261 Life Is On | Schneider Electric www.se.com Chapter 3 – How we manage risk at Schneider Electric Strategic Report 3. 2. Trend driven risks 2.1 World deglobalization and fragmentation Risk description Stable trade is beneficial for economic growth. Trends of increased mercantilism is leading towards regionalization of trade around the United States, China, Russia, Europe, and Indian poles. Regionalized, rather than globally balanced government regulations and policies on, but not limited to, digitization, circularity, carbon, supply chain management, and others could handicap offer development efficiency through redundant efforts. These offer development duplication efforts can potentially impact Schneider Electric’s profitability. In addition to the trade regionalization trend, technology decoupling, specifically between the USA and Chinese poles, have been observed through increased regulations. Furthermore, this acceleration of regional versus global trade and technology policies is increasing the pressure on the supply chains of global companies in the forms of both tariff and non-tariff barriers. As such, trade wars could disrupt Schneider Electric’s operations and global supply chain. The above-mentioned combination of both nationally orientated tariff and non-tariff burden could increase the cost to market and potentially adversely impact the Group profitability. Risk monitoring and management To mitigate the risk on supply chain efficiencies and tariff impacts, Schneider Electric has implemented a multi-hub organization. The Group has R&D and supply chain activities, suppliers, and commercial networks in the main international hubs, which are North America, EMEA, and Asia. In this multi-local context, Schneider Electric can rebalance its activities across geographies. This setup has proved pertinent as the Group has demonstrated a solid resilience in 2020 and 2021. Schneider Electric uses prospective scenarios planning, focusing on geopolitics and trade. While the pace of external changes continues at a historically unprecedented scale regionally, global teams are working across stakeholders from Business Units, Regional Operations, and Transversal Functions (i.e., Finance, Supply Chain, Legal, Marketing, R&D, HR). 2.2 New players such as digital giants, software players, and energy majors entering the energy efficiency and renewable energy space Risk description Schneider Electric operates in the energy market which attracts new players and creates a new competitive landscape. Indeed, the energy industry is undergoing major transformations and disruptions driven by the following main trends: • A net-zero world: pressure on climate change and sustainability call for a change in business practices; • An all-electrical world: oil majors urged to reduce their impacts on carbon emissions; • An all-digital world: increasing influence of digital giants and software players. In this context, Schneider Electric’s competition landscape is evolving, and the Group can now see some digital giants, software players, or large companies such as energy majors positioning themselves – directly or indirectly – as providers of energy efficiency, which may compete with the digital services Value Propositions currently developed by the Group. Risk monitoring and management The Group is driving competition performance analysis and follow- up of organizational changes and M&A news, and reviewing its competitors peer group and all key players in its environment. To anticipate these changes in the competitive landscape, the Group is communicating more widely its values and positioning on climate change and sustainability. Schneider Electric also reinforces its offer portfolio with acquisitions or investments in software companies, such as RIB Software in 2020, and OSIsoft with AVEVA in 2021. Schneider Electric provides a full portfolio of solutions for customers (hardware and software) – as EcoStruxure ™ solutions – and energy and automation digital solutions for efficiency and sustainability. It is also developing the Group’s network of partners and reinforcing its Strategic Technology Alliances.