Investor Presentaiton
Item 1A. Risk Factors.
Among the risks that could materially adversely affect Eaton's businesses, financial condition or results of operations are the
following:
Operational Risks
Impacts related to, and recovery from, the COVID-19 pandemic could have an adverse effect on our business and results of
operations.
The global outbreak of COVID-19 disrupted economic activity around the world. As a result, we and our employees,
suppliers, customers and others were, at times, restricted or prevented from conducting normal business activities, as a result of
shutdowns, travel restrictions and other actions that were requested or mandated by governmental authorities. These impacts
were partially mitigated for us, given that a substantial portion of our businesses and facilities were classified as essential in
jurisdictions in which facility closures were mandated, and most of these disruptions have subsided. None the less, we can give
no assurance that there will not be additional closures in the future or that our businesses and facilities will be classified as
essential in each of the jurisdictions in which we operate, should future outbreaks and/or additional strains of the virus impact
global economic activity. Further, the pandemic has, and could further disrupt our supply chain. The duration of and extent to
which the COVID-19 pandemic continues to impact our results of operations and financial condition will depend on future
developments that are highly uncertain and cannot be predicted. The impact of COVID-19 may also continue to exacerbate
other risks discussed in Item 1A of this Annual Report on Form 10-K, any of which could have a material effect on our results
of operations.
If Eaton is unable to protect its information technology infrastructure against service interruptions, data corruption, cyber-
based attacks or network security breaches, product or service offerings could be compromised or operations could be
disrupted or data confidentiality impaired.
Eaton relies on information technology networks and systems, including the Internet, to process, transmit and store
electronic information, and to manage or support a variety of business processes and activities, including procurement,
manufacturing, distribution, invoicing and collection. Additionally, many of our products and services include integrated
software and information technology that collects data or connects to external and internal systems. Because of this,
cybersecurity threats pose a material risk to our business operations.
Global cybersecurity threats range from widespread vulnerabilities, sophisticated and targeted measures known as advanced
persistent threats, or uncoordinated individual attempts to gain unauthorized access to IT/OT systems. These threats may be
directed at Eaton, its products, software embedded in Eaton's products, or its third-party service providers. The risk is amplified
by the increasingly connected nature of our products and systems. These threats may originate from anywhere in the connected
world and take the form of phishing, malware, bots, or human-centric attacks. Eaton continually seeks to deploy comprehensive
measures to deter, prevent, detect, respond to and mitigate these threats.
As a result of our worldwide operations, we are subject to laws and regulations, including data protection/privacy and
cybersecurity laws and regulations, in many jurisdictions. In addition, we operate in an environment in which there are different
and potentially conflicting data privacy laws in effect in the various U.S. states and foreign jurisdictions in which we operate
and we must understand and comply with each law and standard in each of these jurisdictions while ensuring the data is secure.
For example, the Global Data Protection Regulation (GDPR) prefers that we manage personal data in the E.U. and may impose
fines of up to four percent of our global revenue in the event of certain violations.
Eaton's customers, including Governmental Agencies, are increasingly requiring cybersecurity protections and mandating
cybersecurity standards which may result in additional operating or production costs. Our cybersecurity program aligns with
well-known industry-wide security control frameworks. Despite these efforts, cybersecurity incidents could potentially result in
the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information and
the disruption of business operations. The potential consequences of a material cybersecurity incident include theft of
intellectual property, disruption of operations, reputational damage, adverse health and safety consequences, the loss or misuse
of confidential information, product failure, as well as exposure to fines, legal claims or enforcement actions.
The effects of climate change, including weather disruptions and regulatory/market reactions, create uncertainties that
could negatively impact our business.
Global increases in greenhouse gas emissions are linked to climate change, and there is a growing consensus that dramatic
emissions reductions are needed to avoid severe climate impacts. Extreme weather events linked to climate change, including
hurricanes, flooding, wildfires, and high heat/water scarcity, create physical risks to Eaton's operating locations and supply
chains. While Eaton is working to make its own operations carbon neutral by 2030, a global failure to achieve commitments
could cause increases in these extreme weather events, political instability, and workforce migration, ultimately increasing
Eaton's cost of doing business.
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