The High Cost of Losing Documents to Fire or Flood

The loss of physical or digital documents in the event of a natural disaster is expensive and burdensome, and one that many organizations have not adequately prepared for.

Risk managers should plan for document management and retention in the event of a loss by following several basic guidelines.

First, make sure there is a clear understanding within your organization of any applicable governmental and contractual requirements in place for how long various documents need to be stored. For items such as medical or financial documents, they will likely need to be stored for years. As such, it is very important to identify which documents do not need to be stored for long time periods, so that physical file cabinets and databases are not cluttered with non-essential documents. Additionally, all employees who deal with document retention should be trained on which documents are non-essential, as the tendency is too over-collect documents of all types, cluttering both physical document storage space and digital drives.

To assess document exposure, first determine how densely the documents are stored and the volume of critical documents. If all documents are located in a single physical space, or are stored on a single server rack in a single location, the risk is greater than if digital documents are spread across more than one location. For physical critical documents, are there measures in place to protect against fire, flood, electrical outage or otherwise?

Perhaps most importantly is planning for the amount of insurance coverage needed to protect important documents. The cost of insuring a cubic foot of physical documents can vary widely based on numerous factors. Many policies specifically exclude coverage for physical documents, because some insurers want those items to be addressed in a valuable papers portion of the policy. According to brokers the rule of thumb is typically that the 'valuable papers' portion of a commercial policy will rarely be adequate to cover a large loss of documents. Consult with an insurance agent to see whether your current policies will adequately cover a document loss based on current volume of storage.

And finally, if an organization suffers a large loss of physical documents they will likely need to contract with a document recovery firm. The time and expense needed to recover large quantities of documents from fire or flood can be very time consuming and expensive. In addition to not storing unnecessary documents from the get-go, properly insuring critical documents, and being aware of the cost of document recovery all ahead of time are all immensely valuable projects to undertake before a loss of documents occurs.