ZenGRC

Simply Powerful GRC

Manufacturing

Top 10 Risks Faced by the Manufacturing Industry

· ·

Today’s global economy is more interconnected than ever before. That drives significant benefits for companies and industries operating worldwide. However, it also has significant new risks, necessitating effective risk mitigation strategies.

One industry that faces a multitude of risks is the manufacturing sector. Within this industry, numerous risks affect companies and their human, IT, and financial assets. Risk remediation vs risk mitigation strategies are crucial in addressing these challenges.

Advances in internet-based communications, wireless sensors, and data processing capacity have led to a huge increase in the complexity of supply chains. Because of the intricate nature of these networks, potential risk points are dispersed throughout the entire chain. With their extended supply chains and carefully calibrated internal operations, manufacturing businesses feel that risk especially acutely.

Continue reading to learn more about the top 10 potential risks the manufacturing industry faces.

What Are Manufacturing Risks?

Manufacturing risks encompass uncertainties and potential disruptions that can impact various facets of a manufacturing operation. These types of risks are diverse and complex, making it essential for manufacturing companies to identify, assess, and mitigate them effectively. Here are some examples of manufacturing risks:

  • Raw Material Shortages: Manufacturers heavily rely on a steady supply of raw materials. Any unexpected shortage can disrupt production schedules, increase costs, and affect product quality.
  • Regulatory Changes: New regulations or compliance requirements can necessitate adjustments to production processes, safety protocols, and sometimes significant investments in compliance-related activities, prompting the need for robust risk mitigation strategies.

These are just a couple of examples that underscore the diversity of operational risks in the manufacturing industry. Identifying, assessing, and mitigating these risks is crucial for the resilience and sustainability of operational risk management. 

What Are the 3 Pillars of Operational Risk?

Operational risk in manufacturing can be categorized into three pillars: people, processes, and systems.

  1. People: Employees play a pivotal role in operational risk. Training, competence, and adherence to safety protocols are essential to mitigate human-related risks.
  2. Processes: Effective manufacturing processes are crucial for risk reduction. Streamlining processes, quality control, and continuous improvement efforts can minimize operational disruptions.
  3. Systems: Technology and data management systems must be robust and secure. Regular maintenance, updates, and cybersecurity measures are essential to mitigate risks associated with technology.

Top 10 Manufacturing Risks

1. Cybersecurity risks

Cybersecurity plays a vital role in manufacturing as new technologies are deployed. The manufacturing industry needs to improve its cyber risk management and be more mindful of securing sensitive employee and customer data, IT assets that govern the supply chain, and other industry-related processes.

Cybersecurity vulnerabilities and data breaches are the most pressing threats affecting businesses today since hackers will take advantage of any opportunity to leverage cyberattacks and disrupt operations, causing downtime.

2. Intellectual property protection

The manufacturing industry has moved away from traditional production toward using new technologies to manage the configuration of physical assets provided by other suppliers. As a result, trade secrets and other intellectual property have become valuable targets for cybercriminals.

Therefore, establish cybersecurity and risk assessment protocols to maintain an effective strategy against potential theft of intellectual property and to keep the company’s intellectual output secure.

3. Global impact and international operations

International trade agreements significantly affect industry and business continuity. As a result, it’s essential to comply with regulatory obligations, including export controls, since export control regulators can impose costly sanctions.

Export rules and legislation change often, so keep current with any change affecting your company’s operations. For example, the United Kingdom’s withdrawal from the European Union triggered new U.K. domestic laws affecting the manufacturing industry. Russia’s invasion of Ukraine in 2022 started sanctions worldwide against selling many goods and services to Russia.

4. 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 Covid-19 pandemic was a painfully clear example of this. Shutdowns led to closed ports, shortages, disrupted transport, raw materials not being processed, and other disruptions — leading to rising commodity prices and higher production costs.

5. Supply chain interruption

Manufacturers that can’t meet delivery targets due to a supply chain interruption are at 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 to identify key suppliers and to determine how supply chain disruptions might affect the manufacture of end-products.

6. Product recalls

Product recalls are when a manufacturer must take back already-sold products because the product has a defect that could cause harm or grievance to consumers. Recalls can disrupt production, manufacturing processes, distribution, and the business’ supply chain. They can also expose the organization to costly legal and reputational harm.

7. Third-Party Vendors

A third-party vendor can expose manufacturers to numerous risks. For example, poor vendor practices can be a regulatory risk since the manufacturer is responsible for any misconduct or negligence while a vendor works on the manufacturer’s behalf. So, a system of vendor risk management and security initiatives addressing cyber risk is crucial.

8. Property damage

Various physical 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.

9. Environmental impact

Industrial activity affects the surrounding environment, and harm to the local climate can bring real trouble. Pollution, deforestation, industrial accidents, and other potential damage all need attention. These specific risks demand immediate attention to ensure both regulatory compliance and the preservation of the environment.

For instance, improperly handling organic waste or toxic chemicals can result in regulatory fines and civil lawsuits and harm a company’s reputation. Mitigating these specific risks is paramount for manufacturing businesses’ long-term sustainability and success.

10. Labor concerns

Forced labor and human trafficking can sneak into the far-flung corners of a global supply chain, and the consequences ricochet 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 must meet compliance obligations for workplace safety, organized labor, wage-and-hour violations, etc.

Importance of Managing Risks in Manufacturing

Proactive risk management is essential for the manufacturing industry for several reasons:

  1. Enhanced Safety: Effective risk management reduces workplace accidents and ensures employee safety, promoting a positive workplace culture.
  2. Operational Efficiency: Mitigating risks leads to smoother operations, less downtime, and greater overall efficiency.
  3. Cost Savings: By identifying and addressing risks, manufacturing companies can avoid costly disruptions and recalls. Implementing a robust risk management process allows them to tackle potential issues proactively.

Risk Reduction in the Manufacturing Industry

A risk management plan can reduce the uncertainty around all those risks with planning, assessment, mitigation, and monitoring. Risk identification is the first step, followed by establishing a risk management framework. 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, and apply appropriate mitigation measures as part of your risk management process. Then, continuously monitor ongoing regulatory compliance with risk management protocols.

Manage risk with ZenGRC

ZenGRC is a governance, risk, and compliance platform that assists you with implementing, managing, and monitoring your risk management system and corrective actions. Analyzing risks and documenting risk mitigation methods for manufacturers 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. Keeping records and preparing for audits is automatic and effortless.

Schedule a demo to get started on the path to worry-free risk management the ZenGRC way.

Top 10 Risks Faced By the Manufacturing Industry

· ·

Today’s global economy is more interconnected than ever before. That drives significant benefits for companies and industries operating worldwide. However, it also has significant new risks, necessitating effective risk mitigation strategies.

One industry that faces a multitude of risks is the manufacturing sector. Within this industry, numerous risks affect companies and their human, IT, and financial assets. Risk remediation vs risk mitigation strategies are crucial in addressing these challenges.

Advances in internet-based communications, wireless sensors, and data processing capacity have led to a huge increase in the complexity of supply chains. Because of the intricate nature of these networks, potential risk points are dispersed throughout the entire chain. With their extended supply chains and carefully calibrated internal operations, manufacturing businesses feel that risk especially acutely.

Continue reading to learn more about the top 10 potential risks the manufacturing industry faces.

What are manufacturing risks?

Manufacturing risks encompass uncertainties and potential disruptions that can impact various facets of a manufacturing operation. These types of risks are diverse and complex, making it essential for manufacturing companies to identify, assess, and mitigate them effectively. Here are some examples of manufacturing risks:

  • Raw Material Shortages: Manufacturers heavily rely on a steady supply of raw materials. Any unexpected shortage can disrupt production schedules, increase costs, and affect product quality.
  • Regulatory Changes: New regulations or compliance requirements can necessitate adjustments to production processes, safety protocols, and sometimes significant investments in compliance-related activities, prompting the need for robust risk mitigation strategies.

These are just a couple of examples that underscore the diversity of operational risks in the manufacturing industry. Identifying, assessing, and mitigating these risks is crucial for the resilience and sustainability of operational risk management. 

What are the 3 pillars of operational risk?

Operational risk in manufacturing can be categorized into three pillars: people, processes, and systems.

  1. People: Employees play a pivotal role in operational risk. Training, competence, and adherence to safety protocols are essential to mitigate human-related risks.
  2. Processes: Effective manufacturing processes are crucial for risk reduction. Streamlining processes, quality control, and continuous improvement efforts can minimize operational disruptions.
  3. Systems: Technology and data management systems must be robust and secure. Regular maintenance, updates, and cybersecurity measures are essential to mitigate risks associated with technology.

Top 10 Manufacturing Risks

1. Cybersecurity risks

Cybersecurity plays a vital role in manufacturing as new technologies are deployed. The manufacturing industry needs to improve its cyber risk management and be more mindful of securing sensitive employee and customer data, IT assets that govern the supply chain, and other industry-related processes.

Cybersecurity vulnerabilities and data breaches are the most pressing threats affecting businesses today since hackers will take advantage of any opportunity to leverage cyberattacks and disrupt operations, causing downtime.

2. Intellectual property protection

The manufacturing industry has moved away from traditional production toward using new technologies to manage the configuration of physical assets provided by other suppliers. As a result, trade secrets and other intellectual property have become valuable targets for cybercriminals.

Therefore, establish cybersecurity and risk assessment protocols to maintain an effective strategy against potential theft of intellectual property and to keep the company’s intellectual output secure.

3. Global impact and international operations

International trade agreements significantly affect industry and business continuity. As a result, it’s essential to comply with regulatory obligations, including export controls, since export control regulators can impose costly sanctions.

Export rules and legislation change often, so keep current with any change affecting your company’s operations. For example, the United Kingdom’s withdrawal from the European Union triggered new U.K. domestic laws affecting the manufacturing industry. Russia’s invasion of Ukraine in 2022 started sanctions worldwide against selling many goods and services to Russia.

4. 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 Covid-19 pandemic was a painfully clear example of this. Shutdowns led to closed ports, shortages, disrupted transport, raw materials not being processed, and other disruptions — leading to rising commodity prices and higher production costs.

5. Supply chain interruption

Manufacturers that can’t meet delivery targets due to a supply chain interruption are at 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 to identify key suppliers and to determine how supply chain disruptions might affect the manufacture of end-products.

6. Product recalls

Product recalls are when a manufacturer must take back already-sold products because the product has a defect that could cause harm or grievance to consumers. Recalls can disrupt production, manufacturing processes, distribution, and the business’ supply chain. They can also expose the organization to costly legal and reputational harm.

7. Third-Party Vendors

A third-party vendor can expose manufacturers to numerous risks. For example, poor vendor practices can be a regulatory risk since the manufacturer is responsible for any misconduct or negligence while a vendor works on the manufacturer’s behalf. So, a system of vendor risk management and security initiatives addressing cyber risk is crucial.

8. Property damage

Various physical 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.

9. Environmental impact

Industrial activity affects the surrounding environment, and harm to the local climate can bring real trouble. Pollution, deforestation, industrial accidents, and other potential damage all need attention. These specific risks demand immediate attention to ensure both regulatory compliance and the preservation of the environment.

For instance, improperly handling organic waste or toxic chemicals can result in regulatory fines and civil lawsuits and harm a company’s reputation. Mitigating these specific risks is paramount for manufacturing businesses’ long-term sustainability and success.

10. Labor concerns

Forced labor and human trafficking can sneak into the far-flung corners of a global supply chain, and the consequences ricochet 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 must meet compliance obligations for workplace safety, organized labor, wage-and-hour violations, etc.

Importance of managing risks in manufacturing

Proactive risk management is essential for the manufacturing industry for several reasons:

  1. Enhanced Safety: Effective risk management reduces workplace accidents and ensures employee safety, promoting a positive workplace culture.
  2. Operational Efficiency: Mitigating risks leads to smoother operations, less downtime, and greater overall efficiency.
  3. Cost Savings: By identifying and addressing risks, manufacturing companies can avoid costly disruptions and recalls. Implementing a robust risk management process allows them to tackle potential issues proactively.

Risk Reduction in the Manufacturing Industry

A risk management plan can reduce the uncertainty around all those risks with planning, assessment, mitigation, and monitoring. Risk identification is the first step, followed by establishing a risk management framework. 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, and apply appropriate mitigation measures as part of your risk management process. Then, continuously monitor ongoing regulatory compliance with risk management protocols.

Manage risk with ZenRisk

ZenRisk is a governance, risk, and compliance platform that assists you with implementing, managing, and monitoring your risk management system and corrective actions. Analyzing risks and documenting risk mitigation methods for manufacturers 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. ZenRisk enables manufacturers to assign and prioritize tasks so everyone knows what to do and when. Keeping records and preparing for audits is automatic and effortless.

Schedule a demo to get started on the path to worry-free risk management the ZenRisk way.

The Importance of ISO Certification in Manufacturing

· ·

For organizations that manufacture any type of product, overall quality and customer satisfaction are extremely critical. This is particularly important for companies that manufacture complex products, such as vehicles or medical devices. Note that vehicle manufacturers, particularly in the United States but also in other countries, have established their own quality standards for third party suppliers.  Additionally, medical device manufacturers are typically required to satisfy specific standards such as ISO 13485.     


And when components and assemblies for the end product are manufactured at different factories worldwide, it’s even more complicated to ensure that quality assurance systems are working properly. 


The International Organization for Standardization (ISO) standards enable manufacturers to continually measure, evaluate, and improve the systems that ensure product quality and reliability. Consequently, manufacturers have to verify that their products always fit together properly, function accurately, and meet customer expectations.


The International Organization for Standardization is an organization that publishes standards for goods, services, and processes. The international standards act as benchmarks for quality and efficiency in a number of industries, the majority related to the supply chain and, as such, manufacturing.

What is ISO 9000?

The ISO 9000 family of standards help companies satisfy the needs of their customers, meet regulatory requirements, and achieve continual improvement. 
ISO 9001, which sets out the criteria for a quality management system (QMS), is the only standard in the family that provides certification. To be certified to the ISO 9001 standard, an organization must follow the requirements set forth in the ISO 9001 standard. 


To become certified, a company hires a third-party firm to audit its processes, services, and products. The auditors measure the proper specifications and determine whether or not the organization meets the ISO 9001 criteria.


Companies use the ISO 9001 standard to demonstrate that they can consistently provide products and services that meet customer and regulatory requirements as well as demonstrate continuous improvement. 


ISO 9001 requires calibration of measuring and testing equipment, i.e. measurement traceability, along with continual improvement of the effectiveness of the QMS. Continual improvement is fueled by the objectives set by an organization’s leaders. At a minimum, the quality objectives should address the improvement of internal efficiency, the individual customer requirements, and the level of performance that the company’s industry experts.


ISO 9001 helps organizations find more effective ways to ensure quality while encouraging businesses to find creative ways to exceed customer requirements.

The benefits of ISO 9001 in manufacturing include enabling companies to identify, document, and improve the systems that address customer requirements, such as dimensional and functional specifications and expected production efficiencies. 


Since ISO standards mandate the process of continuous improvement, ISO 9001-certified companies are more apt to reduce overall errors, which saves money, improves customer satisfaction, and makes them more competitive.

What is Risk Management in Manufacturing?

· ·

Risk management in manufacturing refers to the unique challenges that the manufacturing industry faces in managing risks. Cybersecurity risks can be especially challenging to manage.

Increased digital connectivity via artificial intelligence such as robots, the internet of things (IoT), augmented reality, and other forms of new technology can make factories more efficient. But every connection serves as a possible portal for cybercrime.

And the stakes for manufacturing organizations can be especially high. A breach of one factory or facility could cause shutdowns or damage to its sister factories, resulting not only in lost productivity and revenue, but also, possibly, worker injury and even death.

Special risk management considerations for manufacturing companies include:

Enhanced Risk Assessment

Assessing a manufacturing company’s potential risks doesn’t just entail examining its own IT systems and cybersecurity. Risk identification should extend throughout the supply chain, starting with providers of the raw materials its factories use, and include third-party vendors.

Strategic Risk Identification

What risks are likely to be your greatest concern years into the future? In a Deloitte survey of manufacturing companies, executives said cybersecurity would be their number-one risk management priority. Compliance with critical infrastructure risk management frameworks such as National Institute of Standards and Technology Special Publication 800-53, Security and Privacy Controls for Information Systems and Organizations, is key, especially for companies affected by federal security regulations regarding critical infrastructure.

SCADA Quality Assurance

Keeping Supervisory Control and Data Acquisition (SCADA) systems and Industrial Control Systems (ICS) always on is crucial, so quality assurance testing is imperative. SCADA systems monitor and control a plant or equipment in industries such as manufacturing, telecommunications, water and waste control, energy, oil and gas refining, and transportation. Upgrading and updating systems and software, and monitoring them continuously, are also key. Our 11-step guide to managing manufacturing risk can help.

Automated GRC

Numerous case studies show that software such as the Reciprocity ROAR® Platform can greatly simplify the task of risk management for manufacturing organizations, and ensure compliance with regulations and standards come audit time.

Internal Audit Checklist for Your Manufacturing Company

· ·

The manufacturing industry faces increasing scrutiny from regulatory agencies. As cybercriminals increasing target SCADA system weaknesses, an organization’s cybersecurity posture becomes more important to its ability to protect data and obtain important contracts. Starting with a security-first approach to cybersecurity often protects data, but to meet compliance requirements, the organization need to document the effectiveness of its internal controls.

Internal Audit Checklist for Manufacturing Companies

What are the Primary Cybersecurity Concerns Facing the Manufacturing Industry?

SCADA networks are a combination of hardware and software that control and monitor industrial processes. They allow manufacturers to interact with devices, log data, and control remote and local processes. Many of these devices, however, were not intended for the connectivity now necessary to maintain a modern business model. Therefore, they come with significant cybersecurity risk making the manufacturing industry a primary target for malicious actors.

However, SCADA risks can lead to not only production loss but, more importantly, loss of life. Since SCADA systems control critical infrastructure, cybercriminals increasingly target them more than they do standard business systems.

What are the Regulatory Compliance Requirements for the Manufacturing Industry?

Regulatory compliance requirements in manufacturing are generally dictated by the federal government. These requirements specify rules to ensure that national secrets are protected. They allow non-government entities the ability to create items for government use while still existing as private businesses.

International Traffic In Arms Regulation (ITAR)

ITAR covers both goods and technology, combining commercial and research objectives with national security requirements. It regulates items designed for commercial purposes that the military can also adopt, such as computers and software.

Defense Federal Acquisition Regulation Supplement (DFARS)

DFARS Safeguarding rules and clauses establish minimum security standards for information systems that process, store, or transmit Federal contract information. These basic controls must be implemented throughout the supply chain. NIST Special Publication SP 800-171 set for guidelines for compliance.

What are the Primary Industry Standards Affecting the Manufacturing Industry?

The manufacturing industry traditionally needs to implement controls based on the International Organization for Standardization (ISO) standards.

ISO/IEC 27001:2013

This risk-based approach allows a variety of organizations to and industries to apply ISO 27001. This flexibility makes it one of the most utilized information security standards. Moreover, ISO/IEC 27001 lists a series of controls in Annex A that acts more like a menu creating a choose-your-own-adventure style approach to security. These extended control sets offer management the option to avoid, transfer, or accept risks rather than mitigate them through controls.

ISO 9001

ISO 9001 supports specifies the requirements for a quality management system (QMS). Quality management systems document the processes, procedures, and responsibilities over quality and control objectives.

ISO 9001 audits incorporate three types of review: product, process, and system. The lengthy list of documentation required includes both mandatory and non-mandatory information. The list of mandatory documents includes document control procedures, records procedures, internal audit procedures, control of non-conformance procedures, corrective action procedures, and preventive action procedures. While that does not feel overwhelming at first, each of those categories lists additional documents needed to prove the process works in action.

5 Steps to an Internal Audit in Manufacturing

Although internal audits can feel burdensome, they effectively act as a “pretest” before the external auditors arrive. A successful and comprehensive internal audit can act as a “practice run” that allows you to remediate issues before the external audit and prevent official findings.

Identify your Subject Matter Experts (SMEs)

Even though this is an internal audit, you may need to incorporate stakeholders from across the organization. For example, SCADA experts and internal IT experts need to communicate and work together to create a holistic security first compliance approach.

Document your Internal Control Procedures and Your Reasons for Them

Regardless of maturity level, you need to make sure to establish a risk analysis, policies, procedures, and processes. This documentation acts as the roadmap for your compliance program which helps to create the audit scope.

Continuously Monitor for Control Effectiveness

Cybercriminals continuously evolve their threat methodologies which means that a control’s effectiveness can weaken at any time. You need to continuously monitor your controls and remediate any potential weaknesses as soon as possible.

Continuously Document your Monitoring

Audits rely on documentation. Even if you are continuously monitoring, the auditor may return findings if you do not have the documentation. Documentation proves governance over the program which enables the Board of Directors to oversee the program.

Create an Internal Audit Workflow

Communication before, during, and after the audit helps maintain security and compliance. You need to create a process for preparing, reviewing, and responding to the internal audit to ensure that all tasks are completed in a timely manner.

How ZenGRC Enables Internal Auditing in the Manufacturing Industry

Compliance programs require communication between internal and external stakeholders and an audit system that enables this.

ZenGRC offers workflow tagging so that you can delegate compliance tasks and monitor their progress and completion. Moreover, it allows you to prioritize tasks so that your team members know how to plan their activities.

ZenGRC’s workflow management capabilities include a centralized dashboard that continuously documents your control effectiveness making compliance documentation easier.

Additionally, it helps you create an audit trail by documenting and remediation activities to support your responses to auditor questions.

Using ZenGRC’s single source of information platform can speed up internal and external stakeholder communications and provide all documentation necessary thus reducing external auditor follow up requests.

For more information on how ZenGRC’s audit management workflows can streamline your process, contact us for a demo.