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      Industrial manufacturing is a highly diverse sector including aerospace and defense (A&D), metals, and materials, industrial automation and controls. And, as the KPMG 2024 Industrial Manufacturing and Automotive CEO Outlook indicates, the industry is feeling the impact of geopolitical change, with respondents citing economic uncertainty (74 %) and geopolitical complexities as the top challenges.1

      As part of the Top geopolitical risks 2025 paper from KPMG International, this report looks at the risks — and, equally importantly, the opportunities — in a world increasingly dependent upon the output from the industrial manufacturing sector. While demand for battery materials is surging, supply chains are under stress from conflicts and geopolitical confrontation. And, in a sector characterised by high emissions, companies are also striving to decarbonise.

      This report is intended for independent boards of directors and senior business executives, particularly Chief Executive Officers, Chief Risk Officers and other key decision-makers responsible for strategic planning and risk management within industrial manufacturing companies.

      Five key geopolitical risks and trends facing industrial manufacturing companies in 2025

      Geopolitical risk management: the road ahead

      Geopolitical uncertainty is not a passing phase, and the global industrial manufacturing industry needs to adapt to continued volatility. However, by proactively building strategies to address geopolitical risk, companies can gain competitive advantage through more resilient supply chains, faster decarbonization, and cutting-edge use of technologies like Gen AI and automation. This means assessing both the opportunities and the potential negative impacts of the five key risks outlined in this paper:

      1. Address tectonic shifts in power, economic centers and trade through continued reshoring, friendshoring and nearshoring, including alternative sourcing, and development of local defense capabilities.

      2. By improved regulatory monitoring, integrating compliance into strategy, and investing in circularity, companies can adapt to a complex, fragmented regulatory and tax environment — while also taking advantage of a relaxation of regulations in certain regions.

      3. Selected adoption of technology from different regions, along with a flexible technology stack, can help organisations respond to a fast-moving and politicised technology landscape.

      4. Greater investment in local markets, and diversification of suppliers, should give industrial manufacturers the scale and capabilities to tackle multiple threats to supply chains, assets and infrastructure.

      5. Through modernising the employee value proposition, and focusing on the development of strong technological skills, industrial manufacturing companies have an opportunity to reimagine a career in the sector that appeals to a new generation of workers.

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      Gary Chia
      Gary Chia

      Partner, Head of Consulting

      KPMG in Singapore

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