The illusion of control
Geert Peter de Oude
CEO at Onyx One - Pioneering Global Contractor Management Through SaaS Excellence & Unmatched Compliance
In a world where technological progress and digitisation are advancing at a rapid pace, the industrial sector continues to struggle with a paradoxical problem: the persistent illusion of control through paper-based processes. However, this seemingly innocuous preference for the tangible has far-reaching consequences, which we will explore in depth in this article. We are at a crossroads where the choice between digital innovation and outdated methods is not only a matter of efficiency, but of existential importance for companies in the chemical, energy and pharmaceutical sectors.
The paradoxical shield
The case that rocked the industrial world took place in 2024. A judge ruled that the manual process recording at PharmaGlobal was not just an inefficiency, but represented ‘a conscious acceptance of risk’. This ruling marked a tipping point: paper-based controls, long considered a reliable shield against risk, were transformed overnight into a sword of Damocles hanging over the head of every HSSE manager.
Dr Elena Petrova, professor of business ethics at the London School of Economics, interprets this shift: ‘Here we see a fundamental redefinition of what “due diligence” means in the 21st century. Adhering to methods that are demonstrably inferior to digital alternatives is now seen as a form of negligence.’
The implications of this reach far. In a recent survey of Fortune 500 companies, 78% of CEOs said they are radically overhauling their risk management strategies in response to this statement. John Chen, CEO of ChemTech Industries, puts it this way, ‘This statement was our wake-up call. We realised that what we saw as due diligence was in fact a ticking time bomb.’
The neuro-economy of paper arrogance
To understand why companies cling so stubbornly to outdated methods, we need to dig deeper than conventional economic theories. Recent fMRI research at KU Leuven sheds fascinating light on this issue. Dr Marieke van der Heijden, principal investigator of the study, explains: ‘We found that tactile interaction with documents induces a dopamine release similar to gambling behaviour. There is literally a ‘paper high’.’
This neurological addiction to what we might call ‘paper security’ has far-reaching economic consequences. A comprehensive study by McKinsey shows that this preference costs European industry €23 billion a year in lost productivity. ‘It is a classic case of false sense of security,’ says Dr van der Heijden. ‘The more signatures and paper trails, the less real control there often is.’
These insights from neuroscience offer an explanation for what economists have long observed but struggled to explain: the seemingly irrational resistance to digitisation in risk management systems.
Legal minefield -> compliance as nemesis
The EMA vs PharmaGlobal case (2023) represented a watershed in how the law looks at risk management. The judge's ruling - ‘Deliberately forgoing available digitisation is a form of culpa in causa’ - has far-reaching implications for the entire industry.
Mr Sophia Andersson, partner at renowned law firm Clifford Chance, analyses: ‘This ruling creates a new duty of care for companies. It is no longer enough to show that you have processes in place; you must now be able to show that you are using the most effective processes available.’
The practical implications are already visible. Legal departments at industrial giants such as Dow Chemical and Shell report a 73% increase in liability claims related to manual errors since 2024. This trend is continuing across sectors from petrochemicals to pharmaceuticals.
At the same time, we are also seeing the emergence of technological solutions that address these legal risks. Blockchain-certified logs, for example, have led to a 92% reduction in documentation-related disputes in implementations at Enexis and BASF. ‘This is not just about efficiency,’ Andersson stresses. ‘It's about creating irrefutable evidence of due diligence that stands up in court.’
The hidden algebra of manual risk
An in-depth analysis of 47 industrial companies conducted by the MIT Sloan Center for Information Systems Research reveals what we might call the ‘hidden algebra of manual risk’. Dr Rajiv Patel, lead author of the study, explains: ‘What we see is that each manual process element generates an exponential accumulation of risk. It's like a snowball effect of potential errors and inefficiencies.’
The numbers are staggering:
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Dr Patel stresses, ‘These figures show that manual processes are not only inefficient, they are actively detrimental to an organisation's risk management.’
Strategic implications and recommendations
Dr Klaus Schwab, founder of the World Economic Forum, states, ‘In the era of the Fourth Industrial Revolution, digital transformation is not a technological strategy, but a survival strategy.’ For HSSE managers and CEOs, this means that investment in digital risk management systems should no longer be seen as a cost, but as a strategic necessity.
The transition to digital risk management requires more than just technology implementation. Prof Amy Edmondson of Harvard Business School stresses the importance of a ‘psychologically safe’ working environment: ‘Organisations need to create a culture where people feel safe to report mistakes and embrace digital systems without fear of repercussions.’
In a rapidly changing regulatory environment, static risk management is no longer sustainable. Dr Zhao of Novartis advises, ‘Implement systems that can learn and adapt. The future of risk management lies in predictive analytics and real-time adjustments.’
Mr Andersson of Clifford Chance warns: ‘Don't wait for the next court case to update your systems. Proactive digitisation is the best legal defence in the current climate.’
Beyond the illusion of control
The transition from paper to digital is more than a technological upgrade; it is a fundamental overhaul of how we understand and manage risk. As Prof De Vries aptly puts it, ‘We need to let go of the illusion of control to gain real control.’
For HSSE managers, CEOs and other decision-makers in the industrial sector, the message is clear: the future of risk management is digital, adaptive and proactive. Companies that embrace this reality will not only survive, but thrive in an increasingly complex world.
The choice is yours: will you stick with the familiar but insidious security of paper, or will you move to the robust, data-driven world of digital risk management? In light of the legal, economic and neurological insights we have discussed, there seems to be only one wise choice.
Geert Peter de Oude CEO Onyx One