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
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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
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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
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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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