Risk management is an essential part of running a successful manufacturing facility, including risks, security and facility sustainability. Creating a space that is safe, healthy, and secure is critical, but with climate change policies changing, ensuring the long-term success of a facility also requires sustainable changes that reduce the environmental impact of a facility.

In this article, we will address the common risks and challenges of the manufacturing industry as well as the key strategies to ensure a safe, healthy, and sustainable manufacturing facility. 

Top Risks and Challenges That Manufacturing Facilities Face

Manufacturing is a dynamic industry that comes with a wide range of risks. The risks and challenges facilities face can impact profitability, sustainability, operations, and even reputation. As such, it’s important to know what these risks are to better understand how to address them. These risks can include:


  • Regulatory risks: These risks can arise from issues complying with various policies and laws concerning safety, labor, the environment, and trade and tariffs. Manufacturing companies are subject to a wide range of strict regulations and failing to comply can result in serious consequences. 
  • Operational risks: These are the kinds of risks that hinder or delay operations, such as human errors, technology malfunctions, and equipment failures. These risks often result from poor training, improper maintenance, and a lack of automation and optimization. 
  • Cybersecurity risks: As our world increasingly adopts digital technologies, the threat of cybercrime also increases. While it’s helpful to upgrade to digital tech, without adequate cybersecurity strategies, it can put facilities and their sensitive data at risk, which can cause disruptions and significant financial loss.  
  • Supply chain risks: The globalization of supply chains has created a number of supply chain vulnerabilities. This includes challenges related to logistics, geopolitical issues, and even impacts resulting from natural disasters. 


Once risks have been identified, it’s easier to start planning an appropriate risk management strategy that adequately addresses these challenges. 

Key Risk Management Strategies for the Manufacturing Industry

A proactive approach ensures a more effective risk management program that enables facilities to be more resilient, sustainable, and secure. This starts with identifying different types of risks

1. Identification

When attempting to identify risks, there are three primary methods that can be used for risk analysis. This includes:


  • RCA: This stands for Root Cause Analysis and is a method that helps to trace failures in systems or processes back to the point of origin. 
  • HACCP: Hazard Analysis and Critical Control Points is a method that is primarily used in food manufacturing, and involves analyzing risks and their associated hazards while focusing on key control points. 
  • FMEA: Failure Mode and Effects Analysis helps to identify failures occurring in a process or system. The effect of the failure is then examined and the likelihood that a failure will occur is then determined through that examination. 


These are very specific methods for risk identification, but another way to identify risks more broadly is to create a visual map of all processes and the steps involved. This allows for a bigger picture of how everything works and is connected, which can make it easier to identify where things could go wrong. 

2. Measurement

Once risks have been identified, the next step is to measure risk or calculate the impact the risk will have. This includes measuring for the probability of the risk. There are generally two approaches used when measuring risks:


  • Risk assessment matrix: With this method, you list all of the risks that have been identified, assign them a level of severity, and the probability they will occur, and then organize them in descending order. 
  • Key risk indicators (KRIs): These are metrics that can be used to measure and monitor very specific risks, such as downtime of equipment. The indicators or metrics tracked can vary and can be determined by evaluating historical data or trending industry best practices. 


When determining the potential impact of a risk, it’s necessary to consider the loss or harm that could result if that risk were to occur. This is key when assigning a level of severity to a risk. 

3. Mitigation

The mitigation stage is where you start implementing new protocols to prevent risks. For security risks, this can include adopting robust cybersecurity measures to protect and safeguard sensitive data as well as training staff on proper use of data systems. 

For physical security, this could mean upgrading to a better surveillance system, such as cloud-based video surveillance. Cloud-based security systems enhance overall security by offering features such as remote access, AI-driven analytics, and a centralized management platform. 

To address operational risks and supply chain vulnerability, automation is often the key. Automation technologies help reduce errors and enhance efficiency. They can also help mitigate hazards for workers. Warehouse robotics, for example, are a growing trend in the manufacturing industry as they can help streamline processes, monitor for problems, improve accuracy, and reduce labor costs. 

For sustainability issues, facilities can combine design and operational data to reduce environmental impact and run things more efficiently. For example, the built data of a facility can provide insight into things like how the HVAC system is or should be operating. By updating the design of the facility and monitoring this type of data, it can prevent energy consumption costs from spiraling. 

Using data to look at how space and resources are used can also help identify ways to cut back and run a more lean and efficient facility. The reason many facilities have a bigger carbon footprint is that they are not using their space and resources as efficiently as they could be. This can be addressed by organizing the facility for optimal space usage and using technology to monitor inventory and material usage. 

These are just a few examples of risk mitigation strategies. Strategies and approaches can vary depending on the facility’s unique risks and needs. 

4. Reporting and Monitoring

Having a robust reporting and monitoring strategy is another key element of any effective risk management program. This can be done by adopting advanced and specialized software, such as AI-supply chain management platforms. These systems use machine learning algorithms to monitor and analyze facility data and then create reports and send alerts when something needs to be addressed. 

Wrapping Up

On a final note, a critical part of risk management is continuous risk assessment. Facilities must constantly be monitoring for new risks and assessing them for their potential impact. The manufacturing industry is constantly evolving with digitalization and globalization, so part of the reporting and monitoring should include monitoring for new risks and then adopting new strategies to address those risks before they become a problem. In other words, risk management is all about being proactive rather than reactive. 

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Indiana Lee is a writer from the Pacific Northwest. An expert on business operations, leadership, marketing, and lifestyle, you can connect with her on LinkedIn.

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