Written by Schon Condon in July, 2011

Whilst much of what we read in the press these days is often puffed up and sensationalised, there is often a real and genuine issue lurking under the hype.

This is no more so evident than with all the recent press and notoriety that our friends from LulzSec have gained from their various net-based activities.  However, at the same time we have also seen some other recent internet based announcements, such as the 4,800 Australian websites that were recently lost, that really indicates that it is time for all business owners and their advisors to give serious thought to the real safety and security of their data.

Much of the recent dilemma appears to have arisen as a result of the use of what has become referred to as ‘cloud based’ technology which effectively moves data off site and is admittedly more readily available from a wider variety of devices and locations.  Whilst this form of internet usage clearly has a number of significant advantages it also enables the more unscrupulous amongst us to more readily access anyone’s data they wish.  Even the old adage that the larger organisations amongst us were at least safe because they can afford the necessary levels of security was dispelled when Sony’s database was essentially laid bare.

I certainly do not suggest that business operators should ignore advancements in technology but rather than just accepting the advice of IT specialists they should seriously review their needs, opportunities and risks on a full business basis.  Just because an element of your business can benefit from the new technology does not mean that you have to make an across the board decision.  For example if sales staff need access to product details, price lists and stock levels as well as customer data you could maintain your own core secure system, place the appropriate customer information on each relevant sales persons machine and make the less critical data on a cloud based system.  Such a process provides for the maximum use of technology whilst retaining appropriate levels of security over the relevant company information.

The IT expense of a business is undoubtedly increasing, but notwithstanding this, the overall hardware, software and security expense must be kept in balance; and security doesn’t just mean stopping hackers, its backups, long term accessibility, Privacy Act responsibilities and so on.  Therefore, the degree with which emerging technologies are embraced must be balanced off if not in fact driven by the level of overall security that an organisation can afford.

Interestingly this also brings us to another moot point that is of particular relevance to us as insolvency practitioners, and should be relevant to all business owners and operators.  That is the need for a business to be able to readily access its information years after it was created and even potentially well after it has ceased to operate.

So what does providing the records mean.  Well it does not merely mean the provision of raw data, but also requires one to ensure that the data medium, i.e. disk, memory stick, tape, etc is not corrupted, that the information is complete, and that the relevant software required to read the data is available to enable it to be read and adequately understood.

I have occasionally come across individuals that mistakenly believe that provided you hand over a suite of disks and odd papers you have complied with the legislation.  One should remember that it is a director’s responsibility to maintain adequate records to reasonably explain the activities and operations of the business, and that means translating the information into a readable and usable fashion, whether it be from another language or binary code.

A failure to appreciate this could result in the records being declared non-existent and thereby the directors personally liable for the debts of the company.  Remember, the lack of books and records is prima-facie evidence of insolvent trading.  An experience that could be both costly and embarrassing.

Enjoy the read.

PLEASE NOTE:  All information contained in the articles below was correct at time of publishing.