Table of Contents Item 1A. Risk Factors: Risks Related to Our Business Downturn in Economic Environment and Client Spending Budgets Could Impact the Company’s Business: If overall demand for IBM’s products and solutions decreases, whether due to general economic conditions, including those associated with the COVID-19 pandemic, or a shift in client buying patterns, the company’s revenue and profit could be impacted. Failure of Innovation Initiatives Could Impact the Long-Term Success of the Company: IBM has been moving into  areas, including those that incorporate or utilize hybrid cloud, artificial intelligence, blockchain, IoT, quantum and  other disruptive technologies, in which it can differentiate itself through responsible innovation, by leveraging its  investments in R&D and attracting a successful developer ecosystem. 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. Damage to IBM’s Reputation Could Impact the Company’s Business: IBM has one of the strongest brand names  in the world, and its brand and overall reputation could be negatively impacted by many factors, including if the  company does not continue to be recognized for its industry leading technology and solutions and as a hybrid cloud  and AI leader. IBM’s reputation is potentially susceptible to damage by events such as significant disputes with  clients, product defects, internal control deficiencies, delivery failures, cybersecurity incidents, government  investigations or legal proceedings or actions of current or former clients, directors, employees, competitors,  vendors, alliance partners or joint venture partners. If the company’s brand image is tarnished by negative  perceptions, its ability to attract and retain customers, talent and ecosystem partners could be impacted. Risks from Investing in Growth Opportunities Could Impact the Company’s Business: The company continues to  invest significantly in key strategic areas to drive revenue growth and market share gains. Client adoption rates and  viable economic models are less certain in the high-value, highly competitive, and rapidly-growing segments.  Additionally, emerging business and delivery models may unfavorably impact demand and profitability for our other  products or services. If the company does not adequately and timely anticipate and respond to changes in customer  and market preferences, competitive actions, emerging business models and ecosystems, the client demand for our  products or services may decline or IBM’s costs may increase. IBM’s Intellectual Property Portfolio May Not Prevent Competitive Offerings, and IBM May Not Be Able to Obtain Necessary Licenses: 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. In addition, the company may be the target of aggressive and opportunistic enforcement of patents by  third parties, including non-practicing entities. Also, there can be no assurances that IBM will be able to obtain from  third parties the licenses it needs in the future. The company’s ability to protect its intellectual property could also  be impacted by changes to existing laws, legal principles and regulations governing intellectual property, including  the ownership and protection of patents. Certain of the company’s offerings incorporate or utilize open source and other third-party software licensed with limited or no warranties, indemnification, or other contractual protections for IBM. Further, if open source code that IBM utilizes is no longer maintained, developed or enhanced by the relevant community of independent open source software programmers, most of whom we do not employ, we may be unable to develop new technologies, adequately enhance our existing technologies or meet customer requirements for innovation, quality and price. 4