Regulatory costs a top concern for U.S. manufacturers: BDO study
by CanadianManufacturing.com Staff
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%|
U.S. and Foreign Supplier/Vendor Concerns
|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