Step 1: Notice both circle centers lie on the square's diagonal.
Circle $C_1$ is tangent to the two sides meeting at corner $W$, so its center $O_1$ is equally offset from both sides, which places $O_1$ exactly on the diagonal running from $W$ to $Y$. In the same way, circle $C_2$ is tangent to the two sides meeting at corner $Y$, so its center $O_2$ also lies on that same diagonal $WY$. This means $W$, $O_1$, $O_2$, $Y$ are all collinear, and we can work along this one line instead of using full coordinates.
Step 2: Find the length of the diagonal $WY$.
The square has side 4 cm, so by the Pythagorean theorem the diagonal is
\[ WY = \sqrt{4^2+4^2} = 4\sqrt{2} \text{ cm} \]
Step 3: Find how far $O_1$ is from corner $W$ along the diagonal.
$O_1$ sits a perpendicular distance $r_1$ from each of the two sides at $W$. For a point equally offset by distance $r_1$ from both sides of a right angle, the distance measured along the diagonal from the corner is $r_1\sqrt{2}$, the same 45 degree geometry as the diagonal of a small $r_1 \times r_1$ square. With $r_1 = 1$, that distance is $\sqrt{2}$ cm.
Step 4: Find how far $O_2$ is from corner $Y$ along the diagonal.
By identical reasoning at corner $Y$, $O_2$ sits a distance $r_2\sqrt{2}$ back from $Y$ along the diagonal.
Step 5: Express the gap between $O_1$ and $O_2$ along the diagonal.
The full diagonal $WY$ splits into three pieces: from $W$ to $O_1$, length $r_1\sqrt{2}$; from $O_1$ to $O_2$, the unknown center to center distance; and from $O_2$ to $Y$, length $r_2\sqrt{2}$. So
\[ O_1O_2 = 4\sqrt{2} - r_1\sqrt{2} - r_2\sqrt{2} = \sqrt{2}(4 - r_1 - r_2) \]
With $r_1=1$: $O_1O_2 = \sqrt{2}(3-r_2)$.
Step 6: Apply the external tangency condition and solve.
Since the circles touch each other, $O_1O_2 = r_1+r_2 = 1+r_2$. So
\[ \sqrt{2}(3-r_2) = 1+r_2 \]
\[ 3\sqrt{2}-1 = r_2(1+\sqrt{2}) \]
\[ r_2 = \frac{3\sqrt{2}-1}{1+\sqrt{2}} = 7-4\sqrt{2} \text{ cm, after rationalizing} \]
Final Answer:
Working along the diagonal instead of full coordinates gives the same result.
\[ \boxed{r_2 = 7-4\sqrt{2} \text{ cm}} \]