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The "need to know" principle is crucial for information security because it ensures that individuals only have access to information that is essential for them to perform their specific job functions. This minimizes the risk of unauthorized access by limiting the distribution of sensitive data to only those personnel who require it to fulfill their responsibilities. By tightly controlling who can access what information, organizations can reduce the likelihood of data breaches, leaks, and other security incidents that could arise from individuals having access to information that is beyond their requirement.

The other options do not align with the primary purpose of the "need to know" principle. While reducing paperwork processing time or enhancing collaboration might be favorable, they do not directly address security risks. Allowing free discussion of sensitive information contradicts the principle’s objective, as unrestricted sharing can lead to potential security vulnerabilities.