Turning Risk into Resilience in the Industrials and Manufacturing Industry

Industrials and manufacturing organizations are navigating a landscape defined by volatility. Economic slowdown, geopolitical disruption, cyber threats and talent scarcity are converging to create a uniquely complex risk environment. At the same time, long investment cycles, sustainability pressures and the challenge of modernizing legacy infrastructure are adding further strain. But this complexity also presents opportunity: Organizations that embrace risk as a lever for growth — rather than a cost to be contained — are better positioned to build resilience and stay competitive.

Current Risk Realities: Rapid Changes on Multiple Fronts

According to Aon’s Global Risk Management Survey, industrial and manufacturing leaders identify the following risks as the most critical challenges facing their organizations today:

Top Current Risks Facing Industrial and Manufacturing Organizations

1. Economic Slowdown or Slow Recovery
2. Commodity Price Risk or Scarcity of Materials
3. Supply Chain or Distribution Failure
4. Business Interruption
5. Cyber Attack or Data Breach
6. Increasing Competition
7. Geopolitical Volatility
8. Regulatory or Legislative Changes
9. Exchange Rate Fluctuation
10. Product Liability or Recall

These risks are deeply interconnected; one often amplifies the effects of another. Understanding how they play out in practice — and interact — is essential to building a more complete picture of the sector’s evolving risk landscape. The following examples illustrate how several of the top-ranked risks are unfolding across the industry.

Economic Slowdown: Margin Pressure from All Angles

Economic slowdown is the top-ranked risk for the sector in 2025, climbing two places since our last survey. Persistent inflation, elevated interest rates and softening consumer demand are squeezing margins across the sector. Automotive manufacturers are seeing record-high vehicle prices deter buyers, while European chemical producers are grappling with surging energy costs, prompting some to reconsider their regional footprint.

These pressures cascade through the value chain. Raw-material costs are rising, steel and commodity prices remain volatile, and transportation expenses — from fuel to logistics — continue to climb. For heavy industry and advanced manufacturing, where operations are capital-intensive and margins are already thin, profitability is under threat. Share prices, earnings per share and stakeholder confidence are increasingly vulnerable.

To navigate this environment effectively, organizations should reframe risk management as a strategic enabler — not just a defensive measure. By using data-driven insights to model exposures and evaluate trade-offs, firms can make more-informed capital allocation decisions and uncover hidden efficiencies.

Organizations can leverage risk financing tools such as captives and alternative risk transfer (ART) programs to not only stabilize costs but also support broader business objectives. In this way, risk can become a lever for value creation — helping organizations optimize performance, protect margins and position themselves for long-term growth.

Supply Chain and Geopolitical Volatility: A Fragile Global Framework

Supply chain disruption and geopolitical volatility are increasingly intertwined, creating a complex and evolving risk landscape for industrials and manufacturing organizations. Trade tensions, sanctions, climate events and shifting regulatory regimes are exposing vulnerabilities across global networks. In an industry where supply chains are highly specialized and often cross borders, even minor disruptions can have outsize impacts.

Tariffs and protectionist policies are prompting manufacturers to reconsider their sourcing strategies. While reshoring offers potential relief, the reality is far more nuanced. Rebuilding facilities, securing permits and recruiting skilled labor — especially in advanced manufacturing and chemicals — can take years. Environmental regulations, ISO standards and fragmented compliance frameworks add further complexity, particularly for organizations operating across multiple jurisdictions.

At the same time, climate-related events and political unrest are testing the resilience of existing supply chains. Floods, wildfires and extreme weather are disrupting transportation routes and production schedules. In heavy industry, where raw-material inputs are often sourced from politically unstable regions, the risk of interruption is compounded by commodity price volatility and scarcity.

The post-pandemic shift toward resilience has accelerated investment in supply chain visibility and control, with organizations deploying mapping tools, digital twins and predictive analytics to better understand their exposure and build agility into their networks. Some are going further, pursuing vertical integration or acquiring key suppliers to secure access and reduce dependency. These moves reflect a broader trend toward strategic control, especially for critical components and materials.

But to manage this dual threat, organizations must adopt a holistic approach. Scenario planning and political risk insurance can help navigate uncertainty, while regional diversification and joint ventures offer flexibility in volatile markets. Building redundancy into supply chains — through multisourcing, nearshoring and supplier diversification — is essential. Strategic M&A can enhance resilience, but it must be underpinned by rigorous due diligence and integration planning.

Looking Ahead: The Future Risk Landscape

As industrials and manufacturing organizations look to the future, economic concerns remain front of mind. But rising risks such as cyber attacks, geopolitical volatility and intensifying competition are increasingly overlapping — creating more complex exposures and decision-making demands.

Top Risks Facing Industrial and Manufacturing Organizations in Three Years’ Time

1. Economic Slowdown or Slow Recovery
2. Increasing Competition
3. Commodity Price Risk or Scarcity of Materials
4. Cyber Attack or Data Breach
5. Geopolitical Volatility
6. Business Interruption
7. Supply Chain or Distribution Failure
8. Regulatory or Legislative Changes
9. Political Risk
10. Exchange Rate Fluctuation

Cyber Risk: Expanding Attack Surfaces and Operational Exposure

Digital transformation is reshaping industrials and manufacturing, but it’s also expanding cyber risk. The integration of artificial intelligence (AI), Internet of Things and cloud systems into production and logistics is creating new vulnerabilities, especially in advanced manufacturing and aerospace where precision and uptime are critical. Cyber threats now extend beyond IT, posing direct risks to operations, supply chains and reputation.

The growing reliance on third-party vendors and legacy infrastructure compounds the challenge — contingent business interruption is a rising concern. Many organizations lack full visibility into their digital ecosystem, making it difficult to assess vulnerabilities and respond effectively. A single breach can trigger production shutdowns, regulatory scrutiny and long-term reputational damage, particularly in sectors such as chemicals and heavy industry where safety and compliance are paramount.

To mitigate these risks, organizations must adopt a layered approach. Strong cyber hygiene, incident response planning and third-party risk assessments are essential. Insurance solutions can offer financial protection, but coverage gaps remain. Embedding cyber awareness into culture, modernizing legacy systems and aligning cyber security strategy with business goals are critical steps toward resilience.

Increasing Competition: Innovation, Talent and Global Disruption

Competition across the industrials and manufacturing sector is intensifying, driven by disruptive start-ups, adjacent industries and shifting global dynamics. Technology firms are entering the space with fresh capital, agile operating models, and a strong focus on automation and data-driven innovation. This is particularly evident in advanced manufacturing and automotive, where new entrants with fewer legacy constraints are challenging traditional players.

The automotive sector is facing a wave of competition from Chinese electric vehicle (EV) manufacturers, which are rapidly expanding into global markets. These firms are leveraging cost advantages, government support and advanced battery technologies to produce affordable, high-performance EVs at scale. Their aggressive pricing and speed to market are putting pressure on established OEMs to accelerate innovation and rethink their go-to-market strategies.

Beyond product innovation, the battle for talent is reshaping the competitive landscape. Engineers, data scientists and automation specialists are in high demand, with technology companies often offering more-flexible work models and purpose-driven cultures. This talent war is particularly acute in aerospace and defense, where specialized skills are critical and competition for top candidates is fierce.

In response, incumbents are pursuing strategic acquisitions, investing in mobility platforms and exploring new business models such as subscription services and autonomous transport. The goal is to diversify revenue streams, stay ahead of evolving consumer expectations and build resilience against market disruption.

To remain competitive, organizations must rethink how they attract, retain and develop talent. Flexible work arrangements, upskilling programs and strong employer branding can help differentiate in a crowded labor market. Innovation hubs, strategic partnerships and targeted M&A can accelerate product development and enhance agility. Ultimately, success will depend on the ability to align culture, strategy and technology to meet the demands of a rapidly evolving marketplace.

Three Actions to Help Reframe Risk and Build Resilience

In a sector shaped by economic pressure, geopolitical disruption and accelerating innovation, industrials and manufacturing organizations need more than traditional risk management. These three actions can help leaders strengthen resilience, unlock value and stay competitive in a rapidly evolving landscape.

1. Use Data and Analytics to Drive Strategic Risk Decisions

Advanced analytics and scenario modeling are helping organizations quantify exposures and understand the total cost of risk. By integrating operational, financial and strategic data, leaders can prioritize risks, allocate capital more effectively and uncover hidden efficiencies. This is especially critical in capital-intensive industries such as heavy industry and aerospace, where small shifts in risk strategies can have outsize effects on performance and profitability.

2. Leverage Alternative Risk Transfer to Stabilize Costs and Enable Growth

As volatility increases, organizations are turning to ART solutions to manage exposures that traditional insurance may not fully address. Captives, parametric solutions and other ART mechanisms offer flexibility, liquidity and control, allowing firms to tailor coverage to their unique risk profile. These tools are not just about protection; they’re about enabling smarter capital allocation and supporting long-term strategic goals.

3. Reframe Risk Management as a Value Driver

By embedding risk into strategic planning at the board level and aligning it with business objectives, organizations can shift from a reactive mindset to a proactive, value-based approach. Risk becomes a lever for growth that supports innovation, improves operational efficiency and enhances stakeholder confidence. This reframing is essential for navigating disruption and building a competitive edge.

Why it Matters

As pressures mount across supply chains, markets and technologies, organizations can’t afford to treat risk as a siloed function. The ability to connect risk insights with business strategy is becoming a practical necessity. Organizations that build this capability will be better informed, more agile and more confident in the decisions that shape their future.

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