Metalworking/credit: Vadim Ratnikov/Shutterstock.com

Increasing regulation will require companies in the manufacturing sector to rely more on their legal departments to help with business strategy, according to a report published this week by Forbes Insights and K&L Gates.

Forty-five percent of respondents believe that regulation is increasing in both volume and complexity. Rick Giovannelli, a partner at K&L Gates in Charlotte, North Carolina, said manufacturing companies are now finding that investing in legal is critical to business because of the complexity of new regulations.

"By involving their legal teams earlier and more thoroughly into their strategic and ops functions, many companies are realizing that an ounce of regulatory prevention is worth a pound of cure," Giovannelli said.

Despite the quantity and complexity of legal issues facing the manufacturing sector, only 39% of respondents indicated that legal matters are in the top five considerations when deciding on a growth strategy.

Giovannelli said he views the 39% as growth. He said most companies have moved past the idea that the legal department is "the department of no."

"Lawyers can be most effective at finding those solutions when they are deeply involved in setting, or at least hearing, the company's strategic plans and those plans take legal and regulatory matters into account on the front end," Giovannelli said.

Successful general counsel and chief legal officers may have instilled a culture where their departments help business executives find solutions to business problems, Giovannelli said. However, he said some old habits "die hard" and in some cases, legal problems are still siloed.

Some of those regulations include new laws such as the California Consumer Privacy Act and the General Data Protection Regulation that manufacturing companies must consider.

"The increasing volume and complexity of regulations is especially prevalent in privacy as companies who are just now catching their breath from the race to comply with GDPR now have to lace up those same shoes again with CCPA coming online in the near future," Giovannelli said.

He said regulations surrounding smart devices that manufacturers create themselves or use in their own operations will become more complicated because there does not seem to be a uniform solution coming anytime soon.

"Without a federal solution in place, this creates a dizzying array of state-by-state regulations that will require significant compliance resources," Giovannelli said.

Although data privacy and protection is a hot news topic, only 32% of those surveyed believe the digitization of the manufacturing sector is the most relevant issue from a legal point of view.

The data in the report is based on responses to a survey of 200 U.S.-based legal and nonlegal executives from the manufacturing sector. Twenty-five percent of the survey respondents were chief legal officers, general counsel or other top legal officers. Eighty-eight percent of the respondents came from companies with revenues of $1 billion or more.

The manufacturing segments represented in the survey were aerospace and defense products, automotive, engineering, metals, consumer products, conglomerates and transportation, and logistics.