Accountancy firms in the UK are increasingly recognising that unchecked data proliferation is becoming too risky and costly to ignore. Yet, many are overwhelmed by the scale of the challenge in identifying, classifying, and minimising vast amounts of data. In this article, we explore key considerations and outline a five-step approach to help firms implement effective data retention and disposal strategies.
The growing data challenge
Data is at the heart of accountancy firms. Some of it is outdated, some highly sensitive and much of it is stored in legacy systems that are difficult to access. While there is an instinctive desire to "clean house," the challenge lies in knowing where to start. Many firms put off tackling the issue, allowing their data burden to grow, making it more complex to manage.
Historically, records retention and disposal have been secondary priorities with data security and revenue-related processes taking precedence. However, this needs to change. There are four compelling reasons why information retention and disposal should be a top priority:
1. Reducing risk exposure
Large volumes of unmanaged data increase exposure to cyber threats. Accountancy firms handle sensitive financial and client information, making them prime targets for cybercriminals. Without proper data management, firms risk financial loss, reputational damage and regulatory penalties.
2. Controlling storage costs
Data storage costs are rising, particularly as firms migrate to cloud-based systems like Microsoft 365, SharePoint and other document management platforms. Accumulating excessive data increases operational expenses and affects system performance.
3. Enhancing efficiency
Excess data clogs systems and slows down workflows. By proactively managing data, firms can improve operational efficiency, ensuring that only relevant and necessary information is readily accessible.
4. Meeting regulatory compliance
UK regulations, including GDPR and professional standards set by bodies like the ICAEW, require firms to manage data responsibly. Retaining unnecessary client information beyond required periods can lead to compliance breaches and financial penalties.
Cautionary tales
The risks of poor data management are not just theoretical. UK regulators have imposed significant fines on firms that failed to secure client data properly. For example, a UK accountancy firm was penalised for failing to encrypt sensitive client information stored on an outdated system, resulting in a data breach and regulatory action.
Firms operating internationally must also consider the impact of data protection laws in multiple jurisdictions. Many corporate clients impose stringent internal data management standards, often exceeding regulatory requirements. Failing to comply with these standards can result in lost business opportunities and damaged client relationships.
A five-step approach to data retention and disposal
Addressing data retention and disposal may seem daunting, but firms can follow a structured approach to make the process manageable.
1. Establish a data management committee
The first step is to form a cross-functional team to oversee data retention and disposal efforts. This committee should include senior representatives from compliance,
IT, risk management and operational teams. Their role is to drive policy implementation, ensure alignment with regulatory requirements and communicate changes across the firm.
2. Audit and map existing data
A thorough data audit is essential to understand what information is stored, where it resides and who has access. This includes:
- Identifying all digital and physical repositories.
- Classifying data by type, age, and sensitivity.
- Assessing legacy systems for obsolete or redundant information.
- Reviewing shadow IT practices where staff may have stored data outside sanctioned systems.
3. Develop and implement a retention policy
A clear data retention and disposal policy should outline:
- Retention periods based on legal and regulatory requirements.
- Specific rules for client financial records, HR files and internal documents.
- Secure disposal methods for outdated records (e.g., shredding paper documents and ensuring permanent digital deletion).
The policy should be agreed upon at senior levels and communicated to all staff to ensure compliance.
4. Execute the policy
Once the policy is in place, firms must follow through with its implementation. This involves:
- Automating retention and deletion processes where possible.
- Ensuring secure destruction of outdated physical and digital records.
- Training staff on data management best practices.
- Regularly reviewing compliance with the policy.
5. Enforce and monitor compliance
- A policy is only effective if it is enforced. Firms should:
- Conduct periodic audits to ensure adherence to the retention schedule.
- Review systems for unauthorised data storage practices.
- Provide regular training and awareness programmes to staff.
- Use software tools to monitor data retention and enforce deletion processes.
Achieving lasting change
To successfully implement a data retention and disposal framework, firms need engagement from all stakeholders. Senior leaders must champion the initiative, ensuring that data governance becomes an integral part of firm culture.
Technology can play a crucial role in simplifying data management. Commercial software tools can automate retention and deletion, reducing manual effort and improving compliance. Firms should explore these solutions early to streamline their processes.
Proceeding Iteratively
Firms do not need to address all data issues at once. A phased approach, starting with high-risk areas, can make the task more manageable. Prioritising sensitive financial records and outdated client files can deliver quick wins while laying the groundwork for broader implementation.
Data retention and disposal is a critical but achievable task for UK accountancy firms. By following a structured approach, firms can enhance compliance, improve efficiency and reduce risk, ultimately strengthening their operations and client trust.
While Rome wasn't built in a day, taking the first steps towards better data management today will pay dividends in the future.
.svg)
.svg)