to sort out.
How can a business implement a system to safeguard and store its critical data if all but a few people don’t understand what is being put in place and how it works? Given these factors, it seem larger firms will face a tougher time integrating paperless systems, since these problems are magnified across numerous national or even international offices, as well as large numbers of staff all needing to become familiar with new practises and policies. Part of Harrisons’ success in implementation has been down to its limited size.
Old habits die hard
Tyrone Courtman, partner at Cooper Parry – another firm that has gone paperless – believes that ingrained methods of many insolvency industry veterans, used to working with physical records for decades, can be the main stumbling block. Regardless, he is keen to encourage others to take the leap.
“I see this as an essential tool to increase efficiency and streamline our insolvency case management”, he says. “While the implementation phase was challenging, there have been enormous benefits for us – the file architecture is tailored to readily enable electronic case files to be reviewed and information accessed by the case management teams.
“However, one of the principle obstacles is simply that ‘old habits die hard’: you have to understand that and be sympathetic to individuals’ fears. But once you can demonstrate that they have little to worry about, and the ease with which information can be accessed, they soon see the benefits.
“People generally are naturally resistant to change, which you have to understand, but also challenge.”
John Dickinson of Carter Backer Winter, which implemented the paperless Virtual Cabinet system in June, also believes that the main barrier to the paperless office is the attitude of the end user.
“It’s almost like a leap of faith,” he says. “There is a fear of electronic documents getting lost in the system, but it’s simply not the case.
“For example, if a paper is misfiled, then it’s almost impossible to locate; with digitalised storage, the document can be searched for and found easily.”
It seems that while the profession certainly has its work cut out for it in moving to electronic record-keeping, the biggest issue it must overcome is its own attitude to change.
The restructuring practise at Deloitte has taken the environmental aspect into account when approaching record-keeping, and has taken steps to create a green strategy that has not been detrimental to its work, according to restructuring partner, Lee Manning.
“From an environmental angle we take full advantage of insolvency legislation allowing us to set up websites to upload all statutory notifications, for example, creditors reports”, he says. “We then notify creditors when a new document in uploaded to the website, rather than sending them the entire document.”
But a full transition, he admits, has not been practical. “We still keep original hard copies of statutory signed documents and I can’t see that changing, especially as we are frequently asked for certified copies of documents. There is also the issue of, especially with dividends, of reviewing proof of debts. We still review these as hard copies and they tend to be high volume.”
BUSINESS CONTINUITY: IGNORANCE IS BLISS?
Ignorance of the significance that IT solutions play is still prevalent in the professional services world according to John Dryden, chief technical officer at IT Labs Group.
“We find that a lot of companies simply do not understand these concepts and have unrealistic ideas when it comes to their business continuity”, he says. “Backing up data does not equate to it being easily recoverable or indeed recoverable in a useful format. Another big oversight is the accessibility of recovered data.
“As they say, ‘ignorance is bliss’, and this sadly true of many users’ approach to business continuity and disaster recovery. We find that users simply want to be told that their data is safe and recoverable, and most of the time do not actually get their IT team or service provider to demonstrate this. Just like a car MOT, disaster recovery plans need to be tested on a regular basis and confirmed to deliver the expected results. As with everything in life, you get what you pay for, so if want a Rolls Royce solution, expect to pay the price.”