PhysX System

Uninstall Mass Effect 2 AND uninstall physx from you computer.

Then reinstall the latest version of Physx and after this, reinstall Mass Effect 2.

I have Mass Effect 1 and 2 on Steam and Mass Effect 3 on(of course) Origin.  When I installed them all on my Windows 8 ME1 show a "Catastrophic Failure" and would not load.  ME2 loaded fine, that is until I completed installing ME3. At that time it stated that the Phsyx was not able to be activated.  Here were my solutions, hopefully they wil help you.

For Mass Effect 1 I went to the root folder within steam for it and tried running different .exe files in compatability mode until I found one that worked.  Now it runs great, and looks better than ever.

For Mass Effect 2, I attempted to update the NVidia Phsyx System Software but that did not work.  Instead, go to the Root folder which in my case was Program(86)/Steam/Steam Apps/Common/Mass Effect 2/Redistribut  In there you will find the installer for the version of Physx which came with it.  Go to the Uninstall a Program from your Contro Panel and Uninstall the current Nvidia Physx and then install the previously mentioned one.  ME2 will run great.

For Mass Effect 3 you will have to go to the Program(86)/Origin Games/Mass Effect 3/Redistr file to update the Physx drivers for it.  When you want to play ME2 again you will just have to rinse and repeat.  Hope this helps

For whatever reason, Bioware chose an incompatible version of PhysX for ME-3.  However, the one that came with ME-2 works with all three of the sequels.