Industry 4.0 - Helping Manufacturers Manage Legal Risks

The goal of winning market share in today’s competitive economic environment has led many manufacturers to re-invent themselves by doing things differently.

To prosper and grow, manufacturers are having to embrace Industry 4.0 technologies – that can mean fundamental improvements to the industrial processes involved in engineering, material usage, asset performance and management, and supply chain and lifecycle management.

The ambition is the "smart factory" with cyber-based systems capable of autonomously exchanging information, triggering actions, and controlling each other independently. Factories are empowered to drive productivity and keep costs down while ensuring quality and consistency across manufacturing processes.

But taking an Industry 4.0 approach to new investment – as well as research and development (‘R&D’) - also means navigating a process of change that may have legal implications.

• Data and IP - Industry 4.0 poses new questions around cyber-security, privacy, and ownership of data and intellectual property. There are often questions related to the geographical location of data that is stored in the ‘cloud’ and which jurisdictions can gain access to that information.
  This uncertainty can have the effect of blocking some investments and projects - because of concerns about possible legal implications. Rather than migrating all data to the cloud, some organisations are instead choosing to store information on servers sited at local premises  
• Cybersecurity – the number of cyber attacks on manufacturers is growing, and the problem is holding back some manufacturers from investing in digital technologies, with many having no processes in place to mitigate attacks. Data breaches happen when organisations fail to put in place sufficient information governance and fundamental data protection practices. The high cost can have long term financial effects, because businesses have not fully appreciated the value of their data in preserving and protecting commercially-sensitive information
• Re-thinking risk – one of the primary legal considerations in an Industry 4.0 environment is whether or not any liabilities facing organisations have changed. New processes may involve different liabilities to customers and manufacturers – and may also change liability and responsibilities to regulators.
  When adopting new technology or moving data to the cloud, organisations need to carry out fresh legal checks, and embed any new risk processes in the culture of the business.
  However, for many, the greater risk is just standing still and letting rivals overtake them with higher and more effective levels of innovation. The law should not be seen as a hindrance - but rather a framework to help define risks and responsibilities, and facilitating desired business outcomes, and should certainly not deter technology investments  
• Internal controls and visibility – as businesses become increasingly complex, it is vital to have the systems and operations in place to monitor risk, governance and compliance. This may involve controls over accounting systems, separation of duties involving who carries out checks and balances, adherence to company law and codes of conduct
• People management – Industry 4.0 is not necessarily about job losses. While automation in the factory gives manufacturers the ability to expand product and service offerings, manufacturers have the opportunity to better utilise and upskill an existing workforce. But the process of managing personnel and employment change can be problematic and needing careful human resources management

Overall, Industry 4.0 should be seen as a huge opportunity for businesses and organisations keen to improve historic levels of low productivity in the UK. Legal expertise is sometimes sought too late in the process, when there is already a done deal and substantial sums invested in new processes and technologies.

As with any change, there are always legal considerations and obligations that companies need to meet. But working with a lawyer from the start can mitigate any impact on project implementation.