On Nov. 18, 2020, the AICPA held its annual Global Manufacturing Conference, a yearly gathering of CPAs and global manufacturing companies where industry trends are discussed. Like many conferences and meetings in 2020, things went virtual. While the schedule was reduced for remote delivery, the convenience and access to high value speakers made it one of best conferences in recent years.
I learned three takeaways from the conference concerning the economy, trade, and increased risks to the sector. I’ve summarized the key takeaways below.
Manufacturers Expect to Return to Pre-COVID Levels by the End of 2021
Dr. Chad Moutray, Chief Economist for the National Association of Manufacturers (NAM), kicked things off with an economic update. As part of his presentation, Dr. Moutray reviewed NAM’s third quarter 2020 manufacturers outlook survey. According to the report, 17% of manufacturers were already back to pre-COVID level revenues, while 47% expect to be by the end of 2021.
It comes as no surprise that a weaker economy and sales were the primary business challenges reported. However, it’s significant to note that attracting and retaining talent, which has historically been the number one business challenge in the last several years, was still the second largest concern. The stress over hiring remains even amongst the highest unemployment rate we have seen in more than a decade.
New Trade Deals May Significantly Impact Supply Chains
Lou Longo, an international consulting leaser from Plante Moran, discussed all things trade. Specifically, Mr. Longo discussed the significance of the Regional Comprehensive Economic Partnership (RCEP) trade deal that was signed over the weekend. RCEP is the largest trade agreement in the world, representing one-third of the world’s countries and one-third of the world’s GDP. The agreement, which includes China and 14 other countries, provides China with significant influence and will no doubt have impacts on the global supply chain. Even though the United States is not part of the RCEP, Mr. Longo recommended manufacturers understand the impacts it could have.
Much of the trade focus this year has been on the United States-Mexico-Canada Agreement (USMCA), commonly referred to as NAFTA 2.0. Mr. Longo cautioned that many manufacturers are not aware of the new penalties under this deal, and that the USMCA has some of the most comprehensive enforcement provisions of any trade agreement.
Finally, Mr. Longo speculated that a Biden administration could lead to a higher likelihood of a ‘No Deal’ Brexit, which will no doubt impact U.S. companies operating in the U.K.
Hackers are Increasingly Targeting Manufacturing Companies
Joe Lazzarotti of Jackson Lewis provided a sobering update on the state of cyber-related attacks on the industry. He noted that costs associated with cyber-attacks have doubled in the last year, with one of the largest increases coming from the manufacturing sector. While manufacturers make up 18% of the total ransomware attacks, they represent 62% of the ransom payments made (according to a Kivu 2019 study).
Criminals have now recognized the value in targeting manufacturers. Sadly, most of the successful attacks have been made on companies with fewer than 25 employees. Many of these companies had not developed a business continuity plan to mitigate cyberattacks and were caught off guard without a premeditated response in place.
Despite the hurdles set up by the COVID-19 pandemic, this year’s AICPA Global Manufacturing Conference was a successful event, with valuable information for those able to attend. While the world is set for some major shake-ups in the aftermath of the tumultuous 2020, manufacturers who take the lessons of the conference to heart will be well established to succeed in the coming decade.
If you have any questions regarding the conference, or the outlook for the manufacturing industry, please send me an email.
© Clark Nuber PS, 2020. All Rights Reserved