Unlocking defence sector opportunities: 5 key considerations

At the 2025 NATO Summit, Canada joined our allies in signing the Defence Investment Pledge, which committed signatories to investing 5% of GDP spending on defence by 2035. As the government works to meet its obligation, it’s looking to private enterprises across the country to support its goals by supplying the materiel for our national defence. While multi-billion-dollar marquee projects like those in the National Shipbuilding Strategy garner headlines, there are significant opportunities up and down the supply chain for businesses of all sizes. As with entering any new market, it’s important to understand the requirements of the sector as well as the resources available for businesses looking to enter it.

1. Compliance and regulation

When entering the defence space, it’s important to be aware of its unique compliance and regulatory requirements. Foremost among those regulations is compliance with Canada's Controlled Goods Program, which regulates access to strategic goods and technologies. To register in the program, companies must conduct personnel security assessments, maintain security plans, and comply with inspection and reporting requirements. 

If you’re considering selling outside of Canada, you’ll also need to determine whether your products appear on the export control list and ensure that permits are secured before exporting goods or tech. Among the items requiring export permits under Canada's Export and Import Permits Act are defence products, components, software, technical data, and certain dual-use technologies. 

Cross-border projects frequently involve restrictions on technology sharing, data access, and end-user controls. Organizations working on projects that include US defence contractors should research US regulations, such as the International Traffic in Arms Regulations and Export Administration Regulations. 

2. Government incentives and research

Canada offers a range of incentives and research support programs to help businesses develop defence and security technologies. The Innovation for Defence Excellence and Security program provides grants to organizations working on solutions to challenges identified by the Department of National Defence. The program is composed of five funding elements to accelerate innovation: competitive projects, innovation networks, contests, sandboxes, and test drives.  Additionally, the program’s list of opportunities is a useful tool to identify ongoing challenges looking for the right solutions. 

Defence Research and Development Canada partners with industry, academia, and government organizations on research and technology development projects. They also publish defence and security strategies that identify Canada’s technological priorities and the pathways to achieve their long-term objectives. These can be very useful for developing a strategy for success in the defence sector. 

3. Privacy and security

Getting involved in our national defence means involvement in crucial areas of national security. Depending on which area of the defence sector you specialize in, that could involve incredibly strict security requirements, including physical and cybersecurity precautions, impeccable recordkeeping, strict supply chain due diligence, and ethical procurement practices. Prime contractors (i.e., contractors that have direct contracts with the government) and governments expect suppliers to demonstrate robust protection of sensitive information and intellectual property, effective compliance programs, and the ability to manage regulatory risks throughout the contract lifecycle. All these elements require special attention to your business’ internal control systems and a careful review of your risk management practices.

4. Financing

Depending on your current operations, entry into the defence sector could require significant investment to retool, introduce new internal controls and processes, and bring on new talent with specialized knowledge necessary to innovate in this space. Luckily, Canadian companies can access several financing programs designed to support innovation, growth, exports, and participation in defence procurement opportunities. 

The National Research Council's Industrial Research Assistance Program provides grants, advisory services, and commercialization support for small and medium-sized enterprises (SMEs) to build innovation capacity, strengthen the technical skills of their teams, and bring new products to market faster. Through the recently launched Defence Industry Assist initiative, eligible firms can obtain funding to develop defence and dual-use technologies. The program also provides advice and connections to help SMEs overcome business challenges.

For companies pursuing international growth, Export Development Canada offers financing, loan guarantees, and trade credit insurance that can help firms manage the risks associated with diversifying into new markets abroad. 

Finally, businesses may access provincial innovation funds, strategic investment programs, and private capital sources, including venture capital and specialized defence-focused investment funds. Together, these financing mechanisms provide critical support for research, product development, scaling operations, and accessing global defence supply chains.

5. Consider the intangibles

One of the fundamental characteristics of businesses that succeed in the defence sector is credibility. Without a proven track record, anything you can do to enhance your credibility in the eyes of procurement officers will enhance the likelihood of your future success. That could mean securing international certifications for your quality management processes, partnering with established players to get your foot in the door, or documenting your technical capabilities to provide confidence in your offering. You may also consider emphasizing previous work that also requires diligence and an ability to operate in a demanding (and politically sensitive) environment, such as government, critical infrastructure, and public safety. 

Never underestimate the power of relationships. Getting to know people within the industry can yield valuable insights into the needs and expectations of the government as well as prime defence contractors. Engaging with the defence community by joining industry associations and attending industry events can connect you with people looking for new opportunities and innovations.

Among the greatest assets a defence supplier can have is a long-term mindset. One-off contracts may (or may not) be lucrative, but long-term capability development is where the greatest opportunities reside. The knowledge you build project by project enhances your credibility and will make you an ideal partner for future opportunities. 

How we can help

Entering a new market always requires an adjustment, but you don’t need to do it alone. Whether you’re looking to enhance your governance and compliance function, find incentives to help you expand your capabilities, guidance on how to raise capital Doane Grant Thornton is here to help. If you’d like to know more about how to prepare your business for opportunities in the defence industry, reach out today!

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