www.se.com Schneider Electric Universal Registration Document 2021 262 Chapter 3 – How we manage risk at Schneider Electric 2. Trend driven risks 2.3 Supply chain resilience Risk description The Group is exposed to supply chain dependency and business continuity risk. Since the onset of the COVID-19 pandemic, constrained labor availability, global shortages of raw materials, and unreliable transportation have challenged suppliers and put pressure on global and regional supply chains across industries. Due to market dynamics, these constraints are unlikely to abate in the first half of 2022, particularly in electronic components such as semiconductors. Risk monitoring and management The Group’s supply chain strategy team is responding to the global supply chain crisis to ensure supply chain flexibility and resilience is continually improved. The Group is working closely with its suppliers and research and development teams to qualify alternate components to support increased demand and improve continuity of supply. More than 80% of selected capex is engaged in the Power of Two in Manufacturing project, leveraging multiple factories and suppliers to bolster greater resiliency. 84% of top risks are secured with strategic stock, and 51% of top risks secured under a specific multi-sourcing project. Leveraging its network of more than 190 factories and 90 distribution centers globally, and network of seven control towers (in each region), the Group is able to monitor global transport reliability, labor availability, and overall market dynamics in real time, adjusting lead times as necessary, while enacting mitigating actions to ensure lead times are as short as possible. Teams are empowered to proactively communicate with customers to continue to support them and their operations. 2.4 Digital evolution and software offers Risk description Major transformation in several areas is impacting the markets in which Schneider Electric operates, including the digitization of the Energy industry. In the age of IoT, customers expect ever smarter products with open interfaces enabling them to be tightly integrated into more and more complex software-based solutions and benefit from new services leveraging artificial intelligence and advanced algorithms. The Group is investing in its digital transformation journey and as such is increasing the share of its digital offers. In 2021 software and digital services had a strong growth. As such, Schneider Electric is focusing on offering more digital services, generating more recurring revenues, and increasing customer retention. Also, in 2021, the Group has acquired ETAP, which is a fundamental brick of the digitization of electrical distribution network. This acquisition will accelerate Schneider Electric’s journey to build a network digital twin software portfolio and reach a leadership position in digital and sustainable solutions. The transformation risk will be linked to the monetization and scale of this new digital portfolio in order to generate a steady revenue stream from this mass customers and products connectivity. Risk monitoring and management The Group has launched several initiatives including but not limited to: • creation of a new organization dedicated to the growth of digital services with a clear ambition to leverage a robust strategy, a structured offer portfolio, and a segment market approach; • monetizing critical connected assets with advanced Advisor offer through installed base, using Artificial Intelligence and algorithms; • definition of a consistent connectivity path for partners and direct go-to-market; • acceleration of the attachment of digital services from CapEx to OpEx business. 2.5 Attracting and developing talent with a focus on critical skills Risk description The growth of the Group’s businesses in markets around the world, the digital transformation, and the rapidly evolving context of the “next normal” requires an increased focus on talent. Shaping the workforce of the future depends on the Group’s ability to attract, hire, onboard, develop, and retain the best talent. Critical skills, especially in the areas of technologies, software, services, sustainability, supply chain, and electronics must be prioritized. In addition to critical skills, workforce diversity, equity, and inclusion – especially gender, generation, and nationality/ethnicity – also needs to be a priority to ensure equal opportunities for everyone, everywhere. 3.4 Key risks