Username and Password are using an account that has an Administrator (Full Control) permission.
Other fields can be configured by following the instruction from the help file ofStart Workflow
Save and Publish the workflow.
Run the WORKFLOW 2 using a workflow initiator that has a Limited access to the List.
A user account is required to have a "Full Control" permission to the List to run the "Office 365 Update item permission" action to break the "Inherit permissions from parent" and "Remove existing permissions"
When a "Start Workflow" action triggered by the workflow initiator that has a Limited access but configured using Administrator permission, the Update item permission is automatically run using Administrator permission as well.