Rockwell Automation, Inc.ROK

Capital structure and performance · Credit rating and cost of capital

Our ability to access the credit markets and the costs of borrowing are affected by the strength of our credit rating and current market conditions. If our access to credit, including the commercial paper market, is adversely affected by a change in market conditions or otherwise, our cost of borrowings may increase or our ability to fund operations may be reduced.

Capital structure and performance · Financial performance volatility

Financial results depend on the successful execution of our business operating plans, including current and future cost productivity and margin expansion initiatives. There is a risk that these initiatives will not result in the projected savings that we anticipate and could negatively impact our business and financial results.

International and currency · Transfer pricing and taxation

In October 2021, the Organization for Economic Cooperation and Development (OECD) and G20 Finance Ministers reached an agreement, known as Base Erosion and Profit Shifting (BEPS) Pillar Two, that ensures that income earned in each jurisdiction that qualifying multinational enterprises operate in is subject to a minimum corporate income tax rate of at least 15 percent. Enactment of this regulation in its current form would generally apply to the Company beginning in fiscal year 2026, resulting in an increase in our effective tax rate.

International and currency · Foreign exchange and currency exposure

As a global company operating in over 100 countries, we face risks related to foreign currency markets. A strengthening U.S. Dollar (USD) may adversely impact our sales and profitability related to business we do outside the U.S.

International and currency · International operations and emerging markets

We do business in more than 100 countries around the world. Our global operations are subject to numerous financial, legal, and operating risks, such as political and economic instability; prevalence of corruption in certain countries; enforcement of contract and intellectual property rights; and compliance with existing and future laws, regulations, and policies.

Market and investment · Investment portfolio performance

The expenses we record for our pension and other postretirement benefit plans depend on factors such as changes in market interest rates, the value and investment performance of plan assets, mortality assumptions, and healthcare trend rates. Significant unfavorable changes in these factors would increase our expenses and funding requirements.

Core operations · Operational disruption and business continuity

Natural disasters (including but not limited to those as a result of climate change), pandemics, acts or threats of war or terrorism, international conflicts, power outages, fires, explosions, equipment failures, sabotage, political instability, and the actions taken by governments could cause damage to or disrupt our business operations, our distribution network, our suppliers or our customers.

Human capital and workforce · Talent acquisition and retention

Our success depends on the efforts and abilities of our leadership team and employees across the Company. The market for employees and leaders with certain skills and experiences is very competitive, and difficulty attracting, developing, and retaining members of our leadership team and key employees could have a negative effect on our business, operating results, and financial condition.

Customer and revenue · Changing customer preferences and behavior

Our success depends in part on our ability to anticipate and offer hardware and software products and services that appeal to the changing needs and preferences of our customers in the various markets we serve. If we are not able to anticipate, identify, develop, and market products that respond to changes in customer preferences and emerging technological and broader industry trends, demand for our products could decline.

Market position and competition · Competitive pressure and market share loss

We face strong competition in all of our market segments in several significant respects. We compete based on breadth and scope of our hardware and software product portfolio and solution and service offerings, technology differentiation, the domain expertise of our employees and partners, product performance, quality of our hardware and software products, solutions, and services.

Strategic execution · Merger acquisition and divestiture risks

As part of our strategy, we pursue strategic transactions, including acquisitions, joint ventures, investments, and other business opportunities. We may not be able to identify, or complete beneficial transaction opportunities given the intense competition for them. Even if we successfully identify and complete such transactions, we may not achieve the expected benefits of such transactions.

Economic and market conditions · Economic recession and downturns

We are subject to macroeconomic cycles and when recessions occur, we may experience reduced, canceled or delayed orders, payment delays or defaults, supply chain disruptions, or other adverse events as a result of the economic challenges faced by our customers, prospective customers, and suppliers.

Cybersecurity and data protection · Data breaches and cyber attacks

Despite the implementation of security measures, our systems are vulnerable to unauthorized access by nation states, hackers, cyber-criminals, malicious insiders, and other actors who may engage in fraud, theft of confidential or proprietary information, or sabotage. Our systems could be compromised by malware (including ransomware), cyber-attacks, and other events.

Digital transformation and innovation · Artificial intelligence and automation

As we broaden the application of AI across product development, manufacturing, customer operations, and enterprise operations, we face evolving risks related to safety, data governance, regulatory compliance, intellectual property, and ethical use. Integrating AI into our offerings and internal processes may lead to unintended consequences, including biased outputs, inaccurate decision-making, and increased vulnerability to adversarial attacks.

Cybersecurity and data protection · Data privacy and protection regulations

Compliance with privacy and cybersecurity laws and regulations (including the emerging European Union Cyber Resiliency Act) could increase our operating costs in managing product compliance and as part of our efforts to protect and safeguard our sensitive data, personal information, and IT infrastructure.

Cybersecurity and data protection · Third party data security and vendors

We rely on partners and vendors, including cloud providers, for a wide range of products and outsourced activities as part of our internal IT infrastructure and our commercial product offerings. Our partners and vendors frequently have access to our confidential information as well as confidential information about our customers, employees, and others.

Legal and litigation · Product liability and warranty claims

We have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain of our products many years ago. We estimate the future litigation-related costs, including both future claim resolution costs and defense costs, that we expect to incur.

Legal and litigation · Intellectual property disputes

Others may assert intellectual property infringement claims against us or our customers. We frequently provide a limited intellectual property indemnity in connection with our terms and conditions of sale to our customers. In addition, we own the rights to many patents, trademarks, brand names, and trade names that are important to our business. The inability to secure or enforce our intellectual property rights may have an adverse effect on our results of operations.

Legal and litigation · Litigation and legal proceedings

Various lawsuits, claims, and proceedings have been or may be asserted against us relating to the conduct of our business or of our divested businesses, including those pertaining to the safety and security of the hardware and software products, solutions, and services we sell, employment, contract matters, and environmental remediation.

Stakeholder relations · Supplier and vendor relationships

We also maintain several single-source supplier relationships because either alternative sources are not available, or the relationship is advantageous due to performance, quality, support, delivery, capacity, or price considerations. Unavailability of, or delivery delays for, single-source components or products could adversely affect our ability to ship the related products in a timely manner.