Moving industrial products boards from risk to resilience

In 2025, industrials leaders worked toward strategic invention—tapping innovation, smart technologies, and new capabilities to create intelligent enterprises. Companies aimed to solidify their market positions while transitioning to business models powered by AI, automation, and data. Alas, rapidly shifting tariff and trade policies presented major challenges for both management and boards.

Looking ahead, directors will need to boost their AI expertise as digital transformation continues and work to keep up with developments across the industrial products (IP) landscape.

Neither the pressures nor the pace look likely to lessen in the coming year:

• Aerospace and defense is seeing soaring global demand, but production is cramped by labor and skills gaps, shaky supply chains, and tariff uncertainties.
• The automotive industry is navigating an unexpectedly winding route through regulatory and consumer attitude U-turns, with trade disruptions keeping leaders guessing.
• Engineering and construction companies are struggling to keep pace with rising demand; even as capital projects keep getting bigger, skilled labor and materials remain hard to come by.
• Industrial manufacturers are working to boost operational capabilities as seesawing trade policies and on-demand customer expectations add pressure.
• The space sector is still nascent but rapidly expanding, becoming a launchpad for progress around the globe as the space economy accelerates.

As the IP industry continues to transform in the midst of ongoing geopolitical uncertainty, boards must maintain effective board practices and bolster their oversight capabilities through continuous director education.

Directors in our 2025 Annual Corporate Directors Survey are increasingly concerned about their board colleagues underperforming, as external pressures mount and governance demands intensify. More directors than ever before now say someone on their board should be replaced. The views of IP directors on the subject of board refreshment largely track those of directors overall, but the complex risks their companies are facing may be causing this group of directors to sharpen their focus on whether their boards have the right mix of skills to keep up.

In 2025, 91 directors serving on boards of public IP companies participated in our survey, accounting for 14% of all respondents. An unstable geopolitical environment, ongoing threats to supply chains, and keeping pace on AI implementation were among the notable themes that emerged in their survey responses.

In an industry as broad as IP, the challenges and risks these companies face are just as varied. Yet one theme consistently emerged in directors’ responses to our survey: the geopolitical environment is a top concern. Virtually all IP directors say they’re concerned about geopolitical instability, and many say they are very concerned.

Unsurprisingly, these directors point to trade policy and tariffs as their top worry for future growth. Ongoing shifts in US trade policy have created uncertainty—making forecasting harder and forcing many businesses to rethink supply chains. However, industrial manufacturing deal activity accelerated in 2025 after a slow start to the year. Entering 2026, boards should monitor how sustained policy stability and advancing digital transformation reshape competitive dynamics.

For many IP companies, the supply chain is the backbone of the business. A large share of their goods move through international waters and ports, where conflicts or disruptions can suddenly render established trade routes untenable.

That’s one reason geopolitical risk and trade policy concerns are so closely linked in these boardrooms. Nearly two-thirds of IP directors say their boards discussed supply chain at every meeting over the past year, underscoring how top of mind the issue has become. Yet even that may feel insufficient: nearly half say their boards need to spend more time on supply chain issues in the year ahead.

Alongside geopolitics and supply chain risk, directors are grappling with a very different kind of uncertainty: AI. Not all external threats are predictable, and few boards had the rapid emergence of generative AI (GenAI) on their radar only a few years ago. The technology is reshaping both capabilities and risks inside and outside the boardroom, and as companies look for new ways to innovate and get ahead, boards are under pressure to keep pace.

Compared with peers in other industries, directors on IP boards are less confident in their boards’ readiness to oversee AI, acknowledging that their board may currently lack the requisite skills collectively. They are also the least likely to say they have an approach in place to oversee the technology’s opportunities and risks.

Separately, IP directors are also the least likely industry to say their boards have explored using GenAI in any capacity. Directors are starting to use AI in their oversight role, from external research and strategic thought partnership to governance process improvements and advanced uses like scenario planning. Taken together, these findings point to a clear need for many IP directors to be proactive in upskilling.

There is no shortage of risks and challenges facing companies in the IP industry. Geopolitical tensions are rising, tariffs in the US are forcing companies to become more agile, and AI is adding new layers of complexity that demand adaptability and fresh thinking from directors. Boards that hold themselves accountable, evolve with technology, and put in place meaningful governance practices that encourage continuous learning will be best positioned for success. Will your board be defined by the risks it faces or the resilience it builds?