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.

May 21, 2013  by Staff

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 Conditions98%
2.Federal, State and/or Local Regulations96%
3.Competition & Consolidation in Manufacturing92%
4.Less Demand for Products91%
5.Threats to International Operations87%
6.Environmental Laws, Regulations & Liability86%
6t.Commodity/Raw Material Prices86%

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

9.Management of Mergers & Acquisitions80%
10.Access to Capital78%
11.Labor Concerns; Underfunded Pensions75%
11t.Maintaining IT Systems & Operational Infrastructure75%
13.Failure to Properly Execute Business Strategy74%
14.Currency/Foreign Exchange Fluctuation73%
15.Ability to Innovate to Meet Changing Customer Needs69%
16.Natural Disasters, Terrorism and Geo-Political Events68%
17.Changes to Accounting Standards and Regulations66%
17t.Restrictive International Trade Policies66%
19.Privacy Concerns Related to Security Breach64%
20.Loss of Key Management/New Management62%

*t indicates a tie in the risk factor ranking

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