The Hidden Costs of Poor Information Governance in Law Firms

Information governance (IG) in law firms is often viewed as a compliance requirement—an obligation to manage records, secure client data, and ensure regulatory adherence. However, poor IG practices create financial, operational, and legal risks that firms cannot afford to ignore. The true cost of ineffective IG goes beyond regulatory fines; it impacts efficiency, client trust, and long-term profitability.

Many firms underestimate the ripple effect that weak IG policies create. Disorganized data management, inconsistent security protocols, and outdated retention strategies lead to lost time, costly remediation efforts, and exposure to potential litigation. These issues are magnified in an era where regulatory scrutiny and client expectations around data security are at an all-time high.

Financial Risks: The Price of Inefficiency and Non-Compliance

Poor IG practices introduce significant financial liabilities. Regulatory fines for non-compliance with data protection laws continue to rise, and law firms—trusted with vast amounts of sensitive client information—are high-risk targets for breaches and audits. When policies are not enforced, firms face costly penalties, often reaching millions of dollars, for failing to secure or properly dispose of confidential information.

Beyond direct penalties, poor IG leads to inefficiencies that drain resources. Searching for misplaced files, managing redundant data, and maintaining unnecessary storage add up quickly. Many firms pay for excessive physical and digital storage because they lack a streamlined approach to data retention. Without proper IG controls, firms find themselves accumulating costs for storing irrelevant or outdated documents, which not only increases expenses but also complicates compliance efforts.

Cybersecurity breaches are another costly consequence of weak IG. A single data breach can result in legal fees, damage control, and compensation to affected clients. More concerning is the loss of reputation—a firm known for a security lapse faces difficulties retaining and attracting clients. The financial impact of a breach extends well beyond immediate damages, affecting long-term client confidence and firm valuation.

Operational Disruptions: Inefficiency at Scale

Disorganized data and poor record-keeping lead to wasted time and lost productivity. Attorneys and staff often spend hours retrieving documents that should be readily accessible. Without clear governance, firms rely on inconsistent naming conventions, unsecured storage solutions, and outdated filing practices, leading to confusion and errors.

Poor IG also creates bottlenecks in document review and case preparation. When information is scattered across multiple repositories, teams struggle to work efficiently, increasing billable time for tasks that should be streamlined. This results in higher internal costs and frustration among clients who expect precision and responsiveness.

For firms undergoing mergers or lateral acquisitions, the risks multiply. Integrating multiple sets of inconsistent IG practices creates redundancies and exposes firms to legal and financial risks. Without a structured IG framework, firms risk inheriting poor practices that compound inefficiencies and lead to compliance challenges.

Legal Exposure: A Growing Threat

Failure to adhere to information governance policies doesn’t just slow operations—it exposes firms to legal consequences. Courts and regulatory bodies demand strict adherence to data management, particularly regarding record retention and disposal. Poor IG policies can result in:

• Sanctions for failure to produce requested records in litigation.

• Liability for improper data disposal, leading to client confidentiality breaches.

• Non-compliance fines for failure to meet industry and government regulations.

• Increased vulnerability in malpractice claims due to missing or mishandled records.

Inadequate IG practices also create ethical concerns. Law firms have an obligation to maintain client confidentiality, and any lapse in security or document management can lead to severe reputational damage. Clients expect firms to handle their information with the highest level of diligence. Firms that fail to meet this expectation risk not only legal penalties but also erosion of trust, which is far more difficult to recover.

Small vs. Large Firms: A Cost Comparison

The financial impact of poor IG practices varies by firm size, but the risks remain significant for all.

For smaller firms, the challenge often lies in resource allocation. With leaner teams and fewer dedicated compliance personnel, IG responsibilities frequently fall to legal staff who already have demanding workloads. As a result, record management becomes inconsistent, security gaps emerge, and compliance often takes a back seat to casework. The financial impact of a single regulatory fine or cyberattack can be devastating for a small firm, where budgets are tighter and reputation is paramount.

Larger firms, on the other hand, face complexity challenges. Managing vast amounts of client data across multiple practice areas, offices, and jurisdictions requires sophisticated IG frameworks. Without a centralized strategy, inefficiencies multiply, and compliance risks increase. Large firms also tend to accumulate unnecessary storage costs at scale, paying for data that should have been properly disposed of under retention policies. The cost of regulatory audits and potential fines can be exponentially higher for larger firms due to the sheer volume of data they handle.

Regardless of size, firms that neglect IG often find themselves in reactive mode—addressing compliance failures, security breaches, or litigation risks after the damage has been done. The cost of remediation far outweighs the investment required to establish proactive IG policies.

The Case for Strong IG Practices

The cost of poor IG is clear, but firms that prioritize governance benefit in several ways:

• Cost Savings – Reducing redundant data storage, streamlining compliance processes, and preventing fines significantly lower operational costs.

• Increased Efficiency – Well-organized information enables attorneys and staff to focus on high-value tasks rather than searching for misplaced documents.

• Risk Mitigation – Strong IG policies safeguard firms from regulatory scrutiny, cybersecurity threats, and malpractice claims.

• Stronger Client Relationships – Clients expect law firms to manage their data securely and efficiently. A well-structured IG program reinforces trust and credibility.

Firms that implement robust IG policies don’t just mitigate risks—they position themselves for greater efficiency, lower costs, and enhanced client confidence.

Turning Risk into Opportunity

The consequences of poor IG are significant, but they are avoidable. Law firms that take a proactive approach to governance reduce financial waste, improve operational efficiency, and protect themselves from legal exposure. By prioritizing information governance, firms not only meet compliance obligations but also create a foundation for long-term success. For firms looking to assess and strengthen their IG policy and process, Mattern Associates can provide a roadmap for success. Contact Mattern at info@matternassoc.com to learn how optimized IG practices can reduce costs, mitigate risks, and improve firm efficiency.