Copyright of Royal Dutch Shell plc 1

Finance Operations

Noel ParasoVP Service Centre Network

Facts and figures – Royal Dutch Shell performance in 2009

Source: 2009 Annual Report

2

Characteristics :About 1400 Legal EntitiesMany Joint ventures (incorporated and

unincorporated)Activities in about 90 countries worldwideListed in London, Amsterdam and New YorkGroup reporting on IFRS basisRelatively complex process given size of global

operationsStandardization and automation of key

processesStrong focus on controls (SOX and other) but

also ITCGFocus on first time right and on time reportingStructured preparation and closing process with

close co-operation with external auditorsStatutory reporting 50+ local GAAPs

We follow :EU and UK lawSEC requirements for foreign private

issuersStock Exchange Listing rules

Key external reporting products :QRAs (quarterly result announcements)

plus half year reportingAnnual Report and Form 20F on IFRS

basisSustainability Report (issued after AR)Group/Board level management info

internally

Financial aspects about Royal Dutch Shell

Strategic aim Royal Dutch Shell : to become the world’s most competitive and innovative

energy company3

4

Case for Change: External perspective

0,0%

0,5%

1,0%

Shell Median FirstQuartile

Other cost Technology cost Outsourcing Labor cost

0

35

70

Shell Median FirstQuartile

ComplianceDecision Support + ManagementTransaction Processing

Finance function cost as a % of revenue

Finance FTEs per billion of normalised revenue

Hackett Benchmarking end 2006

Conclusion Bench marking study 2006

Observations:A cost gap between Shell and Median of peer group exists of 40%Processes not standardised and no end to end process view or ownershipHeterogeneous System landscapeHigh cost of labour due to limited use of shared services model (14%)

Main levers to achieve World Class Finance Function:Increase the use of shared services for processes from14% to 50 – 75%Standardisation of processes within Shell across different Business Units and regions/countriesLink up process design and process operations; apply continuous improvement

Implement large scale global IT programme

5

Finance Functional Plan

The Finance Functional Plan outlined the shared vision for Global Finance to become a world-class Finance function by 2010.

Five Finance Fundamentals: Rebalance our roleRebuild the foundations Reduce complexity and cost, Become one Global Finance, Build professionalism and leadership

It highlighted significant opportunities for efficiency and quality improvements of the Finance Function.

Moving to a Top Quartile Finance Function is a transformational journey;

a marathon, not a sprint.

6

Focus: Deep functional expertise e.g. Tax, TreasuryOrganisation Design: Part Global & part business-facing structureValue: Optimising Shell’s financial strength; Managing the balance between risk and control

Shell Finance – 3 Core Areas

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Vision

Availability of world class shared services represents an integral and key component of RDS vision to enable delivery of functional support at world class costs and standards

Shell Strategy for Shared Services

Objectives

Deliver ongoing cost reductions through rigorous programme of Continuous Improvement and Operational Excellence

Apply and maintain high quality risk and control framework

Support standardisation of processes and convergence of systems

Maintain structure for the network that enables future organisational and business changes

Manage concentration risk with adequate BCP arrangements

Scope & benefits

Delivery of services at lower costs through wage arbitrage

Optimise scope coverage as benchmarked against world class standards (process penetration from 10% to 50-75%)

Target range for FTEs in shared service environment 50% of Finance

8

Providing platform for efficiencies and process implementation

Business Need

Accelerate cost reduction

Flexibility to adapt quickly to business changes

Platform for Change

Shared Services Contribution

• Adoption of best shoring model and right skilling the job

• Platform to simplify business processes and accelerate realization of broader business benefits• Reduced cost to upgrade processes & systems

• Common platform in fewer locations enables faster implementation and easier maintenance and control of new standard ways of working• Ability to rapidly scale and/or enhance operations to meet changing business needs

• Leverage expertise, infrastructure, best practices and resources to accelerate implementation• Benefits/performance targets managed through formal governance process and performance monitoring framework• Support delivery of continuous improvement culture

9

10

Emergence & Maturation of Finance Operations

Key elements in Shared Service journey

Direction of the journey since 2006

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Credible progress towards Top Quartile

SBSC organization

•Step‐change: target of approx. 5,000 Finance staff

•Global governance & single point accountability

•More scope & control transfer: endorsed by PwC & FLT

•Centres re‐branded “Shell”: better Employee Value Proposition

•Standardized migration methodology and management

•Largely DS and Central FN activity: predominantly AP and AR

•Processes operated broadly in line with good practice at the time although few controls transferred

• Governance was via regional DS organisations with no structural or standardised sharing

• Early phase developed a set of experiences and platform upon which to build

Glasgow JV

2000 2002 2004 2006 2008 2009KL Guatemala*

c. 800 FTEs Manila

Krakow

Chennai

growth

2010 2011

• Driving achievement of TQ efficiency via operational targets & budgets based on TQ benchmark

• Tight cost control• CI embedded in the

operational targets, moving to E2E

• Optimizing network to deliver more economies of scale – with BCP response

• Driving process standardization

• More migration and deep control migration

• Focus on getting better Connected within Finance and with the Businesses

• Full accountability for operating and designing core finance processes

• Firm commitments for 4500+ FTEs

• Standard metrics drive performance to benchmarked TQ

• Delivery on deeper migration including associated controls

• Increase and material delivery of Continuous Improvement

• Enhanced BCP responses per process concentration

• Process consolidation and scale benefit opportunities

c. 5.500 FTEs

Start Finance Operations* Following DS divestment Guatemala closed 2010

Increased use of SBSCs

Critical mass of controls now operated in Finance Operations (nearly 50%).Migrations in 2011 and 2012 will

move process coverage into TQ range for process targetedWage arbitrage benefits

Key Contributions of Finance Operations Model

Standardisation & Efficiency

Standard metrics in place including TQ targets and flight paths towards TQDelivering economies of scale and increased standardization by selective process concentration opportunitiesDrive efficiency of controls framework

And in addition

Model has offered flexibility for strategic RDS acquisitions and divestment decisionsDrive connectivity on control design and deploy across Finance

Process Organisation

Accountabilities per process with focus and drive on improving process performanceConsistent delivery of Continuous Improvement program, extending beyond Finance Operations organisation.

Key elements in Shared Service journey

Follow through on chosen strategy - persevere!

Ensure there is a compelling rationale for the changes being made

Work bottom up towards top down vision; don’t wait for “perfect plan”

Put in place a structured methodology for migrating work and controls

Implement structured CI methodology for realising benefits after migration

Develop leadership capability in line with the evolving and maturing of the organisation

Have a clear focus on structural and collaborative connectivity with the onshore organisation

Continual comparison and benchmarking to calibrate targets

Manage strongly and consistently by metrics – embed accountability

Strong focus on yearly refresh of network strategy (capacity anticipation)

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When implementing ...

Board level sponsorship and management commitment at all levels needed.

Manage with solid change program (dedicated resources, project plans etc)

Start with easy wins and build credibility

Decrease risk by standardising scope and processes pre-transfer where

possible.

Staff competencies need to match the nature of the work.

Put in place focussed and suitable recruitment/retention strategy.

Define clear standards and end to end process metrics of operation at outset

The greater the process adherence, the fewer foreign language speakers are

needed in the centres.

Finance is part of many end to end processes. Process standardisation can only

happen with all players involved.

Treat stakeholders as true business partners

Accountabilities and responsibilities along clear process lines.14

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FINANCE OPERATIONS ORGANISATION 2011

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Accountable for process

design & Top Quartile

performance for

processes operated in the centres

Support E2E process

improvement across Finance

connecting with the

business)

Accountable for- enterprise wide integration of process design and process standardization- the management of the Finance components of supporting ERPs

Drive changes in competencies

and culture

Provide Finance Functional

Leadership in Centres

GlasgowKrakow

Cape TownKuala Lumpur

ChennaiManila

Finance Operations Organisation

Process Managemen

t

DataExpenditure

MI & SARevenue

Record to Report

Service Centre Network

Controller Migration Coordination

Continuous Improvement

Process Integration

Drive Continuous Improvement of

process performance to TQ (efficiency, effectiveness, compliance)

TQ control framework and

control performance

Appraisal Finance Operations

performance

Accountable for Business Continuity plans for Finance

Operations

Deliver migration projects without

business disruption

Drive efficiency and continued

development of risk based

control framework

Global Processes

Finance Operations has global accountability for the design, operation and performance improvement of its 5 process areas VPs for processes are responsible for the operation and continuous improvement of the performance of their respective processWhere appropriate Process Executive for E2E finance processes.

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Glasgow (1998)Krakow (2006)

Chennai (2007)

Kuala Lumpur (2000)

Manila (2004)

Finance Operations Global Network

METRICS IN ACTION: MEASURE, REVIEW, IMPROVE

Manageria

l metrics

Age Analysis of open unmatched GRIR >90 days (% on #)

(RtP 12)

Non-Compliant PO

(% on # and $)

(RtP 7-8)

Non Compliant documents

(% on #)

(RtP 15-16)

Held invoices at month end

(# & $)

(RtP 17)

Strategic

metrics

Operational

metrics

MEASURE

Ageing of Held Docs (#,$)

Categories of non compliant PO (#, %)

Categories of non compliant docs (#,%)

Cost of non compliance $

8

5

00

5

10

15

J F M A M J J '09 '10 TQ

%

REVIEW

- Process level

IMPROVE

REVIEW

- Business and Entity level

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SUMMARY

A fast and robust ramp up aligned

with Strategic goals

Delivering tangible results

Earning the credibility and right

to grow

A marathon….not a sprint

A transformational journey

12 GB trained

Pilot LSS projects

2007

Initiate work on metrics

2008 2009 2010 and beyond

~ 80 projects

5 MBB in house, 11 BB in house, 80 GB trained & Top

70 in FO

Hard savings $2.5M Cost avoidance $2.5M

Definition of CIstandardsand QA

~400 projects

6 MBB in house, 18 BB in house, 500 GB trained

Mandatory monthly metrics review and action against

targets

Hard savings $26.7M Cost avoidance $6.2M

CI targets allocated to each Process Owner & Process

Manager

Embedding CIin ways of working

/ behaviours

8 MBB in house, 25 BB in house, 40% GB trained

Metrics streaming and review

10% + Y-O-Y Hard savings

CI targets cascaded through all Finance Managers

CI competences= key component of EVP and

leadership development

CI = Key driverto achieve and sustain

TQ performance

Target of 600 projects

-3 levels of metrics for key processes

- Key link of strategy to operational targets

12 GB trained

Pilot LSS projects

2007

Initiate work on metrics

2008 2009 2010 and beyond

~ 80 projects

5 MBB in house, 11 BB in house, 80 GB trained & Top

70 in FO

Hard savings $2.5M Cost avoidance $2.5M

Definition of CIstandardsand QA

~400 projects

6 MBB in house, 18 BB in house, 500 GB trained

Mandatory monthly metrics review and action against

targets

Hard savings $26.7M Cost avoidance $6.2M

CI targets allocated to each Process Owner & Process

Manager

Embedding CIin ways of working

/ behaviours

8 MBB in house, 25 BB in house, 40% GB trained

Metrics streaming and review

10% + Y-O-Y Hard savings

CI targets cascaded through all Finance Managers

CI competences= key component of EVP and

leadership development

CI = Key driverto achieve and sustain

TQ performance

Target of 600 projects

-3 levels of metrics for key processes

- Key link of strategy to operational targets

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