Penske Automotive Group (PAG) Risk Analysis

We evaluate goodwill and other indefinite-lived intangible assets for impairment annually and upon the occurrence of an indicator of impairment. Our process and results for impairment testing of these assets is described further under "Impairment Testing" in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates. If we determine that the amount of our goodwill or other indefinite-lived intangible assets are impaired at any point in time, we would be required to reduce the value of these assets on our balance sheet, which could also result in a material non-cash impairment charge that could also have a material adverse effect on our results of operations for the period in which the impairment occurs.

We have significant investments in a variety of joint ventures, including retail automotive operations in the U.S. and Italy. We have a 28.9% interest in PTS. We expect to receive annual operating distributions from PTS and the other ventures and in the case of PTS, realize significant cash savings on taxes. These benefits may not be realized if the joint ventures do not perform as expected, or if changes in tax, financial, or regulatory requirements negatively impact the results of the joint venture operations. Our ability to dispose of these investments may be limited. In addition, the relevant joint venture agreement and other contractual restrictions may limit our access to the cash flows of these joint ventures. For example, certain of PTS' debt agreements allow partner distributions only as long as it is not in default under those agreements and the amount it pays does not exceed 50% of its consolidated net income, unless its debt-to-equity ratio is less than 3.0 to 1.0, in which case its distributions may not exceed 80% of its consolidated net income.

We generally compete with other franchised dealerships in our markets, used vehicle dealerships, private market buyers and sellers of used vehicles, an increasing number of internet-based vehicle sellers, electric vehicle manufacturers that sell directly to consumers, national and local service and repair shops and parts retailers with respect to commercial vehicles, distributors of similar products, and manufacturers in certain markets. Purchase decisions by consumers when shopping for a vehicle are extremely price sensitive. The level of competition in the market can lead to lower selling prices and related profits. If there is a prolonged drop in retail prices or if new vehicle sales are allowed to be made over the internet or otherwise without the involvement of franchised dealers, our business could be materially adversely affected.

We are the exclusive distributor of Western Star commercial trucks, MAN commercial trucks and buses, and Dennis Eagle refuse collection vehicles, together with associated parts, across Australia, New Zealand, and portions of the Pacific. We are also the distributor of diesel and gas engines and power systems in these same markets. The profitability of these businesses depends upon the number of vehicles, engines, power systems, and parts we distribute, which in turn is impacted by demand for these products. We believe demand is subject to general economic conditions, exchange rate fluctuations, regulatory changes, competitiveness of the products, and other factors over which we have limited control. In the event sales of these products are fewer than we expect, our related results of operations and cash flows for this aspect of our business may be materially adversely affected. The products we distribute are principally manufactured at a limited number of locations. In the event of a supply disruption, sufficient quantities of vehicles, engines, power systems, and parts are not made available to us, or if we accept these products and are unable to economically distribute them, our cash flows or results of operations may be materially adversely affected.

Competition from online retailers. The automotive retail industry is experiencing competition in the used vehicle market from companies with a primarily online business model, including companies such as Carvana and others. We may face increased competition for market share with these non-traditional delivery models and digital retailers over time, which could materially and adversely affect our results of operations. We cannot be sure that our initiatives will be successful or that the amount we invest in these initiatives will result in our maintaining or enhancing our market share and continued or improved financial performance. Sales outside the franchise system. In recent years, new electric vehicle manufacturers have been able to conduct new vehicle sales outside of the franchised automotive system as new entrants. While the sales levels of these new entrants were approximately 3.7% of new vehicles in the U.S. and approximately 2.3% of new vehicles in the U.K. for the year ended December 31, 2025, continued market share gains by manufacturers operating outside the franchise system may materially and adversely affect us. Moreover, while we expect continued good relations with our manufacturer partners, should U.S. franchise laws be repealed or amended to allow our existing manufacturer partners to effectively operate outside the franchised system, our results of operations may be materially and adversely impacted. Our franchised automotive dealers in the U.K., European Union, Australia, and Japan operate effectively without U.S. franchise law protections. Agency. Some of our key automotive manufacturer partners have implemented or announced plans to implement an agency model of selling new vehicles in the U.K. and other countries. Under an agency model, we receive a fee for facilitating the sale by the manufacturer of a new vehicle but do not hold the vehicle in inventory. Vehicles sold under this agency model are counted as new agency units sold instead of new retail units sold by us, and only the fee we receive from the manufacturer, not the price of the vehicle, is reported as new revenue with no corresponding cost of sale. The long-term impact of the agency model at these dealerships as well as other agency models proposed by our manufacturer partners remains uncertain. We believe transition to an agency model in the U.S. would be difficult for the manufacturers in light of U.S. franchise laws. See Item 1. Business, "Regulations" and Item 1A. Risk Factors, "Sales outside the franchise system" and "Other Regulatory Issues." New mobility models and vehicle electrification will continue to result in rapid changes to the automotive and trucking industries. Shared vehicle services such as Uber and Lyft provide consumers with increased choice in their personal mobility options. The effect of these and similar mobility options on the retail automotive industry is uncertain and may include lower levels of new vehicles sales but with increasing miles driven, which could require additional demand for vehicle maintenance. Most major vehicle manufacturers have announced plans to electrify some or all of their new vehicle fleets in response to concerns about the environment and due to regulatory requirements to limit vehicle emissions. We expect to continue to sell electric and hybrid gas/EVs through our franchised dealerships; however, our service revenues may decline over time as these vehicles may require less physical maintenance than gas and hybrid vehicles due to the absence of certain parts systems. Conversely, increasing consumer adoption of EVs may present new service opportunities, including with respect to range maintenance and optimization, cooling protection, torque protection, tire replacement, battery replacement, and warranty on newly released models. The effects of the eventual adoption of driverless vehicles are uncertain. Technological advances are facilitating the evolution of driverless vehicles. While many manufacturers offer varying degrees of driver assistance technology, the timing of adoption of true driverless vehicles remains uncertain due to regulatory requirements, additional technological requirements, and uncertain consumer acceptance of these vehicles. The effect of driverless vehicles on the automotive retail and trucking industries is uncertain and could include changes in the level of new and used vehicles sales, the price of new and used vehicles, the levels of service required by driverless vehicles and the role of franchised dealers, any of which could materially and adversely affect our business.

Our businesses and our commercial vehicle operations, in particular, as those are more concentrated with a particular manufacturer, are impacted by consumer demand and brand preference, including consumers' perception of the quality of those brands. A decline in the quality and brand reputation of the vehicles or other products we sell or distribute, as a result of events such as manufacturer recalls or legal proceedings, may adversely affect our business. If such events were to occur, the profitability of our business related to those manufacturers could be adversely affected.

We are subject to a wide variety of regulatory activities and oversight, including: Governmental regulations, claims, and legal proceedings. Governmental regulations affect almost every aspect of our business, including the fair treatment of our employees, wage and hour issues, and our financing activities with customers. We could be susceptible to claims or related actions if we fail to operate our business in accordance with applicable laws or it is determined that our long-standing compensation methods or other practices did not comply with local laws. Many laws and regulations applicable to our business were adopted prior to the introduction of online vehicle sales, the Internet and certain digital technology, generally. As a result, we are tasked with maintaining compliance in an uncertain regulatory environment. Claims arising out of actual or alleged violations of law which may be asserted against us or any of our dealers by individuals, through class actions, or by governmental entities in civil or criminal investigations and proceedings, may expose us to substantial monetary damages which may adversely affect us. Our financing activities with customers are subject to truth-in-lending, consumer leasing, equal credit opportunity, and similar regulations as well as motor vehicle finance laws, installment finance laws, insurance laws, usury laws, and other installment sales laws. In the U.K., the Financial Conduct Authority (the "FCA") regulates financial services firms and financial markets, including our activities in acting as broker of vehicle financing. The FCA has reviewed the vehicle finance industry concerning certain practices which, in the FCA's determination, may have been unfair to customers, including with respect to vehicle financing commission disclosures. In October 2025, the FCA proposed a redress scheme requiring lenders to compensate customers whose financing arrangements are deemed unfair because they involved an undisclosed discretionary commission arrangement, or undisclosed high levels of commission paid to dealers, or there was an undisclosed exclusivity or similar arrangement between the lender and broker. Under the FCA's proposed redress scheme, lenders would bear primary responsibility for delivering the proposed scheme including identifying affected customers, assessing potential liability and administering and paying redress. The FCA has indicated that dealers will be required to support lenders by providing relevant documentation and information necessary for lenders to implement the scheme. This new proposed redress scheme invited comment by industry participants with that consultation closing in December 2025. The final detail of the redress scheme is expected to be announced in the first quarter of 2026 and implemented later in the same year. The scheme may be subject to industry legal challenges. However, we will be subject to significant administrative obligations in connection with the redress scheme, if implemented, and it is possible that lenders could seek to directly or indirectly offset their redress obligations under the scheme from dealers. While the terms of the final redress scheme and its repercussions are presently unknown, it could materially and adversely affect our business and results of operations. Privacy Regulation. We are subject to numerous laws and regulations in the U.S. and internationally designed to protect the information of clients, customers, employees, and other third parties that we collect and maintain, including the European Union General Data Protection Regulation (the "EUGDPR") and the United Kingdom General Data Protection Regulation (the "UKGDPR"). Both the EUGDPR and UKGDPR, among other things, mandate requirements regarding the handling of personal data of employees and customers, including its use, protection, and the ability of persons whose data is stored to correct or delete such data about themselves. The state of California has similar laws which includes a private right of action for certain violations of law. Multiple other U.S. states have also enacted comprehensive consumer privacy laws, and additional states may follow. Many privacy laws and regulations applicable to our business were adopted prior to the introduction of the Internet, artificial intelligence, certain digital technologies, and e-commerce, generally. As a result, we are tasked with maintaining compliance in an uncertain regulatory environment. These laws pose increasingly complex and rigorous compliance challenges, which may increase our compliance costs and related risk. If we fail to comply with these laws or other similar regulations applicable to our business, we could be subject to reputational harm and significant litigation, monetary damages, regulatory enforcement actions, or fines in one or more jurisdictions. For example, a failure to comply with the UKGDPR could result in fines up to the greater of £17.5 million or 4% of annual global revenues. Recalls. Legislative and regulatory bodies from time to time have considered laws or regulations that would prohibit companies from renting or selling any vehicle that is subject to a recall until the recall service is performed. Whether any such prohibition may be enacted, and its ultimate scope, cannot be determined at this time. If a law or regulation is enacted that prevents the sale of vehicles until recall service has been performed, we could be required to reserve a significant portion of our vehicles from being available for sale for even a minor recall unrelated to vehicle safety. In addition, various manufacturers have issued stop sale notices in relation to certain recalls that require that we retain vehicles until the recall can be performed, whether or not parts are then available. While servicing recall vehicles yields parts and service revenue to us, the inability to sell a significant portion of our vehicles could increase our costs and have an adverse effect on our results of operations if a large number of our vehicles are the subject of simultaneous recalls or if needed replacement parts are not in adequate supply. Tariff and trade risk. During 2025, the U.S. enacted various tariffs on automobiles, automobile parts, medium- and heavy-duty trucks and truck parts which impacted each of our automotive and commercial vehicle suppliers, as well as our and PTS' operations. These tariffs have impacted the retail price of vehicles sold by us and used in the operations of PTS. The policies and announcements regarding tariffs remain fluid. It remains difficult to assess how these tariffs will affect our business and results of operations as each manufacturer has responded differently to the impact of tariffs with some increasing retail prices and some absorbing more of the tariff cost. Moreover, many manufacturers have announced plans to shift production to the U.S. to mitigate the impact of the tariffs. Existing or subsequently announced tariffs affecting the automotive or transportation industry may increase our cost of acquiring vehicles, trucks and parts, as well as our inventory carrying costs. This may lead to increased prices for consumers, which may decrease consumer demand and negatively impact revenue and gross profit with respect to the sale of new vehicles and parts, particularly in light of the prolonged recessionary freight rate environment. In October 2025, the Dutch government invoked emergency powers to seize control of Nexperia, a subsidiary of a Chinese company and an important supplier of basic chips used in vehicles, prompting the Chinese government to ban exports of the company's finished products. This shortage impacted several manufacturers, most notably, Honda, who experienced reduced production in the fourth quarter of 2025. In September 2025, a fire at a major U.S. aluminum production facility caused significant damage which impacted supplies to various manufacturers. Rare earth minerals are broadly used within the vehicle supply chain. Trade tensions has resulted in China threatening to withhold some of those minerals. These and other events affected, and could continue to affect, the timing of new vehicle deliveries to our dealerships, which may materially and adversely affect us. Changes or increases in tariffs, trade restrictions, the negotiation of new trade agreements, non-tariff trade barriers (such as those imposed on Nexperia noted above), local content requirements, uncertainty surrounding global trade policies, and the imposition of retaliatory tariffs or trade barriers against certain countries or covering certain products, including vehicles and parts, may affect our competitive position and negatively impact our gross profit with respect to affected vehicles and parts. The ultimate impact of any tariffs is uncertain and will depend on various factors, including whether such tariffs are maintained and/or implemented, the scope and nature of applicable exemptions, the duration of the tariffs and the timing of their implementation, the amount, scope, and nature of the tariffs, and the related responses from impacted countries, manufacturers, and/or consumers. Franchise laws in the U.S. In the U.S., state law generally provides protections to franchised vehicle dealers from discriminatory practices by manufacturers and from unreasonable termination or non-renewal of their franchise agreements. In many states, the laws require that new vehicle sales be conducted exclusively by automotive retailers (not manufacturers). Should U.S. franchise laws be repealed or amended to allow our existing manufacturer partners to effectively operate outside the franchised system, our results of operations may be materially and adversely impacted. See the risk factor captioned "Sales outside the franchise system" above. Changes in law. New laws and regulations at the state and federal level may be enacted which could materially adversely impact our business. For example, in October 2025, California adopted the "California Combating Auto Retail Scams Act", which will change the way vehicles are advertised and sold in California. The rule, which takes effect in October 2026, mandates a new three-day right to return for certain used vehicles, requires that ads and first customer written communications about a specific vehicle include a "total vehicle price", and expands record retention and customer disclosure requirements. This new law or similar state laws will likely complicate the transaction process and increase our compliance costs and risk, among other effects, which could increase our customers costs and have a significant and adverse effect on us. Climate change and environmental regulations. Scientific evidence suggests that the globe is warming potentially resulting in an environment more prone to natural disasters, such as flooding or wild fires. To date, we have seen increases in our cost to insure against such risks, which costs could continue to increase should this trend continue. We are subject to a wide range of environmental laws and regulations, including those governing discharges into the air and water; the operation and removal of storage tanks; and the use, storage, and disposal of hazardous substances. In the normal course of our operations we use, generate, and dispose of materials covered by these laws and regulations. In the face of climate change, these laws could become more stringent. We face potentially significant costs relating to claims, penalties, and remediation efforts in the event of non-compliance with existing and future laws and regulations. Furthermore, should climate change continue, we expect further regulation of internal combustion engines and vehicle emissions which may affect the types of vehicles we sell and service. We cannot predict the future costs to our businesses for these developments. Accounting and disclosure rules and regulations. Significant changes to generally accepted accounting principles in the U.S. ("GAAP") could significantly affect our reported financial position, earnings, and cash flows upon adoption and effectiveness. For example, a change to lease accounting could affect PTS customers' decisions to purchase or lease trucks, which could adversely affect their business if leasing becomes a less favorable option. See the disclosure provided under "Recent Accounting Pronouncements" in Part II, Item 8, Note 1 of the Notes to our Consolidated Financial Statements for additional detail on accounting standard updates that could have an impact on us. In addition, we are subject to various reporting regimes in the U.S. and internationally. In the U.K. and Australia, we are subject to certain regulations which require disclosure of climate risks and opportunities, among other matters. We are also subject to California's Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act which require disclosure of emissions and other matters, although legal challenges may thwart these acts. Further, we are subject to the European Sustainability Reporting Standards which also require emissions and other disclosures, as well as any regulations regarding climate and sustainability disclosures eventually adopted by the U.S. Securities and Exchange Commission. We are also subject to regulations and corporate financial reporting and auditing obligations in other jurisdictions that we operate in. These multiple sets of disclosures standards are not yet clearly defined and require duplicative and sometimes conflicting disclosures across our individual and consolidated business units, and the failure to comply with these standards may result in fines, penalties and reputational harm. Compliance with these standards will subject us to additional expenses and compliance risk which may adversely affect our business.

PTS' business has additional risks to those in the retail business, including: Customers. PTS has a more concentrated customer base than we do and is subject to changes in the financial health of its customers, changes in their asset utilization rates, and increased competition for those customers. PTS is subject to credit risk associated with accounts receivable from its larger customers. If one or more of its larger customers were to become bankrupt, insolvent, or otherwise were unable to pay for the services PTS provides, PTS may incur significant write-offs of accounts receivable or incur lease or asset impairment charges that could adversely affect its operating results and financial condition. Workforce. PTS requires a significant number of qualified drivers and technicians, which may be difficult to hire, and is subject to increased compliance costs or work stoppages relating to those employees, particularly in regard to changes in labor laws and time of work rules regarding those employees. PTS contributes to several U.S. multi-employer pension plans that provide defined benefits to approximately 2,100 associates covered by collective bargaining agreements. If they withdraw or are deemed to withdraw from participation in any of these plans, then applicable law could require them to make withdrawal liability payments to the plan. If any of those plans were deemed to be underfunded, PTS could be subject to additional assessments, which could be substantial. Fleet risk. As one of the largest purchasers of commercial trucks in North America, PTS requires continued availability from truck manufacturers and suppliers of vehicles and parts for its fleet, which may be uncertain, in particular if a significant recall were to occur. PTS is affected by the same supply issues noted above and any failure of the supply chain resulting in limited availability of new trucks or parts may have a material adverse impact on PTS. In addition, because PTS sells a large number of trucks each year and is subject to residual risk for the vehicles it leases to customers, changes in values of used trucks affect PTS' profitability. PTS also bears the residual risk on the value of its vehicles when a customer's lease for those vehicles expires or when its holding period for rental vehicles ends. If demand for used vehicles declines, PTS may obtain lower sales proceeds upon their sale. A reduction in proceeds from sales of used vehicles in PTS' fleet could cause PTS to sustain a substantial loss or require it to adjust the residual values, which could ultimately lead to depreciating those vehicles at a more accelerated rate. Any reduction in the resale values of the vehicles in its fleet could adversely affect its profitability. Capital markets risk. PTS relies on banks and capital markets to fund its operations and capital commitments. PTS has a significant amount of total indebtedness, which it uses in part to purchase its vehicle fleet and therefore, is subject to changes in, and continued access to, capital markets. Regulatory Requirements and Vehicle Mandates. Increasing efforts to control greenhouse gas emissions are likely to have an effect on PTS' (and PTG's) business and results of operations as further discussed below under "Vehicles Emissions and Other Regulation". Any of the factors noted could increase operating costs in the transportation industry, which would directly affect PTS' and PTG's customers and could reduce demand for vehicles. The new technology and legal requirements may also affect resale values of these vehicles when PTS or PTG attempts to sell them in the future. Centralized Information Systems. PTS relies heavily on centralized information systems to process lease and rental transactions, manage its fleet of vehicles, account for its activities, and otherwise conduct its business. A failure of a major system, or a major disruption of communications between the system and the locations it serves, could cause a loss of reservations, interfere with PTS' ability to manage its fleet, impede real-time diagnostics of vehicles, slow leasing, rental, and sales processes, and otherwise adversely affect PTS' ability to manage its business.

Federal and state governments and regulators in our markets have increasingly placed restrictions and limitations on new vehicles in an effort to combat perceived negative environmental effects. In response to concerns that emissions of nitrogen oxides (NOx), and carbon dioxide and certain other gases, referred to as "greenhouse gases" or "GHGs," may be contributing to warming of the Earth's atmosphere, climate change-related legislation and policy changes to restrict NOx and GHGs have been implemented, at state and federal levels in a manner that impacts our business. Significant increases in fuel economy requirements, new battery warranty standards, and new restrictions on emissions on vehicles and fuels could adversely affect prices, availability, and demand for the vehicles that we sell, which could materially adversely affect us. Such vehicles may also not be able to be produced in the quantities required, or, if produced, may not be able to be sold to consumers in light of customer reluctance to transition to EVs. Adoption of EVs will increasingly require the generation of additional electricity and nationwide electric charging infrastructures which may be unavailable in our markets. While increasing consumer adoption of EVs may present new service opportunities, including with respect to range maintenance and optimization, cooling protection, torque protection, tire replacement, battery replacement, and warranty on newly released models, our service revenue per vehicle may decline over time as these EVs may require less physical maintenance than gas and hybrid vehicles due to the absence of certain parts systems. PTG sells new and used heavy- and medium-duty commercial trucks, parts and service, and offers collision repair services. PTS, with its broad product offering including full-service truck leasing, contract maintenance, and truck rental, along with logistics services, is one of the largest purchasers of commercial trucks in North America. The EPA and the National Highway Traffic Safety Administration ("NHTSA") have been building on federally mandated corporate average fuel economy standards, which are scheduled to increase substantially for certain vehicles through at least 2032 pursuant to existing regulations, and legislative and regulatory efforts in California are seeking higher fuel standards, stringent emissions reductions and a move toward zero emissions fleets while also requiring public disclosures on emissions and other climate-related matters. However, under the current U.S. administration, the EPA and NHTSA have taken steps to revise or scale back their regulations, and Congress has passed resolutions signed by President Trump purporting to revoke a number of waivers necessary for California and other states to engage in their own rulemaking. Moreover, in February 2026, the EPA rescinded its 2009 final rule under the Clean Air Act which found that GHGs endanger the public health and welfare of current and future generations, which forms the basis of the EPA regulatory authority to regulate GHG emissions. These regulatory efforts are expected to face legal challenges and their outcome is uncertain. Should future regulations or consumer sentiment hinder our or PTS' ability to maintain, acquire, lease, sell, service, or operate trucks, we may be adversely affected. Should additional states adopt California Air Resources Board regulations, PTG and PTS could experience increased compliance costs, additional operating restrictions, or changes in demand for their products and services, which could have a material adverse effect on our business, financial condition and results of operations. New regulations could be adopted that require moving to zero emission formats and/or the implementation of more stringent emissions controls. For example, original equipment manufacturers may be required to install additional engine components, additional aerodynamic features or low-rolling resistance tires to comply with fuel economy regulations, which may result in higher costs associated with more complex components and a shorter useful tread life for tires, increasing operating costs for customers, suppliers, and our businesses. Foreign, federal, state, provincial and local lawmakers also are considering a variety of other climate change proposals, including prohibiting the use of certain substances with high "global warming potential."

We have significant operations outside of the U.S. that expose us to changes in foreign currency exchange rates and to the impact of economic and political conditions in the markets where we operate. As exchange rates fluctuate, our results of operations as reported in U.S. Dollars fluctuate. For example, if the U.S. Dollar strengthens against the British Pound, our U.K. results of operations would translate into less U.S. Dollar reported results. Sustained levels or an increase in the value of the U.S. Dollar, particularly as compared to the British Pound, could result in a significant and adverse effect on our reported results.

In the ordinary course of our business, we receive confidential information about our customers, employees, associates, and vendors. We collect, process, retain, and in some cases share this information in the normal course of our business, and such information is collected and stored primarily in our core information systems, including our DMS and CRM platforms. Our internal and third-party systems, including our DMS and CRM systems, are under a heightened level of risk from state actors, cyber criminals or other individuals with malicious intent to gain unauthorized access to our systems and exploit the information, including the confidential information of our customers and employees, that we gather. Moreover, increasingly powerful artificial intelligence technologies may increase our cybersecurity risks as we and other industry participants need to respond to these novel technologies which will likely be used to thwart our defenses or to obtain personal information. Cyber-attacks, such as the CDK Cybersecurity Incident described above, and threats to information systems and network and data security are becoming increasingly diverse and sophisticated, with attacks increasing in frequency, scope, and potential harm. In addition, some of our software applications are utilized by third parties who, in turn, subcontract or otherwise outsource various processes and administrative functions to additional third parties. Such third parties may have access to confidential information that is critical to our business operations and services. While our information security program includes enhanced controls to monitor third party providers' security programs, these third parties are subject to their own risks of data breaches, cyber-attacks, and other events or actions that could damage, disrupt, or close down their networks or systems, which in turn may adversely impact our business operations. For an overview of certain of our efforts related to cybersecurity risk management, strategy, and governance and our written Information Security Program, see Item 1C. Cybersecurity. Despite the security measures we have in place or may implement in the future, we may be unable to fully detect, mitigate, or protect against cyber-attacks, ransomware attacks, computer viruses, security breaches, social engineering, malicious software, lost or misplaced data, programming errors, human errors, burglary, acts of vandalism, misdirected wire transfers or other events impacting us or our third-party service providers. Any security breach or event, whether by us directly or our third-party service providers, may result in an authorized party obtaining trade secrets, personally identifiable information or confidential information and may result in loss of revenue, increase the costs of doing business, harm our competitiveness, reputation or customer, vendor or manufacturer relationships, and have other negative operational impacts. In addition, such security breaches or events resulting in the loss or exposure of this information could result in liabilities and other significant financial exposures, including those derived from investigations, regulatory fines, penalties for violations of applicable laws and regulations, costs related to the remediation of ransomware events, litigation including consumer class actions, the imposition of penalties, or other means, any of which could have a material adverse effect on our business, results of operations or financial condition. In addition, our failure to respond quickly and appropriately to such a security breach, or our failure to adequately test and verify the remediation of security incidents involving third parties prior to reintegration into our information systems, could exacerbate the consequences of the breach.