When Information Becomes a Liability


A while back I wrote a couple of posts (one and two) about attempting to value information as an asset, carried on the balance sheet. I took a very accounting oriented approach, and I think I’ve made some progress. This post follows, after a fashion, those two previous posts.

During my session (here’s a link to the deck) at the 2014 AIIM conference, someone from the middle of the room respectfully disagreed that information is always an asset. My response at the time was that information is always an asset and that you need to set up a contra account to offset any of the negatives that can happen. For example, a contra account for Accounts Receivable would be Allowance for Bad Debts. You can read more about contra accounts here, on Investopedia.

What I should have said was …

When information reaches the stage where it can harm you, let’s say in litigation, you need to create a contingent liability account in order to capture how much (in dollar terms) you anticipate the exposure to be. Now, I’m not an accountant, but from what I can find out an asset cannot be transformed into a liability (please correct me if I’m wrong). However, assets that expose organizations to financial risk, can be accounted for by using contingent liability accounts. You can read more about contingent liabilities on Investopedia.

The other thing I should have said was that organizations need to evaluate the value:risk ratio of their information periodically. It’s absolutely true that certain types of information don’t age well and expose organizations to risk that is greater than the information’s value. At this point an organization needs to determine whether they will dispose of the information (legally) or commit additional resources to mitigating the risk, in whatever manner is most appropriate (doing nothing is not an option).

So, to the gentleman in the middle of the room; Thank you. Your comments forced me to dig a bit and learn something.

For those of you interested, here’s the presentation to which I am referring …

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About christianpwalker

Information management consultant.
This entry was posted in ECM, EIM, General, Governance, Information Governance, Information Management, PHIGs, Records Management, Retention and tagged , , , , , , , , . Bookmark the permalink.

7 Responses to When Information Becomes a Liability

  1. Chris, an excellent presentation. I really like how when you restated the project objectives that you put a business perspective first and not an RIM objective. You have put the emphasis on RIM supporting business not trying to dictate it. That is what we are trying to do after all support the business.

    • Fiona – thanks for the kind words. As for putting a business first perspective on things … I don’t think it’s a really new approach, I think it just may be that orgs are now willing to embrace it. Achieving RIM compliance should be A benefit, not THE benefit.

  2. As a fellow pursuer of truth, justice, and ways to quantify the value of informational assets, I have to say that you (and the man in the middle) are definitely on to something. Coming at it from the perspective of liability — which occupies the other end of the asset spectrum.– does lend weight to the argument for its accounting overtones, and the risk associated with the various liabilities can often be quantified. Fascinating, then, that it is so hard to assign a hard value to the asset!

    • Steve – I sometimes get the feeling that you and I sit in each other’s brain.

      Between the work that Doug Laney started with Infonomics and some of us other people, I think we’ll eventually get there. It may have to be after we retire and can commit full-time, though. You know, once we have no more bills to pay. :-)

  3. Ross Nepean says:

    Outstanding presentation and approach to RIM Chris, thanks for sharing. Reminds me of a story from a while back, where a records manager, asked by a senior executive what it was she did for the company, responded “I keep you out of jail.” Old, outdated information that can lend an executive in jail – or lead to litigation-related loss – is clearly a liability.

    It seems similar conceptually to a company owning a piece of land (an asset) that includes some contaminated soil (a potential liability). When the soil is cleaned up, the liability is eliminated – and the value of the asset increases.

    Maintaining a proper records retention program, which assures that needed information is easy to access, while records past their required retention period are destroyed, maximizes the value of an organization’s information asset.

    Congrats also on Info Mgt Nuggets being named a top records management blog for 2014 (details here: http://recordsmanagement.tab.com/records-management-2/top-records-and-information-management-blogs-part-3/). Great stuff!

    • Hi Ross

      Thanks for the compliments. :-)

      That whole legal-compliance-liability aspect is only one part of IG. Depending on an org’s specific needs and profile, it may or may not be the most important. However, done right IG can’t help but to improve business efficiency. Like I like to say, “Good governance is good business.” :-)

      Thanks also for the inclusion in the top blogs list; I’m honoured and flattered.

      If you’re interested, I’ve also got some items on the Digital Clarity Group blog – http://www.digitalclaritygroup.com/category/thinking/blog-thoughts/

      Cheers!
      Chris

  4. Great post! Been reading a lot about handling different types of info in a business. Thanks for writing this!

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