ABB LTD [ABB] Filings

20-F 1 abb20201231.htm 20-F abb20201231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM

20-F

☐

REGISTRATION STATEMENT

PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

December 31, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

☐

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ____________________

Commission file number:

001-16429

_________________________________________

ABB Ltd

(Exact name of registrant as specified in its charter)

Switzerland

(Jurisdiction of incorporation or organization)

Affolternstrasse 44

CH-8050

Zurich

Switzerland

(Address of principal executive offices)

Richard A. Brown

Affolternstrasse 44

CH-8050

Zurich

Switzerland

Telephone: +

317-7111

Facsimile:

+41-43-317-7992

(Name, Telephone, E-mail and/or Facsimile

number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the

Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

American Depositary Shares

each representing one Registered Share

ABB

New York Stock Exchange

Registered Shares, par value CHF 0.12

N/A

New York Stock Exchange

_________________________________________

Securities registered or to be registered pursuant to Section 12(g) of the

Act: None.

Securities for which there is a reporting obligation pursuant to

Section 15(d) of the Act: None.

Indicate the number of outstanding shares of each of the issuer’s

classes of capital or common stock as of the close of the period covered

by the annual report:

2,030,834,169

Registered Shares

_________________________________________

Indicate by check mark if the registrant is a well-known seasoned

issuer, as defined in Rule 405 of the Securities Act.

Yes

☒

⬜

If this report is an annual or transition report, indicate by check

mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)

of the Securities

Exchange Act of 1934. Yes

☐

☒

Note – Checking the box above will not relieve any registrant required

to file reports pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934 from their

obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports

required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that the registrant was

required to file such reports), and (2) has been subject to such

filing requirements for the past

90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically

every Interactive Data File required to be submitted pursuant to

Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12 months (or

for such shorter period that the registrant was required to submit

such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large

accelerated filer, an accelerated filer,

a non-accelerated filer, or an emerging growth company

See definition of

“large accelerated filer,” “accelerated filer,

”

and “emerging growth company” in Rule 12b-2 of the Exchange

Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Emerging growth company

☐

If an emerging growth company that prepares its financial

statements in accordance with U.S. GAAP,

indicate by check mark if the registrant has elected not to

use the

extended transition period for complying with any new or revised

financial accounting standards†

provided pursuant to Section 13(a) of the Exchange Act.

☐

† The term “new or revised financial accounting standard” refers

to any update issued by the Financial Accounting Standards Board

to its Accounting Standards

Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a

report on and attestation to its management’s

assessment of the effectiveness of its internal control over

financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15

U.S.C. 7262(b)) by the registered public accounting firm tha

prepared or issued its audit report.

☒

Indicate by check mark which basis of accounting the registrant has

used to prepare the financial statements included in this filing:

U.S. GAAP

☒

International Financial Reporting Standards as issued

by the International Accounting Standards Board

☐

Other

☐

If “Other” has been checked in response to the previous question,

indicate by check mark which financial statement item the registrant

has elected to follow.

Item 17

☐

Item 18

☐

If this is an annual report, indicate by check mark whether the registrant

is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes

☐

☒

__________________________________________________

* Listed on the New York

Stock Exchange not for trading or quotation purposes,

but only in connection with the registration of American Depositary Shares

pursuant to

the requirements of the Securities and Exchange Commission.

(i)

TABLE OF CONTENTS

Page

PART

Item 1.

Identity of Directors, Senior Management and Advisers

Item 2.

Offer Statistics and Expected Timetable

Item 3.

Key Information

Item 4.

Information on the Company

Item 4A.

Unresolved Staff Comments

Item 5.

Operating and Financial Review and Prospects

Item 6.

Directors, Senior Management and Employees

Item 7.

Major Shareholders and Related Party Transactions

133

Item 8.

Financial Information

133

Item 9.

The Offer and Listing

135

Item 10.

Additional Information

135

Item 11.

Quantitative and Qualitative

Disclosures About Market Risk

143

Item 12.

Description of Securities Other than Equity Securities

145

PART

146

Item 13.

Defaults, Dividend Arrearages and Delinquencies

146

Item 14.

Material Modifications to the Rights of Security Holders

and Use of Proceeds

146

Item 15.

Controls and Procedures

146

Item 16A.

Audit Committee Financial Expert

147

Item 16B.

Code of Ethics

147

Item 16C.

Principal Accountant Fees and Services

148

Item 16D.

Exemptions from the Listing Standards for Audit Committees

148

Item 16E.

Purchase of Equity Securities by Issuer and Affiliated

Purchasers

149

Item 16F.

Change in Registrant’s Certifying

Accountant

149

Item 16G.

Corporate Governance

149

Item 16H.

Mine Safety Disclosure

149

PART

III

150

Item 17.

Financial Statements

150

Item 18.

Financial Statements

150

Item 19.

Exhibits

151

INTRODUCTION

ABB Ltd is a corporation organized under the

laws of Switzerland. In this Annual Report on Form 20-F

(Annual Report), “the ABB Group,”

“the Group,”

“ABB,” the “Company,”

“we,” “our” and “us” refer to ABB Ltd and

its consolidated subsidiaries (unless the context otherwise

requires). We

also use these terms to refer to ABB Asea

Brown Boveri Ltd and its subsidiaries prior to the establishment

of ABB Ltd as the holding company for the entire ABB

Group in 1999, as described in this Annual Report under

“Item 4. Information on the Company—Introduction—History

of the ABB Group”. Our American Depositary Shares

(each representing one registered share of ABB Ltd) are referred

to as “ADSs”. The registered shares of ABB Ltd are referred

to as “shares”. Our principal corporate offices

are located

at Affolternstrasse 44, CH-8050 Zurich, Switzerland,

telephone number +41-43-317-7111.

FINANCIAL AND OTHER INFORMATION

The Consolidated Financial Statements of ABB Ltd, including

the Notes thereto, as of December 31, 2020 and

2019, and for each of the years in the three-year period

ended December 31, 2020, (our Consolidated Financial

Statements) have been prepared in accordance with United

States generally accepted accounting principles

(U.S. GAAP).

In this Annual Report: (i) “$,” “U.S. dollar”

and “USD” refer to the lawful currency of the United States of

America; (ii) “CHF” and “Swiss franc”

refer to the lawful currency of Switzerland; (iii) “EUR”

and “euro”

refer to the

lawful currency of the participating member states of the

European Economic and Monetary Union (Eurozone);

(iv) “SEK” and “Swedish krona” refer to the lawful

currency of Sweden; (v) “Chinese renminbi” and “CNY” refer to the

lawful currency of the People’s

Republic of China; (vi) “AED” refers to the lawful

currency of the United Arab

Emirates; (vii) “INR” and “Indian Rupee”

refer to the lawful currency of India, and (viii) “HKD” refers to the

Hong

Kong dollar. Information

contained on, or that can be accessed through, our Web

site does not constitute a part of this

annual report and is not incorporated by reference herein.

Except as otherwise stated, all monetary amounts in this

Annual Report are presented in U.S. dollars. Where

specifically indicated, amounts in Swiss francs have been

translated into U.S. dollars. These translations are provided

for

convenience only,

and they are not representations that the Swiss franc could be

converted into U.S. dollars at the rate

indicated. The twelve o’clock buying rate in the City of

New York

for cable transfers as certified for customs purposes

by the Federal Reserve Bank of New York

for Swiss francs on December 31,

2020,

was $1.00 = CHF 0.8841.

The

twelve o’clock buying rate for Swiss francs on February

19,

2021,

was $1.00 = CHF 0.8948.

FORWARD

-LOOKING STATEMENTS

This Annual Report includes forward-looking statements within

the meaning of the United States Private

Securities Litigation Reform Act of 1995.

We intend such

forward-looking statements to be covered by the safe harbor

provisions for forward-looking statements contained

in Section 27A of the Securities Act of 1933,

as amended, and

Section 21E of the Securities Exchange Act of 1934,

as amended (Exchange Act). These forward-looking statements can

be identified by the use of forward-looking terminology,

including the terms “believes,”

“estimates,” “anticipates,”

“expects,”

“intends,”

“may,”

“will,” or “should”

or, in each case, their negative,

or other variations or comparable

terminology. These

forward-looking statements include all matters that are not

historical facts. They appear in a number

of places throughout this Annual Report and include

statements regarding our intentions, beliefs or current expectations

concerning, among other things, our results of operations,

financial condition, liquidity,

prospects, growth, dispositions,

strategies and the countries and industries in which we

operate.

These forward looking statements include, but are not limited

to, statements about our financial condition and

performance, operating results, liquidity and our ability

to fund our business operations and initiatives, the impact of the

COVID-19 pandemic on our business, capital expenditure

and debt service obligations, plans regarding

our capital

structure, ability to take advantage of market opportunities and

drive growth, our products and service offerings and

their anticipated performance and impact across various

industries and consumer segments, anticipated benefits to

the

shareholders, planned divestments, acquisitions and integration,

and related synergies and other benefits, investment and

risk management strategies, volatility in the credit

markets, oil prices, foreign currency exchange rates and other market

conditions, trends and opportunities, industry trends and

expectations, including the Energy and Fourth Industrial

Revolutions and changing consumer behavior and demands,

our ability to respond to changing business and economic

conditions, our comparative advantages, our commitments

and contingencies, availability of raw materials, and other

plans, goals, strategies, priorities and initiatives related to

our business, including our brand management initiative, the

implementation of ABB Way,

and cost-saving measures, as well as, the following:

•

statements in “Item 3. Key Information—Dividends and

Dividend Policy”

regarding our policy on future

dividend payments,

•

statements in “Item 3. Key Information—Risk Factors,”

•

statements in “Item 5. Operating and Financial Review and

Prospects”

regarding our management

objectives, including our outlook, as well as trends in results, prices,

volumes, operations, margins and

overall market trends, and

•

statements in “Item 8. Financial Information—Legal Proceedings

”

regarding the outcome of certain legal

and compliance matters.

By their nature, forward-looking statements involve risks and

uncertainties because they relate to events and

depend on circumstances that may or may not occur in

the future. We caution

you that forward-looking statements are

not guarantees of future performance and that our actual

results of operations, financial condition and liquidity,

and the

development of the countries and industries in which

we operate, may differ materially from those described

in or

suggested by the forward-looking statements contained

in this Annual Report. In addition, even if our results of

operations, financial condition and liquidity,

and the development of the countries and industries in which we

operate,

are consistent with the forward-looking statements contained

in this Annual Report, those results or developments may

not be indicative of results or developments in subsequent

periods. Important factors that could cause actual results to

differ materially from our expectations are contained

in cautionary statements in this Annual Report and include,

without limitation, the following:

Business, economic and industry risks

•

Our business is exposed to risks associated with the COVID

-19 pandemic.

•

Our business is exposed to risks associated with the volatile

global economic environment and political

conditions.

•

Our operations in emerging markets expose us

to risks associated with conditions in those markets.

•

We may encounter

difficulty in managing our business due to the global

nature of our operations.

•

We operate

in very competitive and rapidly changing markets and could

be adversely affected if we fail to

keep pace with technological changes.

•

Industry consolidation could result in more powerful

competitors and fewer customers.

•

Increases in costs or limitation of supplies of raw materials

may adversely affect our financial performance.

•

Our multi-national operations expose us to the risk of

fluctuations in currency exchange rates.

•

The uncertainties relating to the United Kingdom’s

new relationship with the European Union and its

potential impact on the relationship between Switzerland

and the European Union, may have a negative

effect on cross-border trade and our business.

Operational risks

•

Increased information technology (IT) security threats

and more sophisticated cyber‑attacks could pose a

risk to our systems, networks, products, solutions and

services.

•

Our business strategy may include making strategic

divestitures. There can be no assurance that any

divestitures will provide business benefit.

•

Anticipated benefits of historical, existing and potential

future mergers, acquisitions, joint ventures or

strategic alliances may not be realized.

•

There is no guarantee that our ongoing efforts

to reduce costs will be successful.

•

Illegal behavior by any of our employees or agents could

have a material adverse impact on our

consolidated operating results, cash flows, and financial

position as well as on our reputation and our

ability to do business.

•

We may be

the subject of product liability claims.

•

Undertaking long‑term, technically complex projects or

projects that are dependent upon factors not

wholly within our control could adversely affect

our profitability and future prospects.

•

If we are unable to obtain performance and other guarantees

from financial institutions, we may be

prevented from bidding on, or obtaining, some contracts, or

our costs with respect to such contracts could

be higher.

•

Our hedging activities may not protect us against the

consequences of significant fluctuations in exchange

rates, interest rates or commodity prices on our earnings

and cash flows.

Legal and regulatory risks

•

An inability to protect our intellectual property rights

could adversely affect our business.

•

Failure to comply with evolving data privacy and

data protection laws and regulations or to otherwise

protect personal data, may adversely impact our business

and financial results.

•

Examinations by tax authorities and changes in tax regulations

could result in lower earnings and cash

flows.

•

We are subject

to environmental laws and regulations in the countries in

which we operate. We

incur costs

to comply with such regulations, and our ongoing operations

may expose us to environmental liabilities.

•

We could be

affected by future laws or regulations enacted to address

climate change concerns as well as

the physical effects of climate change.

General risk factors

•

If we are unable to attract and retain qualified management

and personnel then our business may be

adversely affected.

•

Our business subjects us to considerable potential exposure

to litigation and legal claims and could be

materially adversely affected if we incur

legal liability.

We urge

you to read the other important factors set forth under sections

of this Annual Report entitled “Item 3.

Key Information—Risk Factors,”

“Item 4. Information on the Company”

and “Item 5. Operating and Financial Review

and Prospects” for a more complete discussion of the

important factors that could affect our future performance

and the

countries and industries in which we operate. In light of

these risks, uncertainties and assumptions, the forward-looking

circumstances described in this Annual Report and the

assumptions underlying them may not occur.

Except as required by law or applicable stock exchange

rules or regulations, we undertake no obligation to

update or revise publicly any forward-looking statement,

whether as a result of new information, future events or

otherwise. All subsequent written and oral forward-looking

statements attributable to us or to persons acting on our

behalf are expressly qualified in their entirety by the cautionary

statements referred to above and contained elsewhere in

this Annual Report.

PART

Item 1.

Identity of Directors, Senior Management and Advisers

Not applicable

Item 2.

Offer Statistics and Expected Timetable

Not applicable

Item 3.

Key Information

SELECTED FINANCIAL DATA

The following table presents our selected financial

and operating information at the dates and for each of the

periods indicated. We

report our financial results in U.S. dollars. Due to our global

operations, a significant amount of

our revenues, expenses, assets and liabilities are denominated

in other currencies. As a consequence, movements in

exchange rates between currencies may affect

our profitability, the comparability

of our results between periods, as well

as the reported carrying value of our assets and liabilities. You

should read the following information together with the

information contained in “Item 5. Operating and Financial

Review and Prospects,”

as well as our Consolidated Financial

Statements and the Notes thereto, included elsewhere in

this Annual Report.

Our selected financial data in the following tables as well as financial

information in “Item 5. Operating and

Financial Review and Prospects” is presented in accordance

with U.S. GAAP and have been derived from our published

Consolidated Financial Statements. Our Consolidated

Financial Statements as of and for each of the years ended

December 31, 2020, 2019 and 2018, were audited by KPMG AG.

Our Consolidated Financial Statements as of

December 31, 2017, and for each of the years ended

December 31, 2017 and 2016, were audited by Ernst & Young

AG.

Our Consolidated Financial Statements as of December

31, 2016 have not been audited following the reclassification

2018 of the Power Grids business from continuing operations

to discontinued operations.

INCOME STATEMENT

DATA:

($ in millions, except per share data in $)

2020

2019

2018

2017

2016

Total

revenues

26,134

27,978

27,662

25,196

24,929

Total

cost of sales

(18,256)

(19,072)

(19,118)

(17,350)

(17,396)

Gross profit

7,878

8,906

8,544

7,846

7,533

Selling, general and administrative expenses

(4,895)

(5,447)

(5,295)

(4,765)

(4,532)

Non-order related research and development expenses

(1,127)

(1,198)

(1,147)

(1,013)

(967)

Impairment of goodwill

(311)

—

Other income (expense), net

(323)

124

162

(105)

Income from operations

1,593

1,938

2,226

2,230

1,929

Interest and dividend income

Interest and other finance expense

(240)

(215)

(262)

(234)

(201)

Losses from extinguishment of debt

(162)

—

Non-operational pension (cost) credit

(401)

(38)

Income from continuing operations before

taxes

841

1,862

2,119

2,102

1,761

Income tax expense

(496)

(772)

(544)

(583)

(526)

Income from continuing operations, net of

tax

345

1,090

1,575

1,519

1,235

Income from discontinued operations, net of tax

4,860

438

723

846

799

Net income

5,205

1,528

2,298

2,365

2,034

Net income attributable to noncontrolling interests

(59)

(89)

(125)

(152)

(135)

Net income attributable to ABB

5,146

1,439

2,173

2,213

1,899

Amounts attributable to ABB shareholders:

Income from continuing operations, net of tax

294

1,043

1,514

1,441

1,172

Income from discontinued operations, net of tax

4,852

396

659

772

727

Net income

5,146

1,439

2,173

2,213

1,899

Basic earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

0.67

0.54

Income from discontinued operations, net of tax

2.30

0.19

0.31

0.36

0.34

Net income

2.44

0.67

1.02

1.04

0.88

Diluted earnings per share attributable

to ABB shareholders:

Income from continuing operations, net of tax

0.14

0.49

0.71

0.67

0.54

Income from discontinued operations, net of tax

2.29

0.19

0.31

0.36

0.34

Net income

2.43

0.67

1.02

1.03

0.88

Weighted

-average number of shares outstanding

(in millions)

used to compute:

Basic earnings per share attributable to ABB shareholders

2,111

2,133

2,132

2,138

2,151

Diluted earnings per share attributable to ABB shareholders

2,119

2,135

2,139

2,148

2,154

BALANCE SHEET DATA:

unaudited

December 31,

($ in millions)

2020

2019

2018

2017

2016

Cash and equivalents and current restricted cash

3,601

3,544

3,445

4,526

3,644

Marketable securities and short-term investments

2,108

566

712

1,083

1,953

Restricted cash - non-current

300

—

Total assets

(1)

41,088

46,108

44,441

43,458

39,391

Long-term debt (excluding current maturities of long-term

debt)

4,828

6,772

6,587

6,682

5,785

Total debt

(2)

6,121

9,059

8,618

7,408

6,783

Common stock

188

192

Total stockholders’

equity (including noncontrolling interests)

15,999

13,980

14,534

15,349

13,897

CASH FLOW DATA:

($ in millions)

2020

2019

2018

2017

2016

Operating activities:

Net cash provided by operating activities — continuing operations

1,875

1,899

2,352

2,588

2,607

Net cash provided by (used in) operating activities — discontinued

operations

(182)

426

572

1,211

1,236

Net cash provided by operating activities

1,693

2,325

2,924

3,799

3,843

Investing activities:

Net cash used in investing activities — continuing operations

(2,272)

(651)

(2,908)

(1,118)

(1,108)

Net cash provided by (used in) investing activities — discontinued

operations

9,032

(164)

(177)

(332)

(197)

Net cash provided by (used in) investing activities

6,760

(815)

(3,085)

(1,450)

(1,305)

Financing activities:

Net cash used in financing activities — continuing operations

(8,206)

(1,328)

(741)

(1,688)

(3,308)

Net cash provided by (used in) financing activities — discontinued

operations

(55)

(48)

(47)

Net cash used in financing activities

(8,175)

(1,383)

(789)

(1,735)

(3,355)

(1)

Total assets

includes ass

ets held for

sale and in

discontinued

operations. See

“Note 3 - Discontinued

operations”

to our Consolidated

Financial Statements.

(2)

Total debt

is equal to

the sum of short

-term debt (including

current maturities

of long-term

debt) and long

-term debt.

DIVIDENDS AND DIVIDEND POLICY

Payment of dividends is subject to general business conditions,

ABB’s current and expected

financial condition

and performance and other relevant factors including

growth opportunities. ABB’s current

dividend policy is to pay a

rising, sustainable annual

dividend per share over time.

The unconsolidated statutory financial statements of ABB Ltd

are prepared in accordance with the Swiss Code

of Obligations.

Based on these financial statements, dividends may be paid only

if ABB Ltd has sufficient distributable

profits from previous years or sufficient free

reserves to allow the distribution of a dividend. As a holding company,

ABB Ltd’s main sources of

income are dividend and interest payments from its subsidiaries.

At December 31, 2020, the total unconsolidated stockholders’ equity

of ABB Ltd was CHF 9,063 million,

including CHF 260 million representing share capital, CHF 12,032

million representing reserves and CHF 3,229 million

representing a reduction of equity for own shares (treasury

stock). Of the reserves, CHF 3,229 million relating to own

shares and CHF 52 million representing 20 percent of share

capital, are restricted and not available for distribution.

With respect to the years

ended December 31, 2016, 2017,

2018 and 2019,

ABB Ltd paid a dividend of

CHF 0.76 (USD 0.76) per share, CHF 0.78 (USD 0.81)

per share, CHF 0.80 (USD 0.79) per share and CHF 0.80

(USD 0.82)

per share,

respectively.

The USD amounts for each of the foregoing dividend payments made

in CHF have

been translated using the average rates of the months

in which the dividends were paid.

With respect to the year ended December

31, 2020,

ABB Ltd’s Board of Directors

has proposed to pay a

dividend of CHF 0.80 per share to shareholders. The distribution

is subject to approval by shareholders at ABB Ltd’s

2021 Annual General Meeting (AGM).

For further information on dividends and dividend policy

see “Item 6. Directors, Senior Management and

Employees—Shareholders—Shareholders’ rights—Shareho

lders’ dividend rights”.

RISK FACTORS

You

should carefully consider all of the

information set forth in this Annual Report and the following

description of risks and uncertainties that we currently

believe may exist. Our business, financial condition or results

operations could be adversely affected by any of these

risks. Additional risks of which we are unaware

or that we

currently deem immaterial may also impair

our business operations. This Annual Report also contains

forward-looking

statements that involve risks and uncertainties. Our results

could differ materially from those

anticipated in these

forward-looking statements as a result

of certain factors, including those described below and

elsewhere in this Annual

Report. See “Forward-Looking Statements”.

Business, economic and industry risks

Our business is exposed to risks associated with the COVID-19

pandemic.

The novel coronavirus (COVID-19)

pandemic has had, and continues to have, significant impacts on

the global

economy including on demand for products, operational

predictability, the movement

of people and products across

borders, supply chains and the cost of capital. Given the global

nature of our business, COVID-19 has adversely

impacted our revenues and operating margins

in all of our businesses and is expected to continue to do

so at least in the

short term. In particular, our service

businesses have been materially impacted and some customer

industries, most

notably cruise operators, are operating significantly below

their normal levels. The ultimate extent to which the

pandemic impacts our business, liquidity,

results of operations and financial condition will depend on

future

developments, which are highly uncertain and cannot

be predicted with confidence, including the availability and

effectiveness of vaccines, future mutations

of the COVID-19 virus and any resulting impact on the effectiveness

vaccines, the duration and extent of the pandemic and

waves of infection, travel restrictions and social distancing, the

duration and extent of business closures and business disruptions

and the effectiveness of actions taken to contain,

treat

and prevent the disease. If we or our customers experience

prolonged shutdowns or other business disruptions, our

business, liquidity,

results of operations and financial condition may be materially

adversely affected and our ability to

access the capital markets may be limited.

Our business is exposed to risks associated with the volatile global

economic environment and political conditions.

Adverse changes in economic or political conditions,

particularly in locations where our customers or

operations are located, as well as concerns about global

trade, global health crises, developments in energy

prices, and

terrorist activities, could have a material adverse effect

on our business, financial condition, results of operations and

liquidity and may adversely impact the demand for our

products and services. These and other factors may prevent

our

customers and suppliers from obtaining the financing

required to pursue their business activities as planned, which

may

force them to modify,

delay or cancel plans to purchase or supply our products or

services. In addition, if our customers

do not generate sufficient revenue, or fail

to timely obtain access to the capital markets, they may not

be able to pay, or

may delay payment of, the amounts they owe us. Customers

with liquidity issues may lead to additional bad debt

expense for us, which may adversely affect

our results of operations and cash flows. We

are also subject to the risk that

the counterparties to our credit agreements and hedging

transactions may go bankrupt if they suffer catastrophic

demand

on their liquidity that prevents them from fulfilling their

contractual obligations to us.

Our business environment is influenced also by numerous

other economic or political uncertainties which may

affect the global economy and the international

capital markets. In periods of slow economic growth or

decline, our

customers are more likely to buy less of our products and

services, and as a result we are more likely to experience

decreased revenues. Our Businesses are affected by

the level of investments and demand in the markets that we serve,

principally utilities, industry and transport & infrastructure.

At various times during the last several years, we also have

experienced, and may experience in the future, gross margin

declines in certain businesses, reflecting the effect

factors such as competitive pricing pressures, inventory write-downs,

charges associated with the cancellation of

planned expansion and increases in component and manufacturing

costs resulting from higher labor and material costs

borne by our manufacturers and suppliers that, as a result

of competitive pricing pressures or other factors, we are unable

to pass on to our customers. Economic downturns also may

lead to restructuring actions and associated expenses.

Uncertainty about future economic conditions makes it difficult

for us to forecast operating results and to make

decisions about future investments.

In addition, we are subject to the risks that our business operations

in or with certain countries may be

adversely affected by trade tariffs, trade

or economic sanctions or other restrictions imposed on these countries

including the trade tensions between the United States and

China in recent years.

These could lead to increased costs for

us or for our customers or limit our ability to do business in

or with certain countries. In addition, actual or potential

investors that object to certain of these business operations

may adversely affect the price of our shares by

disposing or

deciding not to purchase our shares. These countries may

from time to time include countries that are identified by the

United States as state sponsors of terrorism. If any countries

where or with whom we do business are subject to such

sanctions or restrictions, our business, consolidated operating

results, financial condition and the trading price of our

shares may be adversely affected. In 2020,

our total revenues from business with countries identified by the

U.S.

government as state sponsors of terrorism represented significantly

less than 1 percent of our total revenues. Based on

the amount of revenues and other relevant quantitative and

qualitative factors, we have determined that our business in

2020 with countries identified by the U.S. government

as state sponsors of terrorism was not material.

Our operations in emerging markets expose us to risks associated

with conditions in those markets.

A significant amount of our operations is conducted in

the emerging markets in South America, Asia, and the

Middle East and Africa. In 2020, approximately 40 percent

of our consolidated revenues were generated from these

emerging markets. Operations in emerging

markets can present risks that are not encountered in countries with

well-established economic and political systems, including:

•

economic instability,

which could make it difficult for us to anticipate future

business conditions in these

markets, cause delays in the placement of orders for projects

that we have been awarded and subject us to

volatile geographic markets,

•

political or social instability,

which could make our customers less willing to make cross-border

investments in such regions and could complicate our

dealings with governments regarding permits or

other regulatory matters, local businesses and workforces,

•

boycotts and embargoes that may be imposed

by the international community on countries in which we do

business or where we seek to do business could adversely

affect the ability of our operations in those

countries to obtain the materials necessary to fulfill contracts

and our ability to pursue business or establish

operations in those countries,

•

foreign state takeovers of our and our customers’ facilities,

•

significant fluctuations in interest rates and currency

exchange rates,

•

the imposition of unexpected taxes or other payments on

our revenues in these markets,

•

our inability to obtain financing and/or insurance coverage

from export credit agencies, and

•

the introduction of exchange controls and other

restrictions by foreign governments.

Additionally, political

and social instability resulting from increased violence in certain

countries in which we

do business has raised concerns about the safety of our

personnel. These concerns may hinder our ability to send

personnel abroad and to hire and retain local personnel.

Such concerns may require us to increase security for personnel

traveling to and working in affected countries

or to restrict or wind-down operations in such countries, which

may

negatively impact us and result in higher costs and inefficiencies.

Consequently, our

exposure to the conditions in or affecting emerging

markets may adversely affect our

business, financial condition, results of operations and

liquidity.

We may encounter difficulty

in managing our business due to the global nature of

our operations.

We operate

in approximately 100 countries around the world and,

as of December 31, 2020, employed about

105,600 people, of which approximately 47 percent were

located in the Europe region, approximately 27 percent in the

Asia, Middle East and Africa region and approximately

26 percent in the Americas region. To

manage our day-to-day

operations, we must deal with cultural and language barriers

and assimilate different business practices. Due

to our

global nature, we deal with a range of legal and regulatory

systems some of which are less developed and less

well-enforced than others. The laws and regulations to

which we are subject can change rapidly and in unexpected

directions. All of this may impact our ability to protect our

contractual, intellectual property and other legal rights. In

addition, we are required to create compensation programs,

employment policies and other administrative programs

that

comply with the laws of multiple countries. We

also must communicate, monitor and uphold group-wide

standards and

directives across our global network, including in relation

to our suppliers, subcontractors and other relevant

stakeholders. Our failure to manage successfully our geographically

diverse operations could impair our ability to react

quickly to changing business and market conditions and

to enforce compliance with group-wide standards and

procedures.

We operate in very

competitive and rapidly changing markets and could

be adversely affected if we fail to keep pace

with technological changes.

We operate

in very competitive and rapidly changing markets where

we regularly need to innovate and develop

products, systems, services and solutions that address the business challenges

and needs of our customers. The nature of

these challenges varies across the geographic markets

and product areas that we serve. The markets for our products

and

services are characterized by evolving industry standards,

which may require us to modify our products and systems.

The continual development of advanced technologies for

new products and product enhancements is an important way

in which we remain competitive and maintain acceptable

pricing levels. If we fail to keep pace with technological

changes in the industrial sectors that we serve, we may

experience lower revenues, price erosion and lower margins.

Our primary competitors are sophisticated companies

with significant resources that may develop products and

services that are superior to our products and services or

may adapt more quickly than we do to new technologies,

industry changes or evolving customer requirements. We

are also facing increased competition from low cost

competitors in emerging markets, which may

give rise to increased pressure to reduce our prices. Our failure

anticipate or respond quickly to technological developments

or customer requirements could adversely affect

our

business, results of operations, financial condition and

liquidity.

Industry consolidation could result in more powerful competitors and

fewer customers.

Competitors in the industries in which we operate are

consolidating. In particular, the automation industry

undergoing consolidation that is reducing the number

but increasing the size of companies that compete with us. As our

competitors consolidate, they likely will increase their market

share, gain economies of scale that enhance their ability

compete with us and/or acquire additional products and

technologies that could displace our product offerings.

Our customer base also is undergoing consolidation.

Consolidation within our customers’ industries (such as

the marine and cruise industry,

automotive, aluminum, steel, pulp and paper and pharmaceutical

industries and the oil

and gas industry) could affect our customers and

their relationships with us. If one of our competitors’ customers

acquires any of our customers, we may lose that business. Addi

tionally, as our customers

become larger and more

concentrated, they could exert pricing pressure on all suppliers,

including us. If we were to lose market share or

customers or face pricing pressure due to consolidation of

our customers, our results of operations and financial

condition could be adversely affected.

Increases in costs or limitation of supplies of raw materials may

adversely affect our financial performance.

We purchase

large amounts of commodity-based raw

materials, including steel, copper,

aluminum and oil.

Prevailing prices for such commodities are subject to fluctuations

due to changes in supply and demand and a variety of

additional factors beyond our control, such as global

political and economic conditions. Historically,

prices for some of

these raw materials have been volatile and unpredictable,

and such volatility is expected to continue. Therefore,

commodity price changes may result in unexpected

increases in raw material costs, and we may be unable to increase

our prices to offset these increased costs without

suffering reduced volumes, revenues or operating

income. We do

not

fully hedge against changes in commodity prices and our

hedging procedures may not work as planned.

We depend

on third parties to supply raw materials and other components

and may not be able to obtain

sufficient quantities of these materials and components,

which could limit our ability to manufacture products on a

timely basis and could harm our profitability.

The risk that we may not be able to obtain raw materials or other

components is increased by the COVID-19 pandemic. For

some raw materials and components, we rely on a single

supplier or a small number of suppliers. If one of these suppliers were

unable to provide us with a raw material or

component we need, our ability to manufacture some of our

products could be adversely affected until we

are able to

establish a new supply arrangement. We

may be unable to find a sufficient alternative

supply channel in a reasonable

time period or on commercially reasonable terms, if at

all. If our suppliers are unable to deliver sufficient

quantities of

materials on a timely basis, the manufacture and sale of

our products may be disrupted, we may be required to assume

liability under our agreements with customers and our

sales and profitability could be materially adversely affected.

Our multi-national operations expose us to the risk of fluctuations

in currency exchange rates.

Currency exchange rate fluctuations have had, and

could continue to have, a material impact on our operating

results, the comparability of our results between periods,

the value of assets or liabilities as recorded on our

Consolidated Balance Sheet and the price of our securities.

Volatility

in exchange rates makes it harder to predict

exchange rates and perform accurate financial planning.

Changes in exchange rates can unpredictably and adversely

affect our consolidated operating results and

could result in exchange losses.

Currency Translation

Risk.

The results of operations and financial position of most

of our non-U.S.

companies are initially recorded in the currency of the

country in which each such company resides, which we call

“local currency”. That financial information is then translated

into U.S. dollars at the applicable exchange rates for

inclusion in our Consolidated Financial Statements. The

exchange rates between local currencies and the U.S. dollar can

fluctuate substantially,

which could have a significant translation effect

on our reported consolidated results of

operations and financial position.

Increases and decreases in the value of the U.S. dollar versus local

currencies will affect the reported value

our local currency assets, liabilities, revenues and expenses

in our Consolidated Financial Statements, even if the

value

of these items has not changed in local currency

terms. These translations could significantly and adversely affect

our

results of operations and financial position from period

to period.

Currency Transaction

Risk.

Currency risk exposure also affects our operations when

our sales are

denominated in currencies that are different from

those in which our manufacturing or sourcing costs are incurred.

this case, if, after the parties agree on a price, the value of

the currency in which the price is to be paid were to weaken

relative to the currency in which we incur manufacturing

or sourcing costs, there would be a negative impact on

the

profit margin for any such transaction. This

transaction risk may exist regardless of whether there is also

a currency

translation risk as described above.

Currency exchange rate fluctuations in those currencies

in which we incur our principal manufacturing

expenses or sourcing costs may adversely affect

our ability to compete with companies whose costs are incurred

in other

currencies. If our principal expense currencies appreciate

in value against such other currencies, our competitive position

may be weakened.

The uncertainties relating to the United Kingdom’s

new relationship with the European Union and its potential

impact on the relationship between Switzerland and the European

Union, may have a negative effect on cross-border

trade and our business.

The United Kingdom has withdrawn from the European

Union and has negotiated the terms of such departure

(the UK-EU Trade and Cooperation Agreement

or TCA). The TCA is subject to formal approval by

the European

Parliament and the Council of the European Union before

it comes into effect and has been applied provisionally since

January 1, 2021. Because the agreement merely sets forth

a framework in many respects and will require complex

additional bilateral negotiations between the United Kingdom

and the European Union as both parties continue to work

on the rules for implementation, significant political and

economic uncertainty remains and this has had and may

continue to have a material effect on cross-border

trade with the United Kingdom and with the European Union.

Lack of

clarity about future United Kingdom laws and regulations,

potentially divergent national laws, the possibility of

increased regulatory complexities, or future developments

in the European Union could depress economic activity,

reduce demand for our products and services, restrict ou

access to capital, and diminish or eliminate barrier-free access

between the United Kingdom and other European Union

member states or among the European economic area

overall.

Furthermore, the TCA may influence discussions on

open trade and political matters between Switzerland

and the

European Union. Any of these factors could have an adverse

effect on our business, financial condition

and results of

operations.

Operational risks

Increased information technology (IT) security threats and more

sophisticated cyber-attacks could pose a risk to our

systems, networks, products, solutions and services.

We have observed

a global increase in IT security threats and more sophisticated cyber-attacks,

which pose a

risk to the security of systems and networks and the confidentiality,

availability and integrity of data stored and

transmitted on those systems and networks. Despite our

efforts, we have experienced, and may in the future

experience,

cyber-attacks against us and we have

incurred and will continue to incur substantial costs to reduce

the cyber risks to our

systems, networks, products, solutions and services. Similarly,

we have observed a continued increase in attacks

generally against industrial control systems as well as against

our customers and the systems we supply

to them, which

pose a risk to the security of those systems and networks.

Future attacks could potentially lead to the compromising of

confidential information, disruption of our business, improper

use or downtime of our systems and networks or those we

supplied to our customers, manipulation, corruption,

inaccessibility and destruction of data, defective products

services, production downtimes and supply shortages. Such

attacks may also expose us to loss of business, claims or

regulatory action.

Any such impact in turn could adversely affect our reputation,

competitiveness and results of

operations. Our insurance coverage may not be adequate

to cover all the costs related to cyber security attacks or

disruptions resulting from such events. Due to the nature

of these security threats, the nature and scope of the impact

any future incident cannot be predicted.

Our business strategy may include making strategic divestitures.

There can be no assurance that any divestitures will

provide business benefit.

Our strategy includes divesting certain businesses. The divestiture

of an existing business could reduce our

future profits and operating cash flows and make our financial

results more volatile. We

may also retain certain

obligations or grant indemnities in connection with a divestment.

We may not find

suitable purchasers for our non-core

businesses and may continue to pay operating costs associated

with these businesses. Failed attempts to divest non-core

businesses may distract management’s

attention from other business activities, erode employee morale

and customers’

confidence, and harm our business. A divestiture could

also cause a decline in the price of our shares and increased

reliance on other elements of our core business operations.

Whether we realize the anticipated benefits of a divestmen

including our divestment in 2020 of 80.1 percent of the

Power Grids business, depends on whether we successfully

manage the related risks. If we do not successfully manage

the risks associated with a divestiture, our business, financial

condition, and results of operations could be adversely affected.

Anticipated benefits of historical, existing and potential

future mergers, acquisitions, joint ventures or strategic

alliances may not be realized.

As part of our overall strategy,

we may, from time

to time, acquire businesses or interests in businesses,

including noncontrolling interests, or form joint ventures

or create strategic alliances. Whether we realize the anticipat

benefits,

including operating synergies and cost savings,

from these transactions, including our acquisition in 2018 of

General Electric Company’s

Industrial Solutions business, depends, in part, upon the integration

between the businesses

involved, the performance and development of the underlying

products, capabilities or technologies, our correct

assessment of assumed liabilities and the management

of the operations in question. Accordingly,

our

financial results

could be adversely affected by unanticipated

performance and liability issues, transaction-related charges,

amortization

related to intangibles, charges for impairment

of long-term assets and partner performance.

There is no guarantee that our ongoing efforts

to reduce costs will be successful.

We seek continued

cost savings through operational excellence and supply chain

management. Lowering our

cost base is important for our business and future competitiveness.

However, there is no guarantee

that we will achieve

this goal. If we are unsuccessful

and the shortfall is significant, there could be an adverse effect

on our business,

financial condition, and results of operations.

Illegal behavior by any of our employees or agents could

have a material adverse impact on our consolidated

operating results, cash flows, and financial position as

well as on our reputation and our ability to do business.

Certain of our employees or agents have taken, and may

in the future take, actions that violate or are alleged to

violate the U.S. Foreign Corrupt Practices Act of 1977

(FCPA), legislation

promulgated pursuant to the 1997

Organisation for Economic Co-operation

and Development (OECD) Convention on Combating Bribery

of Foreign

Public Officials in International Business Transactions,

applicable antitrust laws and other applicable laws or

regulations. For more information regarding investigations of

past actions taken by certain of our employees, see

“Item 8. Financial Information—Legal Proceedings”.

Such actions have resulted, and in the future could result, in

governmental investigations, enforcement actions, civil

and criminal penalties, including monetary penalties and other

sanctions, and civil litigation. It is possible that any

governmental investigation or enforcement action arising

from such

matters could conclude that a violation of applicable law

has occurred, and the consequences of any such investigat

ion

or enforcement action may have a material adverse impact

on our consolidated operating results, cash flows and

financial position. In addition, such actions, whether actual

or alleged, could damage our reputation and ability to

business.

Further, detecting, investigating and

resolving such actions could be expensive and could consume

significant

time and attention of our senior management. While we

are committed to conducting

business in a legal and ethical

manner, our internal control

systems at times have not been, and in the future may not be, completely

effective to

prevent and detect such improper activities by our employees and

agents. We are

subject to certain ongoing

investigations by governmental agencies.

We may be

the subject of product liability claims.

We may be

required to pay for losses or injuries purportedly caused by

the design, manufacture or operation of

our products and systems. Additionally,

we may be subject to product liability claims for the improper

installation of

products and systems designed and manufactured by others.

Product liability claims brought against us may be based

in tort or in contract, and typically involve claims

seeking compensation for personal injury or property

damage. Claims brought by commercial businesses are often

made

also for financial losses arising from interruption

to operations. Depending on the nature and application of many

of the

products we manufacture, a defect or alleged defect in one

of these products could have serious consequences. For

example:

•

If the products produced by our electricity-related

businesses are defective, there is a risk of fire,

explosions and power surges, and significant

damage to electricity generating, transmission and

distribution facilities as well as electrical shock causing injury

or death.

•

If the products produced by our automation-related businesses

are defective, our customers could suffer

significant damage to facilities and equipment that

rely on these products and systems to properly monitor

and control their manufacturing processes. Additionally,

people could be exposed to electrical shock and/or

other harm causing injury or death.

•

If any of our products contain hazardous substances, then

there is a risk that such products or substances

could cause injury or death.

•

If any of our protective products were to fail to function

properly, there is a risk that

such failure could

cause injury or death.

If we were to incur a very large product liability

claim, our insurance protection might not be adequate or

sufficient to cover such a claim in terms of

paying any awards or settlements, and/or paying for

our defense costs.

Further, some claims may be

outside the scope of our insurance coverage. If a litigant

were successful against us, a lack

or insufficiency of insurance coverage

could result in an adverse effect on our business, financial condition,

results of

operations and liquidity.

Additionally, a well-publicized

actual or perceived issue relating to us or our products could

adversely affect our market reputation,

which could result in a decline in demand for our products and reduce

the trading

price of our shares. Furthermore, if we were required or

we otherwise determined to make a product recall, the costs

could be significant.

Undertaking long-term, technically complex projects or projects that

are dependent upon factors not wholly within

our control could adversely affect our profitability

and future prospects.

We derive a

portion of our revenues from long-term, fixed price and turnkey

projects and from other

technically complex projects that can take many months,

or even years, to complete. Such contracts typically involve

substantial risks, including the possibility that we may

underbid and consequently have no means of recouping the

actual

costs incurred, and the assumption of a large

portion of the risks associated with completing related projects, including

the warranty obligations. Some projects involve technological

risks, including in cases where we are required to modify

our existing products and systems to satisfy the technical requirements

of a project, integrate our products and systems

into the existing infrastructure and systems at the installation

site, or undertake ancillary activities such as civil works at

the installation site. Our revenue, cost and gross profit

realized on such contracts can vary,

sometimes substantially,

from our original projections for numerous reasons, including:

•

unanticipated issues with the scope of supply,

including modification or integration of supplied products

and systems that may require us to incur incremental

expenses to remedy such issues,

•

the quality and efficacy of our products and

services cannot be tested and proven in all situations and

environments and may lead to premature failure or unplanned

degradation of products,

•

changes in the cost of components, materials or labor,

•

difficulties in obtaining required governmental

permits or approvals,

•

delays caused by customers, force majeure or local weather

and geological conditions, including the

ongoing COVID-19 pandemic and natural disasters,

•

shortages of construction equipment,

•

changes in law or government policy,

•

supply bottlenecks, especially of key components,

•

suppliers’, subcontractors’ or consortium partners’ failure

to perform or delay in performance,

•

diversion of management focus due to responding to

unforeseen issues, and

•

loss of follow-on work.

These risks are exacerbated if a project is delayed because

the circumstances upon which we originally bid and

quoted a price may have changed in a manner that increases

our costs or other liabilities relating to the project. In

addition, we sometimes bear the risk of delays caused

by unexpected conditions or events. Our project contracts often

subject us to penalties or damages if we cannot complete

a project in accordance with the contract schedule. In certain

cases, we may be required to pay back to a customer all or

a portion of the contract price as well as potential damages

(which may significantly exceed the contract price), if

we fail to meet contractual obligations.

If we are unable to obtain performance and other guarantees

from financial institutions, we may be prevented from

bidding on, or obtaining, some contracts, or our costs with respect

to such contracts could be higher.

In the normal course of our business and in accordance

with industry practice, we provide a number of

guarantees including bid bonds, advance payment bonds

or guarantees, performance bonds or guarantees and

warranty

bonds or guarantees, which guarantee our own performance.

These guarantees may include guarantees that a

project will

be completed on time or that a project or particular equipment

will achieve other defined performance criteria. If we fail

to satisfy any defined criteria, we may be required to

make payments in cash or in kind. Performance guarantees

frequently are requested in relation to large

projects.

Some customers require that performance guarantees

be issued by a financial institution. In considering

whether to issue a guarantee on our behalf, financial

institutions consider our credit ratings. If, in the future, we cannot

obtain such a guarantee from a financial institution on commercially

reasonable terms or at all, we could be prevented

from bidding on, or obtaining, some contracts, or our costs with

respect to such contracts could be higher,

which would

reduce the profitability of the contracts. If we cannot obtain

guarantees on commercially reasonable terms or at

all from

financial institutions in the future, there could be a

material impact on our business, financial condition, results of

operations or liquidity.

Our hedging activities may not protect us against the consequences

of significant fluctuations in exchange rates,

interest rates or commodity prices on our earnings and cash flows.

Our policy is to hedge material currency exposures by

entering into offsetting transactions with third-party

financial institutions. Given the effective horizons

of our risk management activities and the anticipatory nature of

the

exposures intended to be hedged, there can be no assurance

that our currency hedging activities will fully offset the

adverse financial impact resulting from unfavorable movements

in foreign exchange rates. In addition, the timing of the

accounting for recognition of gains and losses related to

a hedging instrument may not coincide with the timing of

gains

and losses related to the underlying economic exposures.

As a resource-intensive operation, we are exposed to a variety

of market and asset risks, including the effects of

changes in commodity prices and interest rates. We

monitor and manage these exposures as an integral part

of our

overall risk management program, which recognizes the unpredictability

of markets and seeks to reduce the potentially

adverse effects on our business. As part of our

effort to manage these exposures, we may enter into

commodity price and

interest rate hedging arrangements. Nevertheless, changes

in commodity prices and interest rates cannot always be

predicted or hedged.

If we are unable to successfully manage the risk of changes

in exchange rates, interest rates or commodity

prices or if our hedging counterparties are unable to perform

their obligations under our hedging agreements with them,

then changes in these rates and prices could have an adverse effect

on our financial condition and results of operations.

Legal and regulatory risks

An inability to protect our intellectual property rights could

adversely affect our business.

Our intellectual property rights are fundamental to all

of our businesses. We generate,

maintain, utilize and

enforce a substantial portfolio of trademarks, trade dress, patents

and other intellectual property rights globally.

Intellectual property protection is subject to applicable

laws in various local jurisdictions where interpretations and

protections vary or can be unpredictable and costly to enforce.

We use our

intellectual property rights to protect the

goodwill of our products, promote our product recogni

tion, protect our proprietary technology and development

activities, enhance our competitiveness and otherwise

support our business goals and objectives. However,

there can be

no assurance that the steps we take to obtain, maintain

and protect our intellectual property rights will be adequate. Our

intellectual property rights may fail to provide us with

significant competitive advantages, particularly in foreign

jurisdictions that do not have, or do not enforce, strong intellectual

property rights. The weakening of protection of our

trademarks, trade dress, patents and other intellectual property

rights could adversely affect our business. We

also may

engage in legal action to protect our own intellectual property

rights, and enforcing our rights may require considerable

time, money and oversight, and existing laws in the various

countries in which we provide services or solutions may

offer only limited protection.

Failure to comply with evolving data privacy and data

protection laws and regulations or to otherwise protect

personal data, may adversely impact our business and financial

results.

We are subject

to many rapidly evolving privacy and data protection laws

and regulations around the world

including the General Data Protection Regulation (GDPR)

in Europe as well as the California Data Privacy Act and

the

California Privacy Rights Act (effective in

January 2023) in the United States. This requires us to operate

in a complex

environment where there are significant constraints on

how we can process personal data across our business. The

GDPR, which became effective in May 2018, has

established stringent data protection requirements for companies

doing business in or handling personal data of individuals

in the European Union. The GDPR imposes obligations on

data controllers and processors including the requirement

to maintain a record of their data processing and to implement

policies and procedures as part of their mandated privacy

governance framework. Breaches of the GDPR could result

substantial fines, which in some cases could be up to

four percent of our worldwide revenue. In addition, a breach

of the

GDPR or other data privacy or data protection laws or

regulations could result in regulatory investigations, reputational

damage, orders to cease/change our use of data, enforcement

notices, as well as potential civil claims including class

action type litigation. We

have invested, and continue to invest, human and technology

resources in our data privacy and

data protection compliance efforts. There

can be no assurance that any such actions will be sufficient

to prevent

cybersecurity breaches, disruptions, unauthorized release of

sensitive information or corruption of data. Despite such

actions,

there is a risk that we may be subject to fines and penalties, litigation

and reputational harm if we fail to

properly process or protect the data or privacy of third

parties or comply with the GDPR or other applicable data

privacy

and data protection regimes.

Examinations by tax authorities and changes in tax regulations could

result in lower earnings and cash flows.

We operate

in approximately 100 countries and therefore are subject to

different tax regulations. Changes in tax

laws could result in a higher tax expense and higher

tax payments. Furthermore, this could materially impact

our tax-

related receivables and liabilities as well as def

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