McKinsey: Automakers Must Rethink Risk & Resilience Roadmaps
McKinsey & Co understands that the global automotive industry is facing an increasingly complex landscape.
In an insightful article on the consultancy's website written by partner Dr Manuel Altmeier and senior partners Dorothee Herring and Thomas Poppensieker, the flaws of traditional automotive risk management approaches in 2025 are exposed.
The article argues these approaches are no longer enough to navigate the rapid technological changes, geopolitical tensions, and shifting consumer demands that are currently reshaping the sector.
To remain competitive, automotive manufacturers must adopt a more dynamic and resilient approach to risk management – one that integrates strategic resilience into every facet of their operations.
McKinsey's insights highlight how carmakers can turn disruption into an opportunity for growth by embracing this mindset.
Rethinking risk management
Historically, automotive manufacturers have relied on static, long-term planning models to manage risk, often focusing on cost minimisation and operational efficiency.
However, with the rise of unpredictable disruptions such as the COVID-19 pandemic, supply chain challenges and the ongoing shift to electric vehicles (EVs) and autonomous driving technologies, this traditional approach is no longer sufficient.
McKinsey's partners assert that carmakers must embed resilience into their strategies to navigate these volatile conditions. Resilience allows businesses to not only survive disruptions but also use them as opportunities to grow.
One crucial area in which resilience is required is in the investments needed for future technologies.
The rise in spending on EV batteries, expected to increase by 27% annually and reach US$400bn by 2030, highlights the scale of capital required. At the same time, the industry's shift towards autonomous driving also demands heavy investment. These changes alongside geopolitical risks, make traditional planning obsolete.
The importance of identifying and mapping risks
McKinsey's experts suggest that to prepare for future uncertainties, automotive manufacturers must become adept at identifying the broad, long-term trends that lead to disruptions.
These trends often manifest across technology, geopolitics and socioeconomics.
According to the 2024 World Economic Forum's risk report, there are around 25 to 30 core strategic risks in these areas that automotive companies need to monitor closely.
By identifying these risks and evaluating their impact, likelihood, and potential mitigation strategies, carmakers can build more informed, proactive responses.
In practical terms, McKinsey suggests focusing on three to four high-priority scenarios each quarter to guide strategic decision-making.
For example, a car manufacturer might monitor the risk of trade restrictions or tariffs and adjust production schedules to maintain access to key markets.
Similarly, they may explore more flexible production models to better align with shifting consumer demands.
This approach helps automotive companies stay agile in an unpredictable environment, pivoting as needed to respond to emerging risks.
Embedding resilience across key dimensions
McKinsey highlights that resilience should not be viewed as a one-dimensional concept. Instead, it must be embedded across six key areas: financial, operational, digital, organisational, business and reputational.
Each of these areas requires careful consideration and adjustment to ensure that a company can withstand both current and future disruptions.
For instance, supply chain resilience is a critical area for automotive manufacturers, particularly as geopolitical risks like trade barriers and natural disasters can disrupt production. Historically, supply chains were designed for cost efficiency, with minimal regard for flexibility.
However, McKinsey experts suggest that companies must now prioritise flexibility and redundancy. This involves strategic sourcing, identifying backup suppliers, and ensuring production can continue even in the face of significant disruptions.
Similarly, organisational resilience must focus on integrating new technological skill sets and business models.
The automotive industry is increasingly becoming a technology-driven sector, with software development playing a crucial role in everything from EVs to autonomous driving.
Automotive manufacturers must be prepared to merge traditional engineering practices with the fast-paced, iterative nature of software development—a cultural shift that could pose challenges for some organisations.
However, McKinsey experts suggest that companies must now prioritise flexibility and redundancy. This involves strategic sourcing, identifying backup suppliers, and ensuring production can continue even in the face of significant disruptions.
Similarly, organisational resilience must focus on integrating new technological skill sets and business models.
The automotive industry is increasingly becoming a technology-driven sector, with software development playing a crucial role in everything from EVs to autonomous driving.
Automotive manufacturers must be prepared to merge traditional engineering practices with the fast-paced, iterative nature of software development—a cultural shift that could pose challenges for some organisations.
Linking uncertainties with structural resilience
McKinsey stresses that companies must not only prepare for known risks but also consider low-probability, high-impact events.
For example, regulatory changes in autonomous driving or a sudden increase in environmental laws can reshape the industry overnight. By evaluating these uncertainties against structural resilience factors, automotive manufacturers can prioritise their investments and resources more effectively.
To do so, McKinsey suggests that manufacturers implement three key actions.
- Imagine the future by expanding scenario planning to include unlikely but high-impact events
- Evaluate the potential benefits of various scenarios
- Return to their strategies after crises to ensure that their assumptions still hold true
For example, automakers could assess whether regulations governing autonomous vehicles will change dramatically, and whether their technological capabilities are ready to meet these shifts.
To do so, McKinsey suggests that manufacturers implement three key actions.
- Imagine the future by expanding scenario planning to include unlikely but high-impact events
- Evaluate the potential benefits of various scenarios
- Return to their strategies after crises to ensure that their assumptions still hold true
For example, automakers could assess whether regulations governing autonomous vehicles will change dramatically, and whether their technological capabilities are ready to meet these shifts.
Building resilience as a core capability
Ultimately, McKinsey advises that automotive manufacturers should adopt a more agile approach to strategy planning and risk management.
Traditional long-term plans often become outdated within months, and companies must be able to review and adjust their strategies more frequently. Quarterly or semiannual reviews should include updates to strategic risk profiles, with new risks and uncertainties assessed regularly.
The goal is for automakers to build a resilience "muscle" that allows them to adapt quickly to changes in the market or their internal operations.
Furthermore, McKinsey stresses that resilience must be embedded throughout the organisation, starting with the executive suite and extending to middle management. Employees across all levels must be trained to understand the importance of resilience and be prepared to respond swiftly to disruptions.
As the automotive industry undergoes a fundamental transformation - particularly with the shift from internal combustion engines to EVs - being resilient is the key to staying competitive.
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