Only #2 is correct .Please note that we have three patterns for "face" with the meaning having to deal with something, usually a problem or a challenge:
1."someone faces something" or
"someone must/will/could...face something"
2."something is faced WITH something" or
"something is faced BY someone" or
"something must/will/could...BE faced BY someone"
3."someone is faced WITH DOING something" or
"DOING something is faced BY someone" or
"DOING something must/will/could...BE faced BY someone"