This is a bit more complex as the settlement mission at large doesn't properly support combat in the civilian setting. So upgrading workshops would grow into introducing a potentially much larger mechanic. Of course, it could be abstracted away or the conflict could use the alley etc.Let´s say you have a level 3 workshop and bad relations to whoever. Then there is a risk for an encounter that can happen anytime. Like that they demand money, you pay and it´s good but if you don´t pay things can happen like it will be attacked and downgraded to level 1 if you lose the fight (The workers would defend it, not your army if you´re not in the town). Just some brainstorming from me.
I agree that this is a good area to improve on - not just in regards to introducing new mechanics but communicating existing ones.I´m missing some action - reaction stuff in this game, even on this small scale. Things just should matter more.