The Risks and Consequences of Poor Records Management Practices

Best records management in Islamabad

Records management is a crucial part of any organization. It involves storing vital information such as customer data or an organization’s financial records efficiently. Most organizations don’t have a robust records management process despite its importance. They only realize its importance when facing a lawsuit, regulatory action, or other untoward situation.

If you are still not following best record management practices, read this post carefully. We will list the risks and consequences of poor records management practices. It will help you understand why you must ensure your physical records, or any other records are properly managed. Without further ado, let’s start.

Importance of Records Management Practices

1. Non-Compliance

Nowadays, almost every industry requires effective records management. For example, the baking sector regulator requires banks to maintain records for at least five years in most countries. If a bank cannot retrieve the data when the regulator or another stakeholder requires it, they are liable to a fine or any other form of regulatory penalty.

2. Reputation Loss

Let’s build upon the banking sector’s example. If a bank does not have the records, it will damage its reputation. Customers will perceive the bank and its staff as irresponsible. While recovering from a financial loss is easy, managing reputational loss is multiple times more challenging.

3. Loss Intellectual Property

Suppose you have a trade secret which is the reason for your competitive advantage. Indeed, that secret will be stored somewhere. If you lose access to it due to poor records management, you lose your competitive advantage. It may be that the secret falls into your competitor’s hands. You will lose your competitive advantage and give a competitor a chance to replicate it and erode your market share.

For example, consider the example of Taiwan Semiconductor Manufacturing Company Limited (TSMC). It is the leading semiconductor manufacturer. It is now developing the most advanced semiconductors. If it loses the design documents, it is effectively ceding its position to others. Chinese and other competitors can simply start manufacturing themselves.

The risk of losing critical data is why an increasing number of companies are seeking digitizing documents services. They convert all their documents to digital formats and destroy the physical data. There are numerous companies which destroy records inside the organisation’s premises. It means your records never even leave the building premises.

4. Customer Distrust

Another reason you need to invest in effective record management practices is to gain customer trust. When customers know their data is safe and secure, they won’t be afraid to trust your business. In contrast, when you continuously violate their trust due to poor record management practices, it leaves them vulnerable. For instance, hackers may use the information to target your clients. Due to such acts, customers will lose trust in your business.

5.  Missed Business Opportunities

When you don’t live up to customer expectations, you will not only begin losing customers but fail to find new ones. In other words, finding new business opportunities can become a significant challenge. After all, why would customers trust your business when you can’t protect their data?

6. Legal Liabilities

Another reason you need to invest in records management is to avoid legal liabilities. If you operate in Europe or handle the data of European citizens, you should be familiar with the General Data Protection Regulation (GDPR). Suppose a business has poor data management practices. In that case, GDPR states it can face a “fine of up to €10 million, or 2% of the firm’s worldwide annual revenue from the preceding financial year, whichever amount is higher.” So, poor records management is not cheap.

On top of it, your customers may decide to initiate legal action. It means your legal expenses will keep increasing, and there’s no way to escape it. Therefore, it is better to implement robust records management processes if you wish to escape legal challenges and costs.

7. Poor Employee Morale

When your employees continuously waste time finding the relevant records rather than performing their work, their morale will take a hit. They will think that finding records is not rewarding work. Indeed, organisations don’t hire employees to find records but to add value by carrying out their roles effectively. If you wish to ensure your employee morale remains high, invest in effective rewards management practices.

8. Low Productivity

Along with poor morale, employees will have low productivity. They won’t be performing their work. It means they will take longer to complete the tasks. Managers may reprimand the employees for it which can further lower their productivity. Due to low productivity, organisations may fail to achieve their objectives.

9. Employee Layoffs

When organisations fail to achieve their objectives, they won’t hesitate to lay off employees. For instance, if the organisation’s objective is to increase profitability by 15% by year-end and does not achieve it, it may decide to cut costs. Usually, it involves laying off employees. It means workers will lose their livelihood while the organisation will take a hit on its reputation. It may fail to retain and hire top talent due to its reputation for poor employment practices.

10. Poor Decision Making

Lastly, poor records management practices lead to poor decision-making. Usually, decisions require reviewing past or forecasted data. If it is unavailable, the decision-makers will make decisions based on whims. These decisions can easily turn out to be wrong. We don’t need to explain the consequences of poor decision-making on an organisation, its customers, and other stakeholders.


These ten points shed light on the risks and consequences of poor records management practices. We can come up with countless more points, but we are confident these are enough to convince you to change your approach. You can hire a records management company to help you develop effective processes or manage your records entirely.

When hiring a records management company, check their reviews and credentials carefully. The last thing you want is to hand over your records to an organization that does not have the skills for it. You can contact their previous clients for information about their practices and professionalism.

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