The global economy is more connected than ever, generating significant benefits for companies and industries operating worldwide.
Nobody, however, is exempt from threats that drive supply chain and manufacturing risk. There is no doubt that the manufacturing industry is beset by numerous risks that affect the company and its human assets.
Advances in communications and data processing capacity have led to an exponential increase in the complexity of supply chains, and a commensurate increase in their risks. Because of the intricacies of these networks, danger points are dispersed. That makes locating and quantifying those points challenging.
Companies often assume that risk should be reflected in a mathematical calculation. As a result, the likelihood of anticipating a potentially catastrophic event often seems elusive, but implementing strategies based on a risk assessment and mitigation plans can provide a precise response.
That is why we bring you the top 10 potential risks in the manufacturing industry.
Top 10 Manufacturing Risks
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Cyber Risks
Cybersecurity plays a vital role in manufacturing as new technologies are deployed. The manufacturing industry must improve its cyber risk management and be more careful in securing sensitive employee and customer data, IT assets that govern the supply chain, and other industry-related processes.
Since specific data must be stored over the years, access to documents and systems should be limited and carefully reviewed. In addition, there must be multiple layers of protection beyond passwords, such as two-factor authentication or single sign-on.
Cybersecurity vulnerabilities and data breaches are the most pressing threats affecting businesses today, since hackers will take advantage of whatever opportunity they can find to leverage cyberattacks and disrupt operations.
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Intellectual Property Protection
The manufacturing industry has moved away from traditional production and toward implementing new technologies to manage physical assets. As a result, trade secrets have become a valuable target to cybercriminals. Without proper security measures, that intellectual property is vulnerable to cyber theft.
Therefore, establish cybersecurity and risk assessment protocols to maintain an effective strategy against potential intellectual property theft and to keep the company’s intellectual output secure.
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Global Impact and International Operations
International trade agreements among states and organizations have a significant effect on industry and business continuity. As a result, it’s essential to comply with obligations derived from regulations — including export controls (the curbs a business places on what goods a business can sell overseas), as export control regulators can impose costly sanctions.
Export rules and legislation change often, so keep current with any change that may affect your company’s operations. For example, the United Kingdom’s withdrawal from the European Union triggered new U.K. domestic laws that will affect the industry.
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Raw Material Prices
Volatility in global markets can have significant consequences for manufacturing organizations. From unexpected fluctuations in raw material prices to rising energy costs, such surprises can destabilize markets and supply chains, making it difficult for manufacturers to continue delivering positive financial results.
The pandemic has been a painfully clear example of this. Lockdowns led to closed ports, disrupted transport, raw materials not processed, and other disruptions — which all led to rising commodities prices and higher production costs.
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Supply Chain Interruption
Manufacturers that can’t meet delivery targets due to an interruption in their supply chain are at a greater risk of losing millions of dollars in revenue and profits, threatening the business and its reputation.
To combat this threat, manufacturers should perform assessments of their supply chain risks regularly, to identify key suppliers and game out how disruptions along the supply chain might affect manufacture of end-products.
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Product Recalls
Product recalls arise when a manufacturer must take back already-sold products because the items have some defect that could cause harm or grievance with consumers. Recalls can disrupt production, distribution, and even the business’s supply chain, but more importantly, they can also expose the organization to costly legal and reputational harm.
A company should therefore have defined processes if a product recall is necessary, to execute the recall efficiently and with minimal harm to consumers (and minimal cost to the company).
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Third-Party Vendors
A deficient third-party vendor can expose manufacturers to numerous risks. For example, poor vendors can be a regulatory risk, since the manufacturer is responsible for any misconduct or negligence a vendor does while working on the manufacturer’s behalf. So a system of vendor risk management is crucial.
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Property Damage
Various traditional hazards must be managed to reduce threats to the safety of personnel, property, or business operations. For example, a fire can be tremendously harmful if it damages specialized equipment that can’t be replaced quickly or cheaply. In a distribution center, auto or truck accidents can wreck the building, injure employees, and ruin products before shipment.
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Environmental Impact
Industrial activity affects the surrounding environment, and harm to the local environment can bring real trouble. Pollution, deforestation, industrial accidents, and other potential damage all need attention. For example, the improper handling of organic waste or toxic chemicals can result in regulatory fines, civil lawsuits, and reputation harm.
In addition, consumers are paying ever more attention to a company’s environmental footprint and want to see businesses take environmental stewardship seriously. So manufacturers need to manage their environmental risks vigorously, and perhaps even publish reports on their corporate sustainability efforts.
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Labor Concerns
Forced labor and human trafficking can sneak into the far-flung corners of a global supply chain, and the consequences ricochet right up to the manufacturer selling goods to consumers. The result can be reputation harm, operational disruption as you cut ties with offending suppliers and struggle to find replacements, and the cost of dealing with regulatory enforcement.
Closer to home, workplace safety is a heavily regulated field. Businesses need to assure that they meet compliance obligations for workplace safety, organized labor, wage-and-hour violations, and so forth.
Risk Reduction in the Manufacturing Industry
Risk management can reduce the uncertainty around all those risks with planning, assessment, mitigation, and monitoring. Industrial control systems (ICS) connected with supervisory control and data acquisition (SCADA) systems provide firms with real-time monitoring and analysis.
The steps for SCADA risk management are the same as for any other risk. Catalog your assets, identify risks, analyze potential damage, mitigate the threat, and monitor ongoing compliance with risk management protocols.
ZenGRC is Your Secret Weapon for Risk Mitigation
Reciprocity’s ZenGRC is a governance, risk, and compliance platform that assists you with implementing, managing, and monitoring your risk management system and corrective actions. For manufacturers, analyzing risks and documenting risk mitigation methods can result in time-consuming, manual data entry.
To maintain a successful SCADA risk management program, you need a workflow tool that allows internal and external stakeholders to communicate and handle tasks. ZenGRC enables manufacturers to assign and prioritize tasks so everyone knows what to do and when to do it. Keeping records and preparing for audits are automatic and effortless.
Contact us for a free consultation and get started on the path to worry-free risk management – the Zen way.
