Members Predict: What's Ahead in 2017?
Even just days into 2017, it seems likely that uncertainty and risk will be yearlong themes. This is evident in our most recent U.S. Industrial Outlook, which forecasts no more than 2% annual growth for U.S. GDP through 2020. Global economies and manufacturing sectors are contending with risks, structural impediments, and instabilities that are holding back growth. MAPI will be closely watching the shifts in global interest rates, market prices, central bank policies, and government policies in the year ahead.
To better understand short-term risks and opportunities within manufacturing, we asked our members for the trends they’ll be monitoring in 2017.
A changing administration always begets risk.
“Regulatory risks for manufacturing companies, always high on the risk list, will continue in 2017 and may grow, as uncertainty surrounding the regulatory actions of the next U.S. administration and responses from companies to those actions are more unpredictable than in recent years,” said Navistar General Counsel Steven Covey.
Evan G. Young, Jr., corporate director of security for Parker Hannifin, noted concerns about global risks.
"The current geopolitical landscape will generate significant challenges in the global security space,” Young commented. “As global security professionals continue to focus on risks associated with corporate espionage, travel security, and emerging markets, the importance of navigating political uncertainty from country to country will be the key differentiator in determining success. Now more than ever, global security teams must be agile and fluid to win in an ever-increasingly unpredictable geopolitical landscape."
Gwendolyn Hassan, managing counsel of global compliance and ethics at CNH Industrial, is carefully watching the risks of human trafficking for manufacturers.
“Human trafficking prevention is a topic deserving of every manufacturer’s attention in the coming year," Hassan said. "Previously believed to relate primarily to sex trafficking, trafficking in persons for purposes of forced or indentured labor is actually far more prevalent, a fact government regulators are taking note of. In the wake of the UK Modern Slavery Act of 2015, U.S. regulators have introduced similar pieces of legislation.”
Hassan commented that the potential U.S. legislation could be very similar to Dodd–Frank’s conflict minerals requirements in terms of compliance obligations for manufacturers. “It will be critical for all manufacturers to have conducted a risk assessment on their particular human trafficking risk profile and to have developed a specific risk mitigation and compliance plan to address such risk,” she said.
While advanced manufacturing solutions offer exciting opportunities for companies, greater cyber risks come with the territory.
As Ken Marapese, manager of manufacturing execution systems (MES) at Rockwell Automation, told us, “The focus for MES is how best to leverage it to achieve smart manufacturing goals.” He noted the growing trend to start small, addressing specific manufacturing challenges such as quality, machine performance, and track/trace and genealogy. Another trend is the use of information gathered through the Industrial Internet of Things to improve equipment operation and product quality, analyze data, and comply with regulatory requirements. “Some companies are taking the usefulness of data to a new level by leveraging information from suppliers and integrating it with their own systems,” he added.
In November 2016, MAPI and Deloitte released a study on Cyber Risks in Advanced Manufacturing that illustrates emerging risks likely to materialize amid rapid technological change, including risks related to the Internet of Things. One finding in our report was that only 55% of the companies that store or transmit private information in their connected products are encrypting these data. Further, one in four companies does not have legal protections in place to cover the organization’s responsibility for risk and ownership of product data and transfer.