Canadian Manufacturing

Regulatory costs a top concern for U.S. manufacturers: BDO study

Contentious business climate still ranks as top concern in the U.S.



CHICAGO—Concerns over the U.S. regulatory environment and the mounting cost of doing business in that country top the list of a new BDO USA, LLP analysis of risk factors facing the the largest 100 public U.S. manufacturers.

Looking at the factors listed in the most recent 10-K filings of these companies, BDO found that 96 per cent cite federal, state and local regulations as a risk. Amid increasing business costs from healthcare reform and potential changes to U.S. corporate tax structures, U.S. manufacturers may face a competitive disadvantage to those abroad.

In addition, environmental regulation risks are a concern for 86 per cent of manufacturers as they contend with often complex and costly EPA compliance.

Still, the uncertain domestic and global economy are the biggest concern, according to the 2013 BDO Manufacturing RiskFactor Report.

While the manufacturing industry has been viewed as an important driver of jobs and economic growth, labor remains a key challenge. Three in four manufacturers cite labor concerns and underfunded pension and retirement benefits as a risk. Despite the 7.5 per cent unemployment rate, the manufacturing industry is still contending with a skilled labor shortage, particularly as many skilled workers are reaching retirement age.

“While many manufacturers want to expand or even bring back U.S. operations, there are still significant challenges,” said Howard Sosoff, Manufacturing & Distribution practice leader at BDO USA, LLP. “Manufacturers are looking long and hard at their cost containment practices to offset the rising price of conducting business in the U.S., while also exploring opportunities to expand abroad –likely in locations with attractive corporate incentives.”

The following chart highlights the top 20 risk factors cited by the 100 largest U.S. manufacturing companies:

1. General Economic Conditions 98%
2. Federal, State and/or Local Regulations 96%
3. Competition & Consolidation in Manufacturing 92%
4. Less Demand for Products 91%
5. Threats to International Operations 87%
6. Environmental Laws, Regulations & Liability 86%
6t. Commodity/Raw Material Prices 86%
8.

U.S. and Foreign Supplier/Vendor Concerns
and DistributionDisruptions

83%
9. Management of Mergers & Acquisitions 80%
10. Access to Capital 78%
11. Labor Concerns; Underfunded Pensions 75%
11t. Maintaining IT Systems & Operational Infrastructure 75%
13. Failure to Properly Execute Business Strategy 74%
14. Currency/Foreign Exchange Fluctuation 73%
15. Ability to Innovate to Meet Changing Customer Needs 69%
16. Natural Disasters, Terrorism and Geo-Political Events 68%
17. Changes to Accounting Standards and Regulations 66%
17t. Restrictive International Trade Policies 66%
19. Privacy Concerns Related to Security Breach 64%
20. Loss of Key Management/New Management 62%

*t indicates a tie in the risk factor ranking

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