Manufacturing Sector Most Impacted by Global Sanctions and Tariffs

Over half of manufacturing firms (57%) have been affected by newly imposed sanctions over the past 12 months.

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Over half of manufacturing firms (57%) have been affected by newly imposed sanctions over the past 12 months, according to new research from the latest Global Fraud and Risk Report released by Kroll, a division of Duff & Phelps, the global leader in risk mitigation, investigations, compliance, cyber resilience, security and incident response solutions. This figure is 10% higher than the global average (47%). More than two thirds 69% of manufacturing business leaders also reported an impact from new tariffs or trade wars, compared to a global average of 54%.

Kroll’s annual Global Fraud and Risk Report, with research conducted by Forrester Consulting, examines the current global risk landscape, understanding the biggest risks facing global companies and the steps being taken to prevent, detect and respond to daily threats.

Geopolitical issues continue to impact manufacturing firms, making accurately predicting and preparing for future opportunities and challenges difficult. Looking ahead, leaders in this sector are concerned about the potential breakdown in intergovernmental mechanisms for handling issues such as dispute resolution, free trade and combating corruption, with over two thirds (69%) voicing concern, compared to a global average of 61%.

Perhaps unsurprisingly, manufacturing firms are particularly vulnerable to intellectual property (IP) theft, with 43% of business leaders stating that they have experienced this over the past year—the highest of any sector surveyed. The sector is also experiencing the highest incidence of leaks of internal information, with nearly half (46%) of firms being affected by this, 7% higher than the global average of 39%.

The research also found that the manufacturing industry is reporting above-average rates of reputational damage due to third-party relationships, with over a third (35%) experiencing reputational damage within the last 12 months, compared to a global average of 29%. This finding suggests that manufacturing firms may need to enhance their reputational due diligence on suppliers. While a majority (89%) conduct this type of due diligence, manufacturing firms are below the global average of 92%. 

Perhaps due to the impact of robotics and other technologies on the sector, manufacturing firms are more concerned than other industries about disruptions due to artificial intelligence, with over two thirds (67%) of business leaders agreeing that artificial intelligence is a concern for the future compared to a global average of 56%.

“The research clearly shows that the manufacturing sector is susceptible to a number of evolving risks. One of the most prolific historically has been IP theft, which has plagued the sector for years, but geopolitical risks such as sanctions and tariffs are becoming an ever-greater issue for the industry to mitigate. Tariffs are a form of taxation that erode profitability and are a significant risk to the sector’s financial wellbeing. Many firms are now being forced to consider alternative options for their global supply chains and distribution networks, which often results in navigating unfamiliar territories posing a new set of opportunities and threats,” says Nicole Y. Lamb-Hale, a managing director in the business intelligence and investigations practice at Kroll, comments.