Enron: Conflict of Interest under Review

Auditors are not effective strategists for Document Retention Policies; Conflict of Interest Always Leads to Shortcomings

Boston, MA -- Many lessons will be learned from the Enron bankruptcy case. Two that seem the most basic and compelling are the importance of utilizing outside consulting expertise that is truly objective -- not tied to the clients organization or the solution-selling market at large -- and the absolute necessity of establishing sound policies with regards to document retention policies.

"The lapses in records retention on the part of Enron and its auditors along with the lack of a solid business strategy with regards to document and knowledge management at Enron have put new emphasis on the need for every enterprise to have in place well-articulated document retention policies," says Carl Frappaolo, executive vice president of Delphi Group and a document practices advisor.

"It is essential for every enterprise to have a strategy for the creation, disposition and leveraging of internal knowledge and documents. In this age of information, it is a message that has been repeated so often we risk becoming deaf to it. The Enron case is our wake up call," says Frappaolo. "Putting information, knowledge management and records management practices in the hands of a firm who advocates a retention policy of 'keep it if its important, else destroy it, is clearly ludicrous."

"On a related, and equally compelling note, it was refreshing to see a reporter from the New York Times last week cite the apparent conflict of interest that arises when an auditor is allowed to also handle business strategy and solution design work," added Frappaolo. "Perhaps now we all will see it."

Over the last decade, technologies such as electronic document management systems, email, portals, and knowledge management have given enterprises new efficiencies in creating and storing information and sharing know-how.

Properly exploiting these technologies takes a clear and objective business strategy. "This," advises Frappaolo, "is best obtained by experts whose core competency is document strategies, and who do not align themselves with the client organization in any other capacity.

The many intricate legal battles that will shake out from the Enron chaos will take years to be resolved. But two lessons are clear today -- separate your accountants and tech/business consultants, and get those independent experts to establish and leverage sound records retention schedules for your knowledgebase."

About Delphi Group
Delphi Group (www.delphigroup.com) is the leading provider of business advisory services that illuminate the value proposition of digital documents in the enterprise. Delphi Groups market advisory services, consulting, research, and community-building educational events worldwide have assisted more than 20,000 professionals in the Global 2000. Delphi research is available on the World Wide Web at www.delphiweb.com.

Managing Documents
Records managers today are knowledge leaders who acquire, through training and job experience, expertise in knowledge collection, organization, categorization and communication of structured and unstructured information (documents). The knowledge leaders highlighted in Delphi Groups studies repeatedly cite these skills, rather than advanced skills in specific information technologies, as critical to their success.

For additional commentary, please contact:
Carl Frappaolo, executive vice president, Delphi Group, cf@delphigroup.com, 617-247-1511