Combined Management Report 8.3 Risks Below we describe the risks that could have a material adverse effect on our business situation, financial condition (including effects on assets, liabilities and cash flows), results of operations and reputation. The order in which the risks are presented in each of the four categories reflects the currently estimated relative exposure for Siemens associated with these risks and thus provides an indication of the risks’ current importance to us. Additional risks not known to us or that we currently consider immaterial may also negatively impact our business objectives and operations. Unless otherwise stated, the risks described below relate to all our organizational units. 8.3.1 Strategic risks Economic, political and geopolitical conditions: We see high uncertainties regarding the global economic and geopolitical outlook, which deteriorated significantly in the past year due to multiple headwinds, all of which may continue to intensify. First, the Israel-Gaza conflict continues to escalate and might cause a larger regional conflict involving further parties. Ongoing risks emanate from the war in Ukraine. Both the Israel-Gaza conflict and the war in Ukraine may have negative impacts on sales development, production processes and purchasing and logistics processes, for example through interruptions in supply chains and energy supplies or bottlenecks affecting components, raw materials and intermediate products. Each of the conflicts could also intensify further to the point of expanding to include other warring parties, including NATO countries, and the use of unconventional weapons. An expansion of the conflicts would have a significant impact on the Siemens market environment. Even the current states of conflicts could have a further negative impact on development of potential crude oil and natural gas supplies. This would fuel inflation, with further risk of a sustained wage-price-spiral. In any case one of the core risks for the Siemens outlook is that central banks may fail to get inflation below their targets and then react more restrictively or even overreact. More restrictive financial conditions would likely push advanced economies into recession and pose a significant risk to vulnerable emerging economies. Highly indebted (emerging and industrialized) countries could suffer from increasing financing costs, further U.S. dollar appreciation, and loss of investor confidence. Other risks could arise for the stability of public finances and the banking sector. Further risks are coming from other geopolitical tensions (particularly associated with the Baltics, Eastern Europe, the Western Balkans, China, Taiwan, and Iran). We continue to face economic risks from a further significant slow-down of the Chinese economy. Key risks are coming from potential financial imbalances, particularly due to the struggling real-estate sector, but also from the growing debt-level of local governments, with growing negative implications for Siemens business in China and the country’s trading partners. Obstruction and redefinitions of international cooperation agreements could severely impact our business. First and foremost a more extensive U.S.-China decoupling would have adverse effects on confidence and investment activity and would severely hit Siemens’ business. Increasing trade barriers, protectionism, sanctions and in particular technical regulations would negatively impact production costs and productivity along our global value chains, as well as significantly impede or even hinder access to sales markets. A significant risk to our sales potential and cost structures is coming from the possibility of renewed supply chain bottlenecks, due to growing lack of availability of intermediate goods, in particular electronic components. Furthermore, grid-lock in U.S. politics could weigh on U.S. growth with the risk of a global spillover. We are dependent on the economic development of certain industries; a continuation or even an intensification of the cyclical and structural headwinds in core customer industries, e.g. automotive or construction, would have adverse impact on our business prospects. A resurgence of COVID-19 or even the outbreak of a new pandemic, a terrorist attack, a significant cybercrime incident, or a series of such attacks or incidents in major economies, could depress economic activity globally and undermine consumer and business confidence. Additionally, the highly interconnected global economy remains vulnerable to natural disasters or hybrid warfare. If we are not successful in adapting our production and cost structure to subsequent changes in conditions in the markets in which we operate, there can be no assurance that we will not experience adverse effects. For example, our customers may modify, delay or cancel plans to purchase our products, solutions and services, or fail to follow through on purchases or contracts already executed. In addition, it may become more difficult for our customers to obtain financing. Contracted payment terms, especially regarding the level of advance payments by our customers relating to long-term projects, may become less favorable, which could negatively impact our financial condition. Siemens’ global setup with operations in almost all relevant economies, our wide range of offerings with varied exposures to business cycles, and our balanced mix of business models (e.g. equipment, components, systems, software, services and solutions) help us to absorb impacts from adverse developments in any single market. Portfolio measures, at-equity investments, other investments and strategic alliances: Our strategy includes divesting our activities in some business areas and strengthening others through portfolio measures, including mergers and acquisitions. With respect to divestments, we may not be able to divest some of our activities as planned, and the divestitures we do carry out could have a negative impact on our business situation, financial condition, results of operations and reputation. Mergers and acquisitions are inherently risky because of difficulties that may arise when integrating people, operations, technologies and products. There can be no assurance that any of the businesses we acquire can be integrated successfully and in a timely manner as originally planned, or that they will perform as anticipated once integrated. In addition, we may incur significant acquisition, administrative, tax and other expenditures in connection with these transactions, including costs related to integration of acquired businesses. Furthermore, portfolio measures may result in additional financing needs and adversely affect our capital structure. Acquisitions can lead to substantial additions to intangible assets, including goodwill, in our statements of financial position. If we were to encounter continuing adverse business developments or if we were otherwise to perform worse than expected at acquisition activities, then these intangible assets, including goodwill, might have to be impaired, which could adversely affect our business situation, financial condition and results of operations. Our investment portfolio includes investments held for purposes other than trading and other investments. Any factors negatively influencing the financial condition and results of operations of our at-equity investments, such as Siemens Energy, and other investments could have an adverse effect on our equity pick-up related to these investments or may result in a related write-off. In addition, our business situation, financial condition and results of operations could also be adversely affected in connection with loans, guarantees or non-compliance with financial covenants related to these investments. Furthermore, such investments are inherently risky as we may not be able to sufficiently influence corporate governance processes or business decisions taken by our at-equity investments, by other investments and by strategic alliances, which may have a negative effect on our business and especially on our reputation. In addition, joint ventures bear the risk of difficulties that may arise when integrating people, operations, technologies and products. Strategic alliances may also pose risks for us because we compete in some business areas with companies with which we have strategic alliances. Besides other measures, we handle these risks with standardized processes as well as dedicated roles and responsibilities in the areas of mergers, acquisitions, divestments and carve- outs. This includes the systematic treatment of all contractual obligations and post-closing claims. 25