Records management (RM) is a field of management that oversees the creation, receipt, storage, use, access, maintenance, and disposal of records, whether in paper or digital format. It involves the supervision and administration of records throughout their lifecycle to ensure proper organization, accessibility, and compliance with regulatory requirements.

Why is records management important?

Records management focuses on:

  • Reducing lost and misfiled documents
  • Helping to organize existing documents better
  • Enabling quicker search and retrieval of documents
  • Improving the general work processes as well as efficiency
  • Increasing office space by reducing the amount of space needed for documents e.g. filing cabinets.

As well as improving the daily storing, modifying and sharing of documents, records management also establishes policies and standards so various types of records can be maintained:

  • Identifying what records exist by maintaining a records inventory
  • Applying required retention periods to stored items
  • Disposing of documents
  • Applying legal holds to records when necessary
  • Identifying the owner of each records series
  • Determining that a chain of custody and a proper audit trail both exist
  • Developing and administering defined records policy and procedures, regardless of whether the records are paper or electronic
  • Maintaining records throughout their life cycle

As a company grows, it gets more difficult to keep an overview of where documents are stored, whether they’re up-to-date, or if you even still have them.

The aim of records management is, therefore, to help a company make documents accessible for both business operations and audits. Spreadsheets are a great way to track where records are stored. Many small or medium-sized businesses use this method, but for larger businesses, records management software suites are more suitable and often have accounting software included.

How to comply with legal requirements

For many companies, it’s not simply a case of deciding whether to organize your documents correctly using records management; it’s actually a legal requirement. A company may find themselves faced with hefty fines and their business disrupted if they don’t comply with the regulations.

Sarbanes-Oxley Act

This act was passed by the U.S. Congress on July 30, 2002 and is one of the most important regulations in the United States. Also known as SOX, this act mandated strict reforms to existing securities regulations and imposed more severe penalties on anyone that didn’t comply. The act also aimed to help protect investors from fraudulent financial reporting by corporations.

The Sarbanes-Oxley Act achieves its aims by creating a new board, the Public Company Accounting Oversight Board, to oversee accounting as well as setting new standards for audit reports. It’s now compulsory for auditors of public companies to register with this board, which will then inspect and investigate these companies to make sure they’re complying with the legal requirements for records management.

The most important requirements of SOX include:

  • CEO and CFO responsibility: The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are required to certify the accuracy of financial statements, confirming their accountability for implementing and maintaining effective internal controls over financial reporting.
  • Internal control report: As part of their annual Exchange Act report, management must submit an internal control report, demonstrating their responsibility for establishing and upholding a structured internal control framework for financial reporting.
  • Data security policies: Companies must put formal data security policies in place, ensuring they are clearly communicated across the organization and strictly enforced.
  • Compliance proof: Organizations are required to maintain and present up-to-date documentation proving their adherence to SOX regulations.
Note

SOX has provisions for maintaining both physical and electronic records. It is important to bear email retention guidelines in mind when recordkeeping for a business: Emails can be (but are not required to be) considered business correspondence, and thus have to be retained for a minimum of seven years. Implementing a company-wide policy to ensure that all relevant email correspondence is being properly recorded and archived is key to ensuring your company is SOX compliant.

Consequences of non-compliance

Failure to comply with SOX can result in severe penalties, including:

  • Fines ranging from $1 million to $5 million
  • Imprisonment for up to 20 years

These strict penalties highlight the importance of adhering to records management and financial reporting standards to maintain corporate integrity and protect investor interests.

Recent changes in enforcement policies

While the Sarbanes-Oxley Act remains in effect, enforcement priorities have shifted. In February 2025, the U.S. president ordered the Department of Justice to stop enforcing the Foreign Corrupt Practices Act (FCPA), citing concerns over economic competitiveness and national security. This decision marks a significant change in the U.S. government’s approach to corporate compliance and anti-corruption enforcement.

Despite this shift, SOX remains fully enforced, requiring companies to adhere to strict financial reporting and internal control regulations. Businesses must stay updated on regulatory developments and seek legal counsel to ensure compliance with both SOX and evolving federal policies.

For the most up-to-date information, consult official sources such as the Securities and Exchange Commission (SEC) or legal professionals specializing in corporate compliance.

Please note the legal notice for this article.

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