As we look ahead to a new year, there is an interesting shift in the conversation surrounding e-discovery that portends a change in 2016 with how we view the value that technology can bring to the process.
A growing choir of in-house counsel and outside law firms are talking less about the paradigm of linear e-discovery review—where electronic evidence travels from one stop on the EDRM to the next—and more about the need to gain a deeper vision into the evidence in a case as early as possible. In response to this evolution in client focus, we predict a sea change for litigation technology in 2016 brought about by the emphasis on early case assessment (ECA).
Of course, ECA is a term that means different things to different people. At the heart of ECA is the need to understand and deal with very large data sets resulting from the growing volume of electronic evidence, litigation and regulatory investigations, and make the right decision for the client when it comes to litigation versus settlement. In other words, being able to conduct ECA provides a means to assess exposure quickly, reduce cost and better shape litigation strategy.
In fact, the BTI Litigation Outlook survey has already identified early case assessment as the number one market driver for 2015, noting that in-house counsel are focusing on aggressive settlement strategies and placing more focus on case elimination rather than trial. Moreover, a recent LexisNexis survey of property and casualty (P&C) insurance carriers found that three out of four P&C Carriers use some form of early case assessment, with a stunning 98 percent of them declaring it is “effective” or “very effective” as a means of cost containment.
Benefits of ECA
There are three primary benefits that corporate clients can realize from treating ECA as their new paradigm for e-discovery:
1. Reduce Costs
ECA drives down costs in two additional key ways. First, by addressing electronic evidence at the source and making the content searchable, litigation teams can start reshaping the entire e-discovery process across the workflow, gaining dramatic efficiencies downstream.
Second, an effective ECA strategy on the front end of the e-discovery process can significantly reduce data volumes into the funnel, which obviously has massive implications for cost savings during the expensive document review phase. Some companies have been able to reduce the amount of data subject to review by as much as 85 percent with a robust early case assessment effort.
2. Manage Risk
Interestingly, one of the things that many in-house counsel found appealing about outsourcing their e-discovery in the past was the notion that they were transferring the responsibility of storage, spoliation, retrieval and other potential data custodian risks. Now, many corporate counsel are determining that it’s actually in the company’s best interests to keep as much of the e-discovery work in-house in order to better manage risk.
ECA plays a crucial role in this risk management. Taking e-discovery upstream and closer to the original data allows the client to control its own standards for consistency, transparency and repeatability, which all equate to defensibility. This translates to greater control and reduced risk.
3. Shape Litigation Strategy
In addition to reducing costs and more aggressively managing risk, a focus on ECA helps litigation teams to develop more insightful litigation strategy. Simply put, the more information that your in-house team has regarding the size and risk associated with litigation, the more likely your company is going to be making the best decisions about how to proceed in the case.
Do we go all-in on trying the case, knowing the discovery expenses we’ll be encountering and the sheer volume of pre-trial work that will be required? Do we push forward for now but apply some clear litmus tests on how far we’ll litigate and at which points we’d be willing to settle? Or do we fold our tent now, cut our losses and get the matter resolved as quickly as possible? Hopefully, the decision whether to settle or move forward to trial is simpler, now that projected costs and the potential risks involved with the litigation have been thoroughly assessed.
The ability to collect, access, and analyze massive amounts of data has reached the point where no single entity can do all the work; great data collaboration is a necessity for success at any level of business. According to article, “Andreas Weigend, who directs Stanford University’s Social Data Lab, is a longtime proponent of the societal benefits that come with the socialization of data. If the last century was marked by the ability to observe the interactions of physical matter—think of technologies like x-ray and radar — this century, he says, is going to be defined by the ability to observe people through the data they create, share and consume.”
Such a socialization of data and the collaboration that comes with it has many sides though, “On one side, businesses now require smart machines to blend vast amounts of data together for analysis. Two-thirds of organizations are already trying to blend together five to 15 sources of data for analysis, according to a recent Harvard Business Review study (PDF), and the majority who use manual analysis with Excel docs realize it’s not a viable solution anymore.
On the flip side, once that complex data blending has been done, there are significant benefits to the wisdom of the crowd, aka data analysis collaboration. Various experts in different disciplines can review and weigh in, external partners can collaborate on shared data insights, and new answers can be asked in a groupthink manner with iterations within the data analysis.”
The problem with many catastrophic risks isn’t just that their impacts, when they hit, are so massive. It’s also that their odds of occurring in any given short time frame are very small, so that planning for them has to be handled as a long-term priority while the proverbial sun is shining. And neither companies nor individuals are particularly apt at taking serious, long-term action to prepare for low probability, high consequence events.
Enter the Wharton Risk Management and Decision Processes Center, which was created 30 years ago to help individuals, businesses, governments and global organizations to be better prepared for those longer range, more unpredictable dangers.
Knowledge@Wharton spoke with Howard Kunreuther and Robert Meyer, co-directors of the Wharton Risk Management and Decision Processes Center, and executive director Erwann Michel-Kerjan about the center’s research and how managing risk has changed over the past few decades.
An edited transcript of the conversation appears below.
Knowledge@Wharton: Howard, what led to the starting of the Risk Center 30 years ago?
Howard Kunreuther: Well, it’s interesting that our center has always focused on low probability, high consequence events, [because] it was a low probability, high consequence event that actually got the center started. I was in the office of the CEO of Rohm and Haas with my colleague Ned Bowman [of Wharton]. We were looking at the challenges that the company was facing in dealing with environmental risks, and when we arrived there, we were told that there had been a large chemical accident in Bhopal that the company was very concerned about. It involved Union Carbide, but every chemical company was involved. And that really was the start of the center, because we worked very closely with Rohm and Haas and Cigna to begin to look at issues like chemical accidents as a way of trying to figure out how we would deal with extreme events.
Knowledge@Wharton: Thinking about the catastrophic risks that businesses faced 30 years ago, what were some of the most important risks in addition to manufacturing accidents like Bhopal that you were concerned about?
Kunreuther: It was really the chemical accidents that got us started, and I think technological accidents were clearly a very important part of how businesses had to think. They weren’t thinking as much about it as we would have liked them to. They were saying it wasn’t going to happen to me. But that was certainly on the agenda, and any time there was an accident like a Bhopal, they then paid attention to it. The other area we focused on — and that had been the focus of a lot of the research a number of us had been doing, including my late colleague, Paul Kleindorfer, who was co-director of the center when we formed it — was natural hazard risks and natural disasters. And those were risks that were not predictable, but if there was a severe hurricane or flood or earthquake, that might have an impact in terms of how the firms had to react.
“When you talk to companies or individuals and ask what risks they are most concerned about, typically, they are the things that just happened yesterday. People tend to focus on the disaster that just happened.” –Robert Meyer
Knowledge@Wharton: What were some of the research projects that you took on to look into these risks?
Kunreuther: Well, because of our start with the chemical industry, we had a very large project with the Environmental Protection Agency on chemical accidents — how one dealt with them — and technological accidents, so we were certainly working on that. We were also working on the natural hazards area and why individuals were not protecting themselves and purchasing insurance. That was something that both Paul and I had been focusing on with others over a period of time.
The other area that emerged was the siting of the high-level radioactive waste facility at Yucca Mountain in Nevada. There was a whole project that was formed, and for 10 years, there was a group of us who were working together. It was very much an interdisciplinary group. Paul Slovic, president of Decision Research, was a part of that. Roger Kasperson, a geographer, a psychologist, and then there were anthropologists — we were all working with the state of Nevada to try to figure out how to site this facility, and so the center played a role in that. We had been looking at siting a liquefied natural gas facility before the center had been formed.
Knowledge@Wharton: What would you say were some of the key findings of your earliest research projects?
Kunreuther: The key findings are findings we may want to talk about even today. Really, what was happening was that it wasn’t until a disaster occurred that there was really a lot of attention paid. There was a tendency to say, “This is not going to happen to me,” and firms were behaving that way. Certainly, consumers and homeowners were behaving that way. As a result, we as a center were trying to figure out the important things to think about beforehand, and what kinds of programs and policies could be put forward to try to deal with them so we didn’t have to be in a reactive mode after a disaster occurred.
Knowledge@Wharton: If all of you were to look back over the past 30 years, how would you say the nature of risk has evolved and changed? Bob, would you like to start us off?
Robert Meyer: The risks have always been there. To build on what Howard was saying, one of the things we’ve observed as a center is that often, when you talk to companies or individuals and ask what risks they’re most concerned about, typically, they are the things that just happened yesterday. People tend to focus on the disaster that just happened, so one of the things we try to do as a center is get people and organizations to focus not only on the event that just happened, but also to refocus on unseen risks.
Just to give you an example, we work with the World Economic Forum, and every year, they come out with a survey of about 900 academics and ask them what are the risks that they are most concerned about. Typically, what you find is an awful lot of year-to-year variability in what is hitting the radar screen. For example, last year, the No. 1 thing that came up was state unrest, particularly in Europe. If you think about it, that makes sense, because one of the big news items in Europe last year was unrest in the Ukraine and so forth. But what’s interesting is a risk that was very important two or three years ago: cyberterrorism. In some sense, one of our challenges as a center is to get people and organizations to think about not just the thing that happened most recently, but to take a good long-term view of what are real risks. Often, the things you have to worry about are the things that you’re not currently thinking about.
Knowledge@Wharton: Erwann, what do you think?
Erwann Michel-Kerjan: …The
“Republished with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.”
