Enterprise Risk Management - Manufacturing Industry Spotlight

Five Questions Manufacturing Leaders Should Ask About Enterprise Risks

Manufacturers today operate in a volatile environment, facing interconnected risks that can affect operations. Supply chains stretch across geopolitical fault lines, cyber attacks target production systems and back-office data, trade policies shift, and skilled labor markets remain tight. A single vendor disruption, a tariff change, or an unlocked terminal can cascade into missed production, delayed orders, and lost revenue before leadership can react to the initial problem.

Some organizations manage these risks in isolation — a compliance report here, a heat map there — treating risk management as a periodic exercise rather than an operating discipline. That approach is no longer sufficient. A strong enterprise risk management (ERM) strategy connects risk directly to performance, giving leaders the coordinated visibility and accountability needed to protect production and make faster decisions under pressure.

The following questions and answers shed new light on the importance of ERM and how an ERM assessment can help manufacturers reduce risk and operational disruption.

What Are the Most Significant Enterprise Risks Facing Manufacturers Today?

• Cybersecurity risks can extend to the production floor, where unsecured terminals, data storage, and inconsistent access controls create vulnerabilities despite formal cyber defenses.
• Supply chain risks and third-party vendor management continue to be a significant enterprise-level concern, since a single vendor’s failure to deliver can stop production, compromise quality, or increase costs.
• Tariff and trade volatility create uncertainty around sourcing, costs, and production planning, making it critical to understand which products, materials, and suppliers carry the greatest exposure.
• Workforce management affects production and operations as manufacturers navigate a lack of skilled workers to fill workforce vacancies.
• Regulatory change creates risks that could result in fees and penalties for organizations that are unable to swiftly comply.
• Financial and market factors — such as inflation, commodity price volatility, changing customer demand, and economic uncertainty — continue to challenge manufacturers and put pressure on margins and growth plans.

How Have Top Risks Changed in Recent Years, and What New Risks Are Emerging?

• Cyber risk continues to intensify as organizations face increasingly sophisticated threats while simultaneously increasing their dependence on connected systems and digital operations. Cybersecurity has evolved from a periodic IT project into a continuous operational discipline and requires leaders to broadly assess risk while addressing specific vulnerabilities.
• Trade volatility in the market has increased. This is due to the accelerated pace of change in trade policy, with new tariffs being introduced, changed, or rescinded completely.
• Supply chain disruptions driven by geopolitical uncertainty and global market instability are affecting manufacturers’ ability to keep production lines operating, resulting in a significant impact on the ability to meet customer demand.
• Workforce gaps in manufacturing are widening as a significant portion of the experienced workforce approaches retirement, accelerating the loss of critical operational knowledge and technical expertise.
• Automation and artificial intelligence (AI) have begun accelerating productivity in some areas while simultaneously also expanding the attack surface and introducing types of risk that didn’t exist even a few years ago.

Where Do Manufacturers Most Commonly Struggle With ERM?

• It’s often difficult to understand the need to assess overall risks and implement internal controls or playbooks to manage potential risks.
• Addressing enterprise risks from a siloed position instead of taking an overarching approach can create fragmented accountability for risk management.
• Failing to regularly re-evaluate risk on a daily basis for core functions and day-to-day operations when systemic risk is widespread can significantly affect production.
• Some organizations fail to recognize how vendor and supply chain dependencies can quickly halt production lines.
• Understanding that data security gaps are often less about sophisticated attacks and more about legacy infrastructure is critical for success. Many manufacturers run outdated systems while asking employees to adopt new technology faster, with less training and fewer resources than the shift requires.
• Treating small, seemingly contained data losses as isolated incidents rather than meaningful organizational risks that signal a systemic gap.
• As AI use proliferates, some organizations miss the opportunity to mitigate AI risks through extensive, in-depth employee training.
• Some manufacturers struggle to address workforce challenges, including the need for training and capturing institutional knowledge before workers leave.

How Can Manufacturers Better Connect Risk Management to Operational Performance and Strategy?

Contact BDO today to learn more about our Enterprise Risk Management services and how we can help your organization build resilience for the future.