Risk Factors

Exxon Mobil Corp · 10-K · FY 2024

● EXXON MOBIL CORP · FY 2024

ExxonMobil operates in an environment of extreme systemic risk, as the global energy transition fundamentally challenges the company's core business model. The firm faces a complex vulnerability resulting from the combination of commodity price volatility, rapidly increasing climate mandates, and geopolitical instability. The overall assessment notes that the most critical threat is the mismatch between the pace of regulatory change and the certainty of the company's revenue streams.

XOM L1 Synthesis

● SYMBOLOGY.ONLINE l1 SYNTHESIS

Exxon Mobil Corp Risk Factors Analysis

Financial Risk Assessment: ExxonMobil Corp. (10-K, 2024)

This assessment analyzes the risk factors detailed in the 10-K filing, focusing on the interconnected nature of market, regulatory, and climate-related exposures.

1. Key Risk Categories

The risks facing ExxonMobil are highly diversified and can be grouped into four major, interconnected categories:

A. Commodity and Market Risk:

Price Volatility: Extreme sensitivity to changes in global oil, gas, and petrochemical prices and margins.
Economic Cycles: Direct adverse impact from global economic downturns, recessions, or periods of low growth.
Macroeconomic Instability: Exposure to geopolitical events (sanctions, trade tariffs, conflicts), currency fluctuations, and systemic financial risks (e.g., sovereign debt downgrades, de-dollarization).
Demand Substitution: Risk from technological improvements in energy efficiency, consumer preference shifts (e.g., electric/alternative fuels), and increased competitiveness of non-hydrocarbon energy sources.

B. Regulatory and Political Risk:

Government Intervention: Risk of adverse changes in law, including increased taxes, royalties, price controls, or punitive taxes (e.g., windfall profit taxes).
Jurisdictional Restrictions: Limitations on accessing resources, restrictions on foreign investment, and sanctions that prohibit doing business in certain countries or with certain counterparties.
Legal Uncertainty: Lack of well-developed legal systems in operating jurisdictions, making contract enforcement and compliance difficult.
Litigation Risk: Increased risk from legal actions (including those promoting public policy agendas) and large, unpredictable punitive damage awards.

C. Climate Change and Energy Transition Risk:

Policy Uncertainty: The success of the energy transition depends on supportive, stable, and timely government policies and supportive markets.
Mandates and Restrictions: Exposure to mandates (e.g., cap-and-trade, carbon taxes, minimum renewable usage requirements, EV mandates) that increase compliance costs and reduce hydrocarbon viability.
Technology Dependence: Reliance on the successful development, scalability, and cost-effectiveness of new technologies (e.g., CCS, hydrogen, lithium) which are not guaranteed.

D. Operational and External Risk:

Project Execution: High risk associated with complex, capital-intensive, long-term projects, requiring successful negotiation with joint venturers and managing supply chain disruptions.
Cybersecurity: Vulnerability to state-sponsored and other cybersecurity disruptions, with limited ability to influence third-party security controls.
Physical/Environmental: Exposure to natural disasters, severe weather events, and operational incidents (spills).
Reputational Damage: Negative impact on reputation due to operating incidents or perceived insufficient progress toward energy transition goals.

2. Most Significant Risks

Based on the breadth and potential severity of impact, the following risks are the most significant:

The Energy Transition and Climate Policy Risk: This is the most pervasive risk. The entire business model is challenged by the global shift toward net-zero emissions. The risk is not just the existence of climate change, but the uncertainty of how supportive policies, technologies, and markets will materialize, potentially rendering core hydrocarbon products less competitive or restricted.
Geopolitical and Regulatory Instability: The company operates globally, making it highly vulnerable to the confluence of political instability, trade sanctions, and conflicting national regulations. The risk of "lack of legal certainty" and the potential for governments to use regulations as "foreign policy tools" represents a systemic threat to profitability and operational freedom.
Commodity Price and Demand Collapse: The fundamental nature of the business means that any material decline in oil or gas prices, coupled with a global economic recession, poses an immediate and severe threat to cash flow and financial condition.
Cybersecurity and Operational Disruption: The increasing sophistication of cyber threats, coupled with the physical risks from natural disasters and operational incidents, poses a critical threat to continuous business function and asset integrity.

3. Risk Trend Analysis

The filing indicates several trends that increase the overall risk profile:

Increased Regulatory Scrutiny: There is a clear trend toward governments adopting or considering stricter regulations (e.g., carbon taxes, mandatory efficiency standards, restrictions on fossil fuels). This is moving from voluntary guidelines to enforceable mandates.
Globalization of Legal Risk: The risk of litigation and public policy agendas is broadening, with similar legal practices beginning to be applied to competitors in the European Union, suggesting a widening legal frontier.
Complexity of Transition: The transition itself is trending toward greater complexity, requiring not only technological breakthroughs but also the development of supportive, stable, and coordinated global policies and markets.
Heightened Security Threats: The mention of state-sponsored actors in cybersecurity and the increasing geopolitical tensions suggest a rising baseline level of operational and security risk.

4. Risk Mitigation Strategies

ExxonMobil outlines several strategies to manage these risks:

Low Carbon Solutions (LCS) Business Unit: Establishing a dedicated unit to advance and deploy new, lower-emission technologies (CCS, hydrogen, etc.) to participate in the energy transition.
R&D and Collaboration: Investing in in-house research and development, and collaborating with universities and commercial partners to ensure the successful and cost-competitive development of future energy technologies.
Operational Resilience: Implementing a robust and evolving Enterprise Risk Management (ERM) system, coupled with rigorous disaster preparedness, business continuity planning, and engineering upgrades to withstand extreme climatic events.
Portfolio Management: Maintaining a disciplined framework for managing the overall asset portfolio, including strategies for diversification and optimizing project management to maximize efficiency.
Cybersecurity Measures: Implementing specific programs and controls to protect against cybersecurity disruptions, acknowledging the need to manage risks from third-party service providers.

5. Overall Risk Assessment

Assessment Level: High

ExxonMobil operates in an environment characterized by extreme systemic risk. The company's core business model is fundamentally challenged by the global energy transition, creating a high degree of regulatory and technological uncertainty.

While the company has established mitigation strategies (LCS, R&D, ERM) that demonstrate an awareness of these risks, the mitigation efforts are heavily dependent on external factors—namely, the successful development of supportive government policies, the timely maturation of new technologies, and the sustained stability of global markets.

The most critical vulnerability is the mismatch between the pace of regulatory/societal change and the certainty of the company's revenue streams. The combination of commodity price volatility, geopolitical instability, and the looming threat of carbon-based regulations creates a highly volatile and unpredictable operating landscape. The company's future success hinges not only on its internal operational efficiency but critically on its ability to navigate and capitalize on the unpredictable policy and market development of the global energy system.

● EXXON MOBIL CORP · FY 2024

Risk Factors

ITEM 1A. RISK FACTORS

ExxonMobil's financial and operating results are subject to a variety of risks inherent in the global oil, gas, and petrochemical businesses and the pursuit of lower-emission and other new business opportunities. Many of these risk factors are not within the Company's control and could adversely affect our business, our financial and operating results, or our financial condition. These risk factors include:

Supply and Demand

The oil, gas, and petrochemical businesses are fundamentally commodity businesses. This means ExxonMobil's operations and earnings may be significantly affected by changes in oil, gas, and petrochemical prices and by changes in margins on refined products. Oil, gas, petrochemical, and product prices and margins in turn depend on local, regional, and global events or conditions that affect supply and demand for the relevant commodity or product. Any material decline in oil or natural gas prices could have a material adverse effect on the Company's operations, financial condition, and proved reserves, especially in the Upstream segment. On the other hand, a material increase in oil or natural gas prices could have a material adverse effect on the Company's operations, especially in the Energy Products, Chemical Products, and Specialty Products segments. Our pursuit of lower-emission and other new business opportunities, including carbon capture and storage, hydrogen, lower-emission fuels, ProxximaTM systems, carbon materials, and lithium also depends on the growth and development of markets for those products and services, including implementation of supportive and stable government policies and developments in technology to enable those products and services to be provided on a cost-effective basis at commercial scale. See "Climate Change and the Energy Transition" in this Item 1A.

Economic conditions. The demand for energy and petrochemicals is generally linked closely with broad-based economic activities and levels of prosperity. The occurrence of economic downturns, recessions or other periods of low or negative economic growth will typically have a direct adverse impact on our results. Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates, periods of civil unrest, government regulation or austerity programs, national or regional trade tariffs, trade sanctions or trade controls, international monetary and currency exchange rate fluctuations, decoupling of economies, disruptions in trade alliances or military alliances, or a broader breakdown in global trade, security or public health issues and responses, can also impact the demand for energy and petrochemicals. Sovereign debt downgrades, defaults, extended government shutdowns, inability to access debt markets due to rating, banking, or legal constraints, liquidity crises, the breakup or restructuring of fiscal, monetary, or political systems such as the European Union, de-dollarization in global trade or the growth or use of alternative common currencies, and other events or conditions that impair the functioning of financial markets and institutions also pose risks to ExxonMobil, including risks to the safety of our financial assets and to the ability of our partners and customers to fulfill their commitments to ExxonMobil. Our future business results, including cash flows and financing needs, may also be affected by the occurrence, severity, pace and rate of recovery of future public health epidemics or pandemics; the responsive actions taken by governments and others; and the resulting effects on regional and global markets and economies.

Other demand-related factors. Other factors that may affect the demand for oil, gas, petrochemicals or our other products, and therefore impact our results, include technological improvements in energy efficiency; seasonal weather patterns; increased competitiveness of, or government policy support for, alternative energy sources or potential substitutes for our products; changes in technology that alter fuel choices, such as technological advances in energy storage or other critical areas that make wind, solar, nuclear or other alternatives more competitive for power generation; changes in consumer preferences for our products, including consumer demand for alternative-fueled or electric transportation or alternatives to plastic products; and broad-based changes in personal income levels. See also "Climate Change and the Energy Transition" below.

Other supply-related factors. Commodity prices and margins also vary depending on a number of factors affecting supply. For example, increased supply from the development of new oil and gas supply sources and technologies to enhance recovery from existing sources tends to reduce commodity prices to the extent such supply increases are not offset by commensurate growth in demand. Similarly, increases in industry refining or petrochemical manufacturing capacity relative to demand tend to reduce margins on the affected products. World oil, gas, and petrochemical supply levels can also be affected by factors that reduce available supplies, such as the level of and adherence by participating countries to production quotas established by OPEC or OPEC+ and other agreements among sovereigns; government policies, including actions intended to reduce greenhouse gas emissions, that restrict oil and gas production or increase associated production, reporting or compliance costs; collective actions by non-governmental organizations and financial institutions to withhold funding or support from oil and gas producers; the occurrence of wars or hostile actions, including disruption of land or sea transportation routes; natural disasters; disruptions in competitors' operations; and logistics constraints or unexpected unavailability of distribution channels that may disrupt supplies. Technological change can also alter the relative costs for competitors to find, produce and refine oil and gas, and to manufacture petrochemicals.

Other market factors. ExxonMobil's business results are also exposed to potential negative impacts due to changes in interest rates, inflation, currency exchange rates, changes in usage of the U.S. dollar in global trade, and other local or regional market conditions. In addition to direct potential impacts on our costs and revenues, market factors such as rates of inflation may indirectly impact our results to the extent such factors reduce general rates of economic growth and therefore energy demand, as discussed under "Economic conditions". Market factors may also result in losses from commodity derivatives and other instruments we use to hedge price exposures or for trading purposes. Additional information regarding the potential future impact of market factors on our businesses is included or incorporated by reference under Item 7A in this report.

Government and Political Factors

ExxonMobil's results can be adversely affected by political or regulatory developments affecting our businesses or operations.

Access limitations. A number of countries limit access to their oil and gas resources, including by restricting leasing or permitting activities, or may place resources off-limits from development altogether. Restrictions on production of oil and gas could increase to the extent governments view such measures as a viable approach for pursuing national and global energy and climate policies. Restrictions on foreign investment in the oil and gas sector tend to increase in times of high commodity prices or when national governments may have less need for outside sources of private capital. Many countries also restrict the import or export of certain products based on point of origin and such restrictions may increase during periods of escalating geopolitical or trade tensions.

Restrictions on doing business. ExxonMobil is subject to laws and sanctions imposed by the United States and by other jurisdictions where we do business that may prohibit ExxonMobil or its affiliates from doing business in certain countries or with certain counterparties or restrict the kind of business that may be conducted, including acquiring and divesting certain assets or importing or exporting certain materials or products. Such restrictions may provide a competitive advantage to competitors who may not be subject to comparable restrictions.

Lack of legal certainty. Some countries in which we do business lack well-developed legal systems, lack political or governmental stability, have not yet adopted or may be unable to maintain clear regulatory frameworks, or may have evolving and unharmonized standards that vary or conflict across jurisdictions. Lack of legal certainty exposes us to increased risk of adverse or unpredictable actions by government officials, may reduce our ability to comply timely or cost-effectively with evolving standards or requirements, and also makes it more difficult for us to enforce our contracts. In some cases, these risks can be partially offset by agreements to arbitrate disputes in an international forum, but the adequacy of this remedy may still depend on the local legal system to enforce an award.

Regulatory and litigation risks. Even in countries with well-developed legal systems where ExxonMobil does business, we remain exposed to changes in law or interpretation of settled law, including changes that result from international treaties and accords or changes by local jurisdictions encroaching on national regulatory frameworks or global issues, and changes in policy that could adversely affect our results, such as:

•increases or changes in taxes, duties, or government royalty rates, including retroactive claims, punitive taxes on oil, gas and petrochemical operations, windfall profit taxes, or global minimum taxes;

•price controls;

•changes in environmental regulations or other laws that penalize us for past or current production of legal and/or permitted products and operations, increase our cost of operation or compliance or reduce or delay available business opportunities, including changes in laws affecting offshore drilling operations, standards to complete decommissioning, water use, production of our products, emissions, hydraulic fracturing, or production or use of new or recycled plastics, as well as laws and regulations affecting trading, carbon capture and storage, hydrogen, lower-emission fuels, ProxximaTM systems, carbon materials, or lithium;

•actions by policy-makers, regulators, or other actors to delay or deny necessary licenses and permits, restrict the availability of oil and gas leases or the transportation or export of our products, reduce or retract government incentives for emissions reductions, or otherwise require changes in the Company's business or strategy that could result in reduced returns;

•regulatory interpretations that exclude or disfavor our products under government policies or programs intended to support new or developing markets or technologies, or that otherwise are not technology-neutral;

•adoption of regulations mandating efficiency standards, emission standards, the use of alternative fuels or uncompetitive fuel components;

•use of regulatory or legal standards as a foreign policy tool;

•unstable policies impacting new or emerging markets;

•adoption of disclosure regulations that could create competitive disadvantages, require us to incur disproportionate costs, or increase legal risk due to a need to rely on uncertain estimates or extrapolations (such as emissions of third parties) and lack of uniform standards across jurisdictions, or by requiring us to disclose competitively sensitive commercial information or to violate the non-disclosure laws of other countries; and

•government actions to cancel contracts, redenominate the official currency, renounce or default on obligations, renegotiate terms unilaterally, or expropriate assets.

Legal remedies available to compensate us for expropriation or other takings may be inadequate.

We also may be adversely affected by the outcome of litigation or arbitration, especially in countries such as the United States in which very large and unpredictable punitive damage awards may occur; by government enforcement proceedings alleging non-compliance with applicable laws or regulations; or by state and local government actors as well as private plaintiffs acting in parallel that attempt to use the legal system to promote public policy agendas (including seeking to reduce the production and sale of hydrocarbon products through litigation targeting the Company or other industry participants), gain political notoriety, or obtain monetary awards from the Company. The continued adoption of similar legal practices in the European Union or elsewhere would broaden this risk and has begun to be applied to some of our competitors in the European Union.

Security concerns. Successful operation of particular facilities or projects may be disrupted by civil unrest, acts of sabotage, piracy, or terrorism, cybersecurity attacks, the application of national security laws or policies that result in restricting our ability to do business in a particular jurisdiction, strikes or protests, and other local security concerns. Such concerns may be directed specifically at our company, our industry, or as part of broader movements and may require us to incur greater costs for security or to shut down operations for a period of time.

Climate Change and the Energy Transition

Net-zero scenarios. Driven by concern over the risks of climate change, a number of countries have adopted, or are considering the adoption of, regulatory frameworks to report on or reduce greenhouse gas emissions, including emissions from the production and use of oil and gas and their products, as well as increase the use of or support for different emission-reduction technologies. These actions are being taken both independently by national and regional governments and within the framework of United Nations Conference of the Parties summits under which many countries of the world have endorsed objectives to reduce the atmospheric concentration of carbon dioxide (CO2) over the coming decades, with an ambition ultimately to achieve "net zero". Net zero means that emissions of greenhouse gases from human activities would be balanced by actions that remove such gases from the atmosphere. Expectations for transition of the world's energy system to lower-emission sources, and ultimately net-zero, derive from hypothetical scenarios that reflect many assumptions about the future, including supportive policy and technology advancements, and reflect substantial uncertainties. The Company's objective to play a leading role in the energy transition, including the Company's announced ambition ultimately to achieve net zero with respect to Scope 1 and 2 emissions from operations with continued technology development and government policy support where ExxonMobil is the operator, carries risks that the transition, including underlying technologies, government policies, and markets as discussed in more detail below, will not be available or develop at the pace or in the manner expected by current net-zero scenarios. The success of our strategy for the energy transition will also depend on our ability to recognize key signposts of changes in the global energy system on a timely basis, and our corresponding ability to direct investment to the technologies and businesses, at the appropriate stage of development, to best capitalize on our competitive strengths.

Greenhouse gas restrictions. Government actions intended to reduce greenhouse gas emissions include adoption of cap and trade regimes, carbon taxes, carbon accounting, carbon-based import duties or other trade tariffs, minimum renewable usage requirements, restrictive permitting, increased mileage and other efficiency standards, mandates for sales of electric vehicles, restrictions on sales of gasoline-only vehicles, mandates for use of specific fuels or technologies, and other incentives or mandates designed to support certain technologies for transitioning to lower-emission energy sources. Political and other actors and their agents also increasingly seek to collectively advance climate change objectives indirectly, such as by seeking to reduce the availability or increase the cost of financing and investment in the oil and gas sector. These actions include delaying or blocking needed infrastructure, utilizing shareholder governance mechanisms against companies or their shareholders or financial institutions in an effort to deter investment in oil and gas activities, and taking other actions intended to promote changes in business strategy for oil and gas companies. Depending on how policies are formulated and applied, such policies could negatively affect our investment returns, make our hydrocarbon-based products more expensive or less competitive, lengthen project implementation times, and reduce demand for hydrocarbons, as well as shift hydrocarbon demand toward relatively lower-carbon alternatives. Current and pending greenhouse gas regulations or policies

may also increase our compliance costs, such as for monitoring or sequestering emissions and complying with increased or mandatory disclosure or due diligence requirements and government mandated energy transition plans.

Technology and lower-emission solutions. Achieving societal ambitions to reduce greenhouse gas emissions and ultimately achieve net zero will require new technologies and added infrastructure to reduce the cost and increase the scalability of alternative energy sources, as well as technologies such as carbon capture and storage (CCS). CCS technologies, focused initially on capturing and sequestering CO2 emissions from high-carbon intensity industrial activities, can assist in meeting society's objective to mitigate atmospheric greenhouse gas levels while also helping ensure the availability of the reliable and affordable energy the world requires. ExxonMobil has established a Low Carbon Solutions (LCS) business unit and is continuing efforts in our existing businesses to advance the development and deployment of these technologies and projects, including CCS, hydrogen, lower-emission fuels, and lithium, breakthrough energy efficiency processes, advanced energy-saving materials, and other technologies. The Company's efforts include both in-house research and development as well as collaborative efforts with leading universities and with commercial partners involved in new energy technologies. Our future results and ability to grow our business, help others meet their emission-reduction goals, and succeed through the energy transition will depend in part on the success of these research and collaboration efforts and on our ability to adapt and apply the strengths of our current business model to providing the energy products of the future in a cost-competitive manner.

Policy and market development. The scale of the world's energy system means that, in addition to developments in technology as discussed above, any successful energy transition will require appropriate support from governments and private participants throughout the global economy. Our ability to develop and deploy CCS and other new energy technologies at commercial scale, and the growth and future returns of LCS and other emerging businesses in which we invest, will depend in part on the continued development of stable and supportive government policies and markets. Failure or delay of these policies or markets to materialize or be maintained could adversely impact these investments. Policy and other actions that result in restricting the availability of hydrocarbon products without a commensurate reduction in demand may have unpredictable adverse effects, including increased commodity price volatility; periods of significantly higher commodity prices and resulting inflationary pressures; and local or regional energy shortages. Such effects in turn may depress economic growth or lead to rapid or conflicting shifts in policy by different actors, with resulting adverse effects on our businesses. In addition, the existence of supportive policies in any jurisdiction is not a guarantee that those policies will continue in the future. See also the discussion of "Supply and Demand," "Government and Political Factors," and "Operational and Other Factors" in this Item 1A.

Operational and Other Factors

In addition to external economic and political factors, our future business results also depend on our ability to successfully manage those factors that are, at least in part, within our control, including our capital allocation into existing and new businesses. The extent to which we manage these factors will impact our performance relative to competition. For projects in which we are not the operator, we depend on the management effectiveness of one or more co-venturers whom we do not control.

Exploration and development program. Our ability to maintain and grow our oil and gas production depends on the success of our exploration and development efforts. Among other factors, we must continuously improve our ability to identify the most promising resource prospects and apply our project management expertise to bring discovered resources online as scheduled and within budget.

Project and portfolio management. The long-term success of ExxonMobil's Upstream and Product Solutions businesses, as well as the future success of LCS and other emerging investments, depends on complex, long-term, capital-intensive projects. These projects in turn require a high degree of project management expertise to maximize efficiency. Specific factors that can affect the performance of major projects include our ability to: negotiate successfully with joint venturers, partners, governments, suppliers, customers, or others; protect and enforce our contractual and legal rights, including with our joint venture partners; model and optimize reservoir performance; develop markets for project outputs, whether through long-term contracts or the development of effective spot markets; qualify for certain incentives available under supportive government policies for emerging markets and technologies; manage changes in operating conditions and costs, including costs of third party equipment or services such as drilling rigs and shipping, supply-chain disruptions, and inflationary cost pressures; prevent, to the extent possible, and respond effectively to unforeseen technical difficulties that could delay project start-up or cause unscheduled project downtime; and influence the performance of project operators where ExxonMobil does not perform that role. In addition to the effective management of individual projects, ExxonMobil's success, including our ability to mitigate risk and provide attractive returns to shareholders, depends on our ability to successfully manage our overall portfolio, including diversification among types and locations of our projects, products produced, and strategies to acquire or divest assets. We may not be able to acquire or divest assets at a price or on the timeline we contemplate in our strategies. Additionally, we may retain certain liabilities following a divestment and could be held liable for past use or for different liabilities than anticipated, including reversion of decommissioning or other liabilities upon bankruptcy or other default of successors in title.

The term "project" as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government payment transparency reports.

Operational efficiency. An important component of ExxonMobil's competitive performance, especially given the commodity-based nature of many of our businesses, is our ability to operate efficiently, including our ability to manage expenses, improve production

yields on an ongoing basis and successfully integrate and achieve the anticipated synergies of acquisitions, including the acquisition of Pioneer. This requires continuous management focus, including technology integration and improvements, cost control, productivity enhancements, harmonizing functions, policies, procedures and processes, regular reappraisal of our asset portfolio, and the recruitment, development, and retention of high caliber employees.

Research and development and technological change. To maintain our competitive position, especially in light of the technological nature of our businesses, the dynamic and rapidly evolving technological landscape, and the need for continuous efficiency improvement, ExxonMobil's technology, research, and development organizations must be successful and able to adapt to a changing market, regulatory, and policy environment, including continuous improvement in the efficiency of hydraulic fracturing technology and developing technologies to help reduce greenhouse gas emissions. To remain competitive, we must also continuously adapt and capture the benefits of new and emerging technologies, including successfully applying advances in the ability to process very large amounts of data to our businesses.

Safety, business controls, and environmental risk management. Our results depend on management's ability to minimize the inherent risks of oil, gas, and petrochemical operations, as well as potential risks related to new energy technologies, to effectively control our business activities, including trading, and to minimize the potential for human error. We apply rigorous management systems and continuous focus on workplace safety and avoiding spills or other adverse environmental events. For example, we work to minimize spills through a combined program of effective operations integrity management, ongoing upgrades, key equipment replacements, and comprehensive inspection and surveillance. Similarly, we are implementing cost-effective new technologies and adopting new operating practices to reduce emissions, not only in response to government requirements but also to address community priorities. We employ a robust and actively evolving enterprise risk management system to identify and manage risk across our businesses. We also maintain a disciplined framework of internal controls and apply a controls management system for monitoring compliance with this framework. Substantial liabilities and other adverse impacts could result if we do not timely identify and mitigate applicable risks, or if our management systems and controls do not function as intended.

Cybersecurity. ExxonMobil is regularly subject to attempted cybersecurity disruptions from a variety of sources including state-sponsored actors. See Item 1C in this report for information on ExxonMobil's program for managing cybersecurity risks. If the measures we are taking to protect against cybersecurity disruptions prove to be insufficient or if our proprietary data is otherwise not protected, ExxonMobil, as well as our customers, employees, or third parties, could be adversely affected. We have limited ability to influence third parties, including our partners, suppliers and service providers (including providers of cloud-hosting services for our data or applications), to implement strong cybersecurity controls and are exposed to potential harm from cybersecurity events that may affect their operations. Cybersecurity disruptions could cause physical harm to people or the environment; damage or destroy assets; compromise business systems; result in proprietary information being altered, lost, or stolen; result in employee, customer, or third-party information being compromised; or otherwise disrupt our business operations. We could incur significant costs to remedy the effects of a major cybersecurity disruption in addition to costs in connection with resulting regulatory actions, litigation, or reputational harm.

Preparedness. Our operations may be disrupted by severe weather events, natural disasters, human error, and similar events. For example, hurricanes may damage our offshore production facilities or coastal refining and petrochemical plants in vulnerable areas. Our facilities are designed, engineered, constructed, and operated to withstand a variety of extreme climatic and other conditions, with safety factors built in to cover a number of uncertainties, including those associated with wave, wind, and current intensity, marine ice flow patterns, permafrost stability, storm surge magnitude, temperature extremes, extreme rainfall events, and earthquakes. Our consideration of changing weather conditions and inclusion of safety factors in design covers the engineering uncertainties that climate change and other events may potentially introduce. Our ability to mitigate the adverse impacts of these events depends in part upon the effectiveness of our robust facility engineering, our rigorous disaster preparedness and response, and business continuity planning.

Insurance limitations. The ability of the Corporation to insure against many of the risks it faces as described in this Item 1A is limited by the availability and cost of coverage, which may not be economic, as well as the capacity of the applicable insurance markets, which may not be sufficient.

Competition. As noted in Item 1 above, the energy and petrochemical industries are highly competitive. We face competition not only from other private firms, but also from state-owned companies that are increasingly competing for opportunities outside of their home countries and as partners with other private firms. In some cases, these state-owned companies may pursue opportunities in furtherance of strategic objectives of their government owners, with less focus on financial returns than companies owned by private shareholders, such as ExxonMobil. Technology and expertise provided by industry service companies may also enhance the competitiveness of firms that may not have the internal resources and capabilities of ExxonMobil or reduce the need for resource-owning countries to partner with private-sector oil and gas companies in order to monetize national resources. As described in more detail above, our hydrocarbon-based energy products are also subject to growing and, in many cases, government-supported competition from alternative energy sources. In addition, as we enter new markets in pursuit of lower-emission and other new business opportunities, we will need to compete effectively with established competitors in these markets, as well as with new market entrants seeking to capitalize on these opportunities, while successfully navigating changing market conditions or technologies.

Reputation. Our reputation is an important corporate asset. Factors that could have a negative impact on our reputation include an operating incident or significant cybersecurity disruption; changes in consumer views concerning our products; changes in consumer media preferences from traditional mainstream media to decentralized and personalized media; a perception by investors or others that the Corporation is making insufficient progress with respect to our ambition to play a leading role in the energy transition, or that pursuit of this ambition may result in allocation of capital to investments with reduced returns; and other adverse events such as those described in this Item 1A. Negative impacts on our reputation could in turn make it more difficult for us to compete successfully for new opportunities, obtain necessary regulatory approvals, obtain financing, and attract talent, or they could reduce consumer demand for our branded products. ExxonMobil's reputation may also be harmed by events which negatively affect the image of our industry as a whole.

Projections, estimates, and descriptions of ExxonMobil's plans and objectives included or incorporated in Items 1, 1A, 1C, 2, 5, 7, and 7A of this report are forward-looking statements. Actual future results, including project completion dates, production rates, capital expenditures, costs, and business plans could differ materially due to, among other things, the factors discussed above and elsewhere in this report.