Why Fragmented Compliance is Holding Manufacturers Back

Manufacturing faces evolution from fragmentation to connected compliance

The traditionally fragmented business practices of many manufacturers are struggling to keep pace with the challenges of an increasingly complex operating environment, highlighting the urgency of adopting a modernized and connected approach to risk management and compliance. 

These legacy industry practices – separate systems, siloed processes, disconnected teams – are colliding with the current realities of operations spanning multiple facilities, supplier networks that stretch across continents, regulations that continue to expand, and new technologies like AI. Amid new disruptions and new governance requirements, the uniquely intricate kingdoms under manufacturing’s umbrella must come together in a cohesive response. Failure to do so opens the door for increased risk – and could shut the door on opportunities for business expansion. 

However, there is reason for optimism in the shift these challenges will require. A connected GRC approach creates the opportunity for differing elements of a manufacturing organization to learn to “speak the same language” of risk, promoting greater strategic agility overall and a shared culture of ethics and compliance across business units. Ultimately, a connected compliance strategy can help support greater innovation, resilience and growth.

Why traditional manufacturing compliance programs are reaching their limits

The cost of compliance is no small burden for manufacturers. A study by the National Association of Manufacturers, a major trade group in the United States, found U.S. manufacturers spent an average of $29,100 per employee on federal compliance – more than twice  the average for all business types. U.S. manufacturers with fewer than 100 employees spent even more, at $50,100. While these figures focus on the U.S., significant compliance requirements are also common for firms elsewhere. 

Not surprisingly, 37% of surveyed risk and compliance leaders from manufacturing organizations said “difficulty keeping up with new regulatory demands” was a compliance challenge experienced in the past 12 months, a greater share than the global average (31%) seen in the 2026 NAVEX State of Risk & Compliance Report. 

The old, fragmented approach may be part of the problem, and manufacturers themselves appear aware of the issue. When asked to describe their job function’s relationship to other functional areas in a 2025 NAVEX survey, manufacturing risk and compliance leaders were less likely than industries as a whole to indicate a strong relationship with most other business units like Data Privacy, Finance, Audit and Human Resources. 

What specific stumbling blocks does a fragmented approach create for risk and compliance? Siloed teams without shared expectations, manual processes, point solutions, lack of visibility – these are just some of the challenges that manufacturers may face without a connected mindset. 

The manufacturing organizations that thrive will be those that move beyond fragmented compliance programs and adopt a connected approach. We’ll explore three areas of opportunity – people and culture, supply chain risk, and evolving regulation and governance - with a specific nod to emerging demands arising from varying AI implementations.

Staying ahead of supply chain risks

While countless organizations rely on third parties for a bevy of supplies and services, manufacturers often hold uniquely critical relationships with outside firms for parts and raw materials. The very survival of the manufacturer may depend on those supply chains, and those third-party partners may also face the same challenges that make risk and compliance management so complex for the industry. If a compliance issue creates a hiccup in a sensitive part of the supply chain, a very real risk exists that production will stop, impacting not just the factory floor but all aspects of the organization.  

Real-world examples of these impacts are plentiful, from a large automaker forced to halt some operations after a cyberattack impacting a single third-party supplier to helium shortages that threatened the supply chain of microchips to technology manufacturers. Disruptions go both directions – a major cyberattack prompting a production shutdown for another automaker prompted major concerns among its smaller suppliers who rely on the firm as their primary customer.  

The philosophy of connected risk and compliance programs also includes procurement and third-party due diligence across supply chains, extending the organization’s cohesive approach to ethics and compliance risk to the wider web outside of the organization itself.  

Risks across the supply chain abound. Perhaps the supplier is subject to a particular environmental, social and governance (ESG)-type regulation. Even if the customer manufacturer is not, would a supplier’s violation risk potential disruption and reputational damage across the chain? The manufacturer may have air-tight cybersecurity practices, but does a critical supplier with access to the manufacturer’s sensitive data match or exceed those standards for cyber resilience? What if a supplier is subject to geopolitical risks? 

Manufacturers anticipate needing to strengthen their practices for supply chains, with 29% of industry risk and compliance leaders indicating plans to increase investment or activity in third-party due diligence in NAVEX’s 2026 survey. What measures are they implementing? 

One concern is continuous monitoring – revisiting supplier risk assessments at appropriate intervals following initial due diligence. About three-quarters of manufacturing survey respondents told NAVEX in 2025 that their organization was at least “good” in this area, but it’s easy to see how demands will only ramp up as reliance on third parties and supply chains grows more complex. As with other compliance risks, different parts of the business should speak a “common language” in assessment that may include a risk “score” for third parties, supporting an informed and agreed-upon strategy, including the time between supplier reassessments. 

A shared understanding across business units should also exist for what to do if something goes wrong. Organizations are likely to invest in additional training across job roles to properly escalate compliance concerns among third parties – risk management and compliance should be made aware of these incidents. But for a complex manufacturing organization, it may be unrealistic for those business units to be deeply involved on a day-to-day basis. Those managing the frontline relationships for the supply chain should implement the risk policy of the organization in their decisions, as defined through a connected compliance approach.

Keeping up with a risk and compliance landscape that never stops changing

As stated earlier, many manufacturers cite regulatory expansion as a challenge. Even for those well-equipped for the task, the regulatory environment is constantly expanding into new frontiers requiring yet more resources for compliance. A lack of visibility into how all aspects of the manufacturer navigate the risk and compliance landscape invites the emergence of compliance gaps, blind spots – and ultimately, audit failures. 

Ensuring differing business units act in line with evolving risk and compliance needs is a constant and multi-faceted concern for leaders tasked with managing those areas organization-wide. Privacy rules are one evolving area where varying operational jurisdictions have different, sometimes highly specific requirements for handling customer and other sensitive data. Are all aspects of the business complying as needed? 

Then there is the rapid emergence of AI, offering unique promise across a host of business areas, yet with regulations that continue to struggle to keep pace with innovation. Different parts of the manufacturing organization will use AI in a host of different ways – a promising environment for innovation, yet with the potential to inadvertently generate specific regulatory risk or broader risks to the business without widespread training and awareness.  

Thankfully, Compliance is said to have a “seat at the table” in the development of AI policy for manufacturers, with nearly 80% of surveyed industry risk and compliance leaders telling NAVEX that Compliance was at least “somewhat involved” in decisions regarding the use of AI. 

A modern, connected compliance approach would give manufacturers real-time access to regulatory intelligence that is then translated in short order to training and directives throughout the disparate parts of the business. When policies are updated, information and guidance are efficiently delivered to appropriate workers in a scalable and accountable way. Governance frameworks for challenges like privacy regulation, compliance and AI oversight are widely deployed and adhered to, regardless of the nature of the business unit.

The advantages of connected compliance

Manufacturers with a connected compliance approach achieve a greater shared visibility into the emergence of risks across their interconnected operations. 

For example, supply chain reliability is critical. For parts of procurement, vetting may focus on aspects of resilience such as whether the supplier is delivering a component or raw material of sufficient quality, and on time, for the manufacturer. Downtime may be measured by reliability in that supplier’s own manufacturing process. Yet compliance also plays a role here – if the supplier is not adhering to regulatory requirements on workplace safety, environmental regulations and other considerations, these compliance risks may result in fines and other impacts that jeopardize the third party’s ability to deliver. When it comes to supplier assessment, these differing perspectives should be within the same, connected compliance mindset.  

Other theoretical examples abound. Perhaps a governance oversight led to establishing a new manufacturing process that fell short on safety rules, prompting costly remediation or, even worse, a workplace safety incident. As the new process is under development and deployment, risk and compliance would be involved in a connected approach.  

AI tools may enable business units to move faster, yet a lack of guardrails may inadvertently expose trade secrets to the public. Again, risk and compliance would be part of the conversation to help guide the deployment of these new technologies throughout the organization. 

Perhaps the chief benefit is the visibility that connected compliance can enable for a manufacturer. Specialized business units will continue their operations, but their decisions, training needs and emergence of new risks filter up into a single, universally actionable view of the firm’s overall posture. 

Building resilience in a more complex manufacturing environment 

Manufacturers face an interconnected web of concerns unique among industries. Operations vary across the business and its employees, and reliance on outside suppliers is often critical. These specialized nodes may operate well in isolation, but fractured elements must communicate in a common language if the organization as a whole is to remain compliant with evolving regulations and manage complex risks. 

It appears inevitable that the complexity for manufacturing organizations will only increase, along with their regulatory burdens. Supply chains will remain dynamic, with varied risks for volatility and disruption. New frontiers in governance, such as those related to the advent of AI, will continue to emerge. 

Manufacturers need a connected compliance strategy capable of adapting as quickly as the business itself.