International Business Machines Corporation

Human capital and workforce · Skills shortage and training requirements

Changing demographics and labor work force trends may result in a shortage of or insufficient knowledge and skills. In addition, as global opportunities and industry demand shifts, realignment, training and scaling of skilled resources may not be sufficiently rapid or successful.

Human capital and workforce · Talent acquisition and retention

Much of the future success of the company depends on the continued service, availability and integrity of skilled employees, including technical, marketing and staff resources. Skilled and experienced personnel in the areas where the company competes are in high demand, and competition for their talents is intense.

Innovation and product development · Intellectual property protection and infringement

The company's patents and other intellectual property may not prevent competitors from independently developing products and services similar to or duplicative to the company's, nor can there be any assurance that the resources invested by the company to protect its intellectual property will be sufficient or that the company's intellectual property portfolio will adequately deter misappropriation or improper use of the company's technology.

Market position and competition · Competitive pressure and market share loss

Client adoption rates and viable economic models are less certain in the high-value, highly competitive, and rapidly-growing segments. If the company does not adequately and timely anticipate and respond to changes in customer and market preferences, competitive actions, disruptive technologies, emerging business models and ecosystems, the client demand for our products or services may decline.

Innovation and product development · Product development and randd investment risks

If IBM is unable to continue its cutting-edge innovation in a highly competitive and rapidly evolving environment or is unable to commercialize such innovations, expand and scale them with sufficient speed and versatility or is unable to attract a successful developer ecosystem, the company could fail in its ongoing efforts to maintain and increase its market share and its profit margins.

Credit and liquidity · Credit risk and customer defaults

Most of the company's sales are on an open credit basis, and the company performs ongoing credit evaluations of its clients' financial conditions. If the company becomes aware of information related to the creditworthiness of a major customer, or if future actual default rates on receivables in general differ from those currently anticipated, the company may have to adjust its allowance for credit losses.

Market and investment · Investment portfolio performance

Adverse financial market conditions and volatility in the credit markets may have an unfavorable impact on the value of the company's pension trust assets and its future estimated pension liabilities. As a result, the company's financial results in any period could be negatively impacted.

Market and investment · Asset valuation and impairment

The company acquires other companies, including the intangible assets of those companies. The company may not realize all the economic benefit from those acquisitions, which could cause an impairment of goodwill or intangible assets.

Market and investment · Interest rate and yield curve risk

Inherent in the company's financing business are risks related to the concentration of credit, client creditworthiness, interest rate and currency fluctuations on the associated debt and liabilities and the determination of residual values.

Capital structure and performance · Financial performance volatility

IBM's revenues and profitability are affected by such factors as the introduction of new products and services, the ability to compete effectively in increasingly competitive marketplaces, the length of the sales cycles and the seasonality of technology purchases. As a result of the above-mentioned factors, the company's financial results are difficult to predict.

International and currency · Foreign exchange and currency exposure

The company derives a significant percentage of its revenues and costs from its affiliates operating in local currency environments, and those results are affected by changes in the relative values of non-U.S. currencies and the U.S. dollar, as well as sudden shifts in regional or global economic activity.

Capital structure and performance · Credit rating and cost of capital

In addition, changes by any rating agency to the company's outlook or credit ratings can negatively impact the value and liquidity of both the company's debt and equity securities.

Natural and catastrophic events · Natural disasters and extreme weather

Any widespread outbreak of an illness, pandemic or other local or global health issue, natural disasters, climate change impacts, or uncertain political climates, international hostilities, or any terrorist activities, could adversely affect customer demand, the company's operations and supply chain.

Economic and market conditions · Market volatility and financial crises

The company's financial performance is exposed to a wide variety of industry sector dynamics worldwide, including sudden shifts in regional or global economic activity. The company's earnings and cash flows, as well as its access to funding, could be negatively impacted by changes in market liquidity conditions.

Geopolitical and trade · Trade policies tariffs and sanctions

Tariffs, international trade sanctions, and export controls on goods, technologies, inputs, and raw materials resulting from these disputes could affect the company's ability to move goods and services across borders, or could impose added costs to those activities.

Natural and catastrophic events · Pandemic and public health crises

Any widespread outbreak of an illness, pandemic or other local or global health issue, natural disasters, climate change impacts, or uncertain political climates, international hostilities, or any terrorist activities, could adversely affect customer demand, the company's operations and supply chain, and its ability to source and deliver products and services to its customers.

Tax and financial reporting · Financial reporting and accounting standards

The application of accounting principles generally accepted in the U.S. (GAAP) requires the company to make estimates and assumptions about certain items and future events that directly affect its reported financial condition. These estimates and assumptions involve the use of judgment. As a result, actual financial results may differ.

Legal and litigation · Litigation and legal proceedings

As a company with a substantial employee population and with clients in more than 175 countries, IBM is or may become involved as a party and/or may be subject to a variety of claims, demands, suits, investigations, tax matters and other proceedings that arise from time to time in the ordinary course of its business.

Tax and financial reporting · Tax compliance and changes in tax law

IBM's provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, but not limited to, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in tax laws, regulations, accounting principles or interpretations thereof.

Digital transformation and innovation · Artificial intelligence and automation

IBM is increasingly applying AI technologies to its services and products, to how it delivers solutions to IBM clients, and to its own internal operations. If the company does not continue to be recognized as an AI leader with strong governance processes or if our AI technologies do not work as intended or produce unexpected outcomes, IBM's ongoing efforts to maintain and increase its market share and its profit margins, its reputation, and its competitiveness could be harmed.