Europe’s defence sector is changing fast. More money, political attention and international partnerships are flowing into the industry. At the same time, defence companies face growing pressure to show not just what they produce, but how they operate. 

In this blog, Yuliia Brusko explores why transparency and operational credibility are becoming more important – especially for Ukraine’s wartime-built defence industry. The article builds on the Basel Institute’s ongoing work in Ukraine, including with defence-sector stakeholders on governance, integrity and operational resilience under wartime conditions. 

Defence companies are entering a new era of scrutiny

European defence companies are attracting unprecedented levels of capital, political attention and strategic relevance. Yet alongside this growth comes a level of external scrutiny many firms were never built for.

A recent public dispute involving Czech defence company Czechoslovak Group (CSG) illustrates this shift. A report published by Hunterbrook Media questioned aspects of CSG’s production claims, business model and corporate structure. Among other issues, the report raised questions about the transparency of certain ownership and subsidiary structures, the company’s reliance on intermediary and external procurement arrangements, and the extent to which publicly communicated production and business claims could be independently substantiated by external actors. 

While the company strongly rejected the allegations, the case reveals a broader structural change: the increasing demand for operational verifiability.

In the booming defence industry, investors, procurement actors and international partners are no longer relying on growth narratives or high-level political positioning. Increasingly, they are trying to independently verify how companies actually operate, including: 

• Where key dependencies sit
• How production is organised
• Whether public claims align with realities

This shift is partly driven by the changing structure of the defence market itself. Alongside traditional defence primes, the sector now includes rapidly scaling private manufacturers, drone producers and venture-backed technology firms. 

Many are entering international financing and export ecosystems that expect a level of operational accountability historically uncommon in parts of the defence sector.

Bridging wartime pragmatism and market expectations in Ukraine

This demand for clarity creates a unique challenge for Ukraine’s defence industry. Developed under wartime conditions, Ukrainian companies have prioritised speed, adaptability and survivability over externally defensible corporate structures. 

Distributed manufacturing, fragmented supply chains and parallel operational entities are practical wartime adaptations, not signs of weak governance.

However, as the sector seeks deeper integration with European partners, these same features can create friction. Documentation and traceability systems built under the urgency of survival often struggle to meet the requirements of international financing and export ecosystems.

The problem is not necessarily the complexity or the inherent opacity of these arrangements; it is the inability to credibly explain and defend them to external stakeholders who can no longer rely on informal trust alone.

Operational credibility is becoming a strategic requirement

As scrutiny becomes more operational, companies are increasingly assessed not only on what they produce, but on whether their operational realities can withstand external examination. When structures are too opaque to confidently assess, perceived risk can outweigh strategic value.

This creates pressure not only for Ukrainian manufacturers, but also for European defence companies navigating a rapidly changing market. For those seeking long-term integration into international financing, procurement and partnership ecosystems, the ability to defend operational realities is becoming a core business capability.

A shift from trust-based networks to verifiable systems

The transition from relatively closed government and industry networks toward a more financialised and internationally interconnected market is reshaping how defence companies are assessed. Shifting to this next step is crucial as deftech companies move from niche producers to systemically important security providers. As their technology increasingly moves independently from the large defense primes, the obvious question arises of “going it alone.” While technologically, the choice is obvious, providing sufficient assurance for direct competitive government procurements will require solid systems. 

The challenge is not eliminating operational complexity or wartime opacity. In many cases, these are unavoidable features of how modern defence industries function under pressure. The challenge is whether companies can credibly explain and defend those realities once they enter ecosystems built around external review, institutional accountability and sophisticated due diligence.

For many defence companies, this will require the ability to clearly explain aspects like: 

• How production is organised
• How supplier and partnership structures operate in practice
• How key decisions are documented under wartime conditions
• How public production claims can be substantiated when questioned by investors, procurement actors or international partners. 

This is likely to require more structured approaches to documentation, traceability and internal oversight – not to replicate peacetime bureaucracy, but to ensure that wartime realities can be credibly defended when scrutiny arises.

Adaptability alone will no longer be enough

In this environment, the ability to combine wartime adaptability with institutional credibility may increasingly determine which companies are able to scale, attract financing and secure long-term positions within international markets.

This increases the importance of building credible systems for transparency, documentation, internal oversight and operational accountability in individual companies and across the defence ecosystem. 

Achieving this is no easy task. It will require sustained cooperation between Ukrainian defence companies, international partners, investors, procurement actors and policymakers – indeed, any actor keen to see Ukraine’s phenomenal defence capabilities more deeply integrated into international markets and partnerships. 

At the Basel Institute, we are increasingly working directly with Ukrainian defence companies and their associations to strengthen compliance on an individual or collective basis and welcome new partners. 

The Basel Institute's work on Ukraine's defence integrity is supported by Norway. This blog represents the views of the author only.