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Risk factors

The risks discussed below could have a material adverse effect separately, or in combination, on our earnings, cash flows and financial condition. Accordingly, investors should carefully consider these risks.

Further background on each risk is set out in the relevant sections of this Report, indicated by way of cross references.

The Board's responsibility for identifying, evaluating and managing our significant and emerging risks is discussed in "Other regulatory and statutory information".

We are exposed to macroeconomic risks, including fluctuating prices of crude oil, natural gas, oil products and chemicals.

See "Market overview".

Risk description

The prices of crude oil, natural gas, oil products and chemicals can be volatile and are affected by supply and demand, both globally and regionally. Under high oil and gas prices, our entitlement to proved reserves under some production-sharing contracts has been, and could continue to be, reduced. Higher prices could also reduce demand for our products which could result in lower profitability in certain businesses in the Group, particularly in our Chemicals and Products, and Marketing businesses. Some of the reduction in demand could be permanent. Higher prices can also lead to more capacity being built, potentially resulting in an oversupplied market which would negatively affect our businesses. In the past, a high oil and gas price environment has generally led to sharp increases in costs and this could continue.

In addition, macroeconomic, geopolitical and technological uncertainties have affected, and could continue to affect, production costs and demand for our products. Government actions may affect the prices of crude oil, natural gas, oil products and chemicals. These include price caps on gas, the promotion of electric vehicle sales or the phasing-out of future sales of new diesel or gasoline vehicles (as announced in the UK and due to come into force in 2035). Oil and gas prices can also move independently of each other (as seen with European gas prices in 2022). Factors that influence supply and demand include operational issues, natural disasters, weather, pandemics such as COVID-19, political instability, conflicts, such as Russia's full-scale invasion of Ukraine and the conflict in Gaza, economic conditions, including inflation, and actions by major oil- and gas-producing countries.

In a low oil and gas price environment, we have generated, and could continue to generate, less revenue from our Upstream and Integrated Gas businesses, and parts of those businesses could become less profitable or incur losses. Low oil and gas prices have also resulted and could continue to result in the debooking of proved oil or gas reserves, if they become uneconomic in this type of price environment. Prolonged periods of low oil and gas prices, or rising costs, have resulted and could continue to result in projects being delayed or cancelled. Assets have been impaired in the past, and there could be impairments in the future. Low oil and gas prices have affected, and could continue to affect, our ability to maintain our long-term capital investment and shareholder distribution programmes. Prolonged periods of low oil and gas prices could adversely affect the financial, fiscal, legal, political and social stability of countries that rely significantly on oil and gas revenue.

Accordingly, price fluctuations could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We maintain a diversified portfolio to manage the impact of price volatility. We test the resilience of our projects and other opportunities against a range of prices and costs for crude oil, natural gas, oil products and chemicals. We prepare annual strategic and financial plans that test different scenarios and their impact on prices on our businesses and organisation as a whole. Through this process, we identify potential interventions that would preserve cash levels. We also aim to maintain a strong balance sheet through the cycle to provide resilience against weak market prices.

Our ability to deliver competitive returns and pursue commercial opportunities depends in part on the accuracy of our price assumptions.

See "Market overview".

Risk description

We use a range of commodity price and margin assumptions, which we review on a periodic basis. These ranges help us to evaluate the robustness of our capital allocation for our evaluation of projects and commercial opportunities. If our assumptions prove to be incorrect, this could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

The range of commodity prices and margins used in our project and portfolio evaluations is subject to a rigorous assessment of short-, medium- and long-term market drivers. These drivers include the extent and pace of the energy transition.

Our ability to achieve our strategic objectives depends on how we react to competitive forces.

See "Outlook for 2024 and beyond".

Risk description

We face competition in all our businesses. We seek to differentiate our services and products, though many of our products are competing in commodity-type markets. Accordingly, failure to manage our costs and our operational performance could result in a material adverse effect on our earnings, cash flows and financial condition. We also compete with state-owned hydrocarbon entities and state-backed utility entities with access to financial resources and local markets. Such entities could be motivated by political or other factors in making their business decisions. Accordingly, when bidding on new leases or projects, we could find ourselves at a competitive disadvantage because these state-owned entities may not require a competitive return. If we are unable to obtain competitive returns when bidding on new leases or projects, this could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We continually assess the external environment – the markets and the underlying economic, political, social and environmental drivers that shape them – to evaluate changes in competitive forces. We define multiple future potential scenarios and business environments by identifying drivers, uncertainties, enablers and constraints to our competitiveness. These scenarios help us to find issues which affect our operating environment and have implications for our strategy.

Rising concerns about climate change and effects of the energy transition could lead to a fall in demand and potentially lower prices for fossil fuels. Climate change could also have a physical impact on our assets and supply chains. This risk has resulted in adverse litigation and regulatory developments which may recur in the future, resulting in project delays or cancellations, potential additional litigation, operational restrictions and additional compliance obligations.

See "Our journey to net zero", "Climate change and energy transition", "Renewables and energy solutions" and "Legal proceedings and other contingencies".

Risk description

Societal demand for urgent action on climate change has increased, especially since the Intergovernmental Panel on Climate Change (IPCC) Special Report on Global Warming of 1.5°C effectively made the more ambitious goal of the Paris Agreement to limit the rise in global average temperature this century to 1.5°C the default target. This increasing focus on climate change and drive for an energy transition have created a risk environment that is changing rapidly, resulting in a wide range of stakeholder actions at global, local and company levels. The potential impact and likelihood of the associated exposure for Shell could vary across different time horizons, depending on the specific components of the risk.

We expect that a growing share of our greenhouse gas (GHG) emissions will be subject to regulation, resulting in increased compliance costs and operational restrictions. Regulators may seek to limit certain oil and gas projects or make it more difficult to obtain required permits. Additionally, climate activists are challenging the grant of new and existing regulatory permits, and protesting at some of our facilities and projects. We expect that these challenges and protests are likely to continue and could delay or prohibit operations in certain cases. Our journey to achieving our target of becoming a net-zero emissions energy business has resulted in and could continue to require additional costs. We also expect that actions by customers to reduce their emissions will lower demand and potentially affect prices for fossil fuels, as will increasing levels of GHG emissions regulation through taxes, fees and/or other incentives. This could be a factor contributing to additional provisions for our assets and result in lower earnings, cancelled projects and potential impairment of certain assets.

The pace and extent of the energy transition could pose a risk to Shell if we decarbonise our operations and the energy we sell at a different speed relative to society. If we are slower than society, customers may prefer a different supplier, which would reduce demand for our products and adversely affect our reputation besides materially affecting our financial results. If we move much faster than society, we risk investing in technologies, low-carbon products or markets for which or where demand fails to materialise. The operating margins for our low-carbon products and services have been, and could continue to be lower than the margins we have experienced historically in our oil and gas operations. Changes in climate-related regulations may also impact our returns.

The physical effects of climate change such as, but not limited to, increases in temperature and sea levels and fluctuations in water levels could also adversely affect our operations and supply chains.

Certain investors have decided to divest their investments in fossil fuel companies. If this were to continue, it could have a material adverse effect on the price of our securities and our ability to access capital markets. Stakeholder groups are also putting pressure on commercial and investment banks to stop financing fossil fuel companies. Some financial institutions have started to limit their exposure to fossil fuel projects. Accordingly, our ability to use financing for these types of future projects may be adversely affected. This could also adversely affect our partners' ability to finance their portion of costs, either through equity or debt.

In some countries governments, regulators, non-governmental organisations and individuals have filed lawsuits seeking to hold fossil fuel companies liable for costs associated with climate change. Losing climate change lawsuits that have been filed against us could have a material adverse effect on our earnings, cash flows and financial condition. For example, in May 2021, the District Court in The Hague, the Netherlands, ruled that by end 2030, Shell must reduce its aggregate net Scope 1, 2 and 3 emissions by 45%, compared with 2019 levels. The Scope 1 component is a results-based obligation and the Scope 2 and 3 components are a significant best-efforts obligation.

As new technologies are developed to more accurately measure emissions, we may be required to revise our emissions estimates and reduction targets. Even if we meet our targets, our efforts may be characterised as insufficient.

In summary, rising climate change concerns, the pace at which we decarbonise our operations relative to society and effects of the energy transition pose multiple challenges to our business. These could, individually or collectively, result in, for example, financial penalties, additional provisions or payments of financial damages, and have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

Our response to the evolving risk outlook requires transparency and clarity around our plans and actions to achieve our climate target. Our climate change risk management approach is supported by standards and manuals as part of our Health, Safety, Security and Environment and Social Performance (HSSE & SP) Control Framework. Climate change and risks resulting from GHG emissions are reviewed and managed in accordance with other significant risks through the Board and the Executive Committee. We have established several dedicated internal forums related to climate change and the energy transition. These are at different levels of the organisation and seek to address, monitor and review climate change issues.

Our strategy to assess and manage risks and opportunities resulting from climate change includes considering different time horizons and their relevance to risk identification and business planning. We actively monitor societal developments, such as regulation-driven carbon-pricing mechanisms and customer-driven preferences for products. We incorporate these into potential scenarios which provide insights into how the energy transition may unfold in the medium and long term. These insights and those from various other external scenarios (such as those prepared for the IPCC Sixth Assessment Report) guide how we set our strategic direction, capital allocation and carbon emission reduction targets.

Overall, we mitigate climate-related risks through our Powering Progress strategy to deliver more value with less emissions. With our focus on performance, discipline and simplification, we believe that we are in a better position to achieve both our financial and climate-related targets and ambitions. This approach includes:

  • reducing the GHG emissions from our operations (Scope 1 and 2) by improving our energy efficiency, deploying renewable electricity, managing flaring, and reducing methane emissions in our assets and projects;
  • growing our world-leading liquefied natural gas (LNG) business while decarbonising our LNG portfolio in two main ways: by growing our portfolio with a lower carbon intensity, and by focusing on reducing emissions of methane;
  • managing our Upstream portfolio to support a balanced energy transition by cutting emissions from oil and gas production, while keeping oil production stable. Oil production is increasingly from our deep-water business which, through innovation, produces higher-margin and lower-carbon barrels; and
  • transforming our businesses in Downstream and Renewables and Energy Solutions to offer more low-carbon solutions, while reducing sales of oil products.

Our investments in low-carbon solutions are subject to financial modelling and stress-testing, due diligence and risk assessments to ensure that our capital is allocated to the most attractive low-carbon projects and opportunities. In addition, we are working to effectively adapt our assets and activities to enhance our resilience to the physical risks related to climate change where needed.

We are also working with governments on their climate policy to help establish regulatory frameworks that will enable society to reach the goals of the Paris Agreement. We signed up to the Oil and Gas Decarbonization Charter announced at COP28, within which organisations have pledged to achieve near-zero methane emissions by 2030 and zero routine flaring by no later than 2030. We also intend to contribute to the World Bank's Global Flaring and Methane Reduction Fund, which was launched at COP28. In relation to the ruling delivered by the District Court in The Hague in May 2021, we have appealed the ruling but continue to implement our Powering Progress strategy to become a net-zero emissions energy business by 2050, regardless of whether we win or lose the appeal.

We operate in more than 70 countries that have differing degrees of political, legal and fiscal stability. This exposes us to a wide range of political developments that could result in changes to contractual terms, laws and regulations. We and our joint arrangements and associates also face the risk of litigation and disputes worldwide.

See "Other regulatory and statutory information".

Risk description

Developments in politics, laws and regulations can and do affect our supply chains and operations. Potential impacts, which we have experienced in the past, include: forced divestment of assets; expropriation of property; cancellation or forced renegotiation of contract rights; delay of new projects; additional taxes, including windfall taxes (especially during periods of prolonged high oil and gas prices experienced in recent years, such as 2022), restrictions on deductions and retroactive tax claims; antitrust claims; changes to trade compliance regulations; price controls; local content requirements; foreign exchange controls; changes to environmental regulations; changes to regulatory interpretations and enforcement; and changes to disclosure requirements. Many parts of the world are facing economic and fiscal challenges and growing pressure on cost-of-living standards. These issues impact our business as governments, in response to political and social pressures, pursue policies that could have a material adverse effect on our earnings, cash flows and financial condition.

The world is also facing continued geopolitical instability, including Russia's full-scale invasion of Ukraine, which impacts market conditions and our operations. The broader consequences of the conflict in Gaza remain uncertain and a wider regional escalation could have greater impacts on our operations in the Middle East and beyond.

From time to time, social and political factors play a role in unprecedented and unanticipated judicial outcomes that could adversely affect Shell. Non‑compliance with policies and regulations could result in regulatory investigations, litigation and, ultimately, sanctions. Certain governments and regulatory bodies have, in Shell's opinion, exceeded their constitutional authority by: attempting unilaterally to amend or cancel existing agreements or arrangements; failing to honour existing contractual commitments; and seeking to adjudicate disputes between private litigants. Certain governments have also adopted laws and regulations that could potentially conflict with other countries' laws and regulations, potentially subjecting us to criminal and civil sanctions. Such developments and outcomes could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We continually monitor geopolitical developments and societal issues relevant to our interests.

Our Legal and Tax functions are organised globally and support our business lines in seeking to ensure compliance with local laws and fiscal regulations, and filing proactive claims where warranted to protest unfair practices. Our Corporate Relations department liaises with governments in countries where we operate to understand and engage on local policies and to advocate Shell's position on topics relevant to our industry.

We are prepared to exit a country if we believe we can no longer operate there in accordance with our standards and applicable law, and we have done so in the past.

With regard to the conflict in Gaza, we have made adjustments to our operations in the Middle East to reduce our exposure and are closely monitoring the risk of a wider regional escalation.

An erosion of our business reputation could have a material adverse effect on our brand, our ability to secure new hydrocarbon or low-carbon opportunities or access capital markets, and on our licence to operate.

See "Living by our values".

Risk description

Our reputation is an important asset. The Shell General Business Principles (SGBP) govern how Shell and its individual companies conduct their affairs, and the Shell Code of Conduct tells employees and contract staff how to behave in line with the SGBP. Our challenge is to ensure that all employees and contract staff comply with the Principles and the Code of Conduct. Real or perceived failures of governance or regulatory compliance or a perceived lack of understanding of how our operations affect surrounding communities could harm our reputation.

Societal expectations of companies are increasing, with a focus on business ethics, quality of products, contribution to society, safety and minimising damage to the environment. There is increasing focus on the role of oil and gas in the context of climate change and the energy transition. Non-governmental organisations (NGOs) continue to challenge Shell's social and legal licence to operate through activities to block or delay projects and by bringing legal actions, diverting our resources. In key markets, we are seeing an increasing number of protests at external events such as the Annual General Meeting, claims brought by NGOs and our brand communications have been subject to bans from advertising regulators in the UK and the Netherlands, following complaints received from members of the public. During prolonged periods of high oil and gas prices, the oil and gas industry could be accused of profiteering from higher fuel and electricity prices and therefore impacting living costs. This could negatively affect our brand, reputation and licence to operate, which could limit our ability to deliver our strategy, reduce consumer demand for our branded and non-branded products, harm our ability to secure new resources and contracts, and restrict our ability to access capital markets or attract staff. Many other factors, including the materialisation of other risks discussed in this section, could negatively affect our reputation and could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

The SGBP set out our responsibilities to shareholders, customers, employees, business partners and society. They set the standards for how we conduct business with integrity, care and respect for people. All Shell employees and contractors, and those at joint ventures we operate, are expected to behave in line with these business principles. We undertake a range of activities to help embed the SGBP throughout the organisation. This involves training, encouraging people to discuss the dilemmas they face in their work.

We continually assess and monitor the external environment for potential risks to our reputation. We engage in dialogue with our key stakeholders, such as investors, industry and trade groups, academics, governments and non-governmental organisations to gain greater insights into societal expectations of the Shell Group of companies. We also take proactive steps when warranted, through legal means to protect our reputation from unwarranted accusations.

We have mitigation plans for identified individual risks at the Group, country and line of business level. Our country chairs are responsible for implementing country plans which are updated annually. We continually develop and defend our brand in line with Shell's purpose and promises and target our efforts to drive brand differentiation, relevance and preference.

Some of the consequences of Russia's full-scale invasion of Ukraine remain unpredictable. The evolving geopolitical situation, including sanctions and export controls, has caused challenges to our operations, the security of our people, and has created new reputational exposure, both of which are likely to continue in the medium to longer term.

See "Other regulatory and statutory information".

Risk description

The Russia-Ukraine war continues to pose challenges to our operations and commercial decisions. The subsequent sanctions and export controls imposed by countries around the world are continuing to have a material impact on a number of our activities, including supply, trading and treasury activities. More sanctions and export controls could be expected.

This continuing war could give rise to additional events that could materially impact our operations, which may be temporary or more permanent in nature. These risks and future events could impact the security of our people, our supply chain, commodity prices, credit, commodity trading, treasury and legal activities. In addition, there are potential reputational risks associated with how Shell's decisions in response to evolving challenges are perceived. The tensions also create heightened cyber security threats to our information technology (IT) infrastructure.

Any of these factors, individually or in aggregate, could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

In response to the invasion, a Group Crisis Team was set up to assess the situation, consider potential scenarios of how events may further develop and coordinate responses accordingly. The team continues to play an oversight and cross-coordination role across Shell's different lines of businesses.

Care for our people remains Shell's top priority.

We continue to closely monitor and respond to the sanctions that have been imposed and follow international guidelines where relevant to our business activities.

Shell no longer participates in any joint ventures with Gazprom and related entities with ongoing operations inside Russia. Shell has also exited all its downstream business (including service stations, fuels supply and lubricants) in Russia.

The estimation of proved oil and gas reserves involves subjective judgements based on available information and the application of complex rules. This means subsequent downward adjustments are possible.

See "Supplementary information – oil and gas (unaudited)".

Risk description

The estimation of proved oil and gas reserves involves subjective judgements and determinations based on available geological, technical, contractual and economic information. Estimates can change over time because of new information from production or drilling activities, changes in economic factors, such as oil and gas prices, alterations in the regulatory policies of host governments, or other events. Estimates also change to reflect acquisitions, divestments, new discoveries, extensions of existing fields and mines, and improved recovery techniques. Published proved oil and gas reserves estimates could also be subject to correction because of errors in the application of rules and changes in guidance. Downward adjustments could indicate lower future production volumes and could also lead to impairment of assets. This could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

A central group of reserves experts undertakes the primary assurance of the proved reserves bookings. A multidisciplinary committee reviews and endorses all major proved reserves bookings. Shell's Audit and Risk Committee reviews all proved reserves bookings and Shell's CEO is responsible for final approval. The Internal Audit function also provides further assurance through audits of the control framework, from which information disclosed in "Supplementary information – oil and gas (unaudited)" is obtained.

Our future hydrocarbon production depends on the delivery of large and integrated projects and our ability to replace proved oil and gas reserves.

See "Oil and gas information".

Risk description

We face numerous challenges in developing capital projects, especially those which are large and integrated. Challenges include: uncertain geology; frontier conditions; the existence and availability of necessary technology and engineering resources; the availability of skilled labour; the existence of transport infrastructure; project delays; the expiration of licences; delays in obtaining required permits; potential cost overruns; and technical, fiscal, regulatory, political and other conditions. These challenges are particularly relevant in certain developing and emerging market countries, in frontier areas and in deep-water fields, such as off the coast of Namibia. We may fail to assess or manage these and other risks properly. Such potential obstacles could impair our delivery of these projects, our ability to fulfil the full potential value of the project as assessed when the investment was approved, and our ability to fulfil related contractual commitments. This could lead to impairments and could have a material adverse effect on our earnings, cash flows and financial condition.

Future oil and gas production will depend on our access to new proved reserves through exploration, negotiations with governments and other owners of proved reserves and acquisitions, and through developing and applying new technologies and recovery processes to existing fields. Failure to replace proved reserves could result in an accelerated decrease of future production, potentially having a material adverse effect on our earnings, cash flows and financial condition.

Oil and gas production available for sale




Million boe [A]





Shell subsidiaries




Shell share of joint ventures and associates









Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.

Proved developed and undeveloped oil and gas reserves [A][B]




Million boe [C]


Dec 31, 2023

Dec 31, 2022

Dec 31, 2021

Shell subsidiaries




Shell share of joint ventures and associates








Attributable to non-controlling interest of Shell subsidiaries





We manage our total proved reserves base without distinguishing between proved reserves from subsidiaries and those from joint ventures and associates.


Includes proved reserves associated with future production that will be consumed in operations.


Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.

How this risk is managed

We continue to explore for and mature hydrocarbons across our Upstream and Integrated Gas businesses. We use our subsurface, project and technical expertise, and actively manage non-technical risks across a diversified portfolio of opportunities and projects. This involves adopting an integrated approach for all stages, from basin choice to development. We use competitive techniques and benchmark our approach internally and externally.

The nature of our operations exposes us, and the communities in which we work, to a wide range of health, safety, security and environment risks.

See "Safety", and "Living by our values".

Risk description

The health, safety, security and environment (HSSE) risks to which we and the communities in which we work are potentially exposed cover a wide spectrum, given the geographical range, operational diversity and technical complexity of our operations. These risks include the effects of natural disasters (including weather events and earthquakes), social unrest, pandemic diseases, criminal actions by external parties, and safety lapses. If a major risk materialises, such as an explosion or hydrocarbon leak or spill, which we have experienced in the past, this could result in injuries, loss of life, environmental harm, disruption of business activities, loss or suspension of permits, loss of our licence to operate and loss of our ability to bid on mineral rights. Accordingly, this could have a material adverse effect on our earnings, cash flows and financial condition.

Our operations are subject to extensive HSSE regulatory requirements that often change and are likely to become more stringent over time. Governments could require operators to adjust their future production plans, affecting production and costs. We could incur significant extra costs in the future because of the need to comply with such requirements. We could also incur significant extra costs due to violations of or liabilities under laws and regulations that involve elements such as fines, penalties, clean-up costs and third-party claims. If HSSE risks materialise, they could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We have internal standards and a clear governance structure to help manage HSSE risks and avoid potential adverse effects. Our governance structure and standards also help us to develop mitigation strategies aimed at ensuring that if an HSSE risk materialises, we avoid the worst possible consequences and have ways to remediate any environmental damage. Our standards describe how key control processes need to be implemented, for example, to ensure safe production and equipment care. When planning new major projects, we conduct detailed environmental, social and health impact assessments. We routinely practise our emergency response plans for potential events, such as spills or fire, which pose a significant risk.

Our standards and governance structure are currently defined in our Health, Safety, Security, Environment and Social Performance (HSSE & SP) Control Framework and supporting guidance documents. We are in the process of transitioning to new Safety, Environment and Asset Management Standards as part of the Shell Performance Framework.

The Shell Internal Audit and Investigation team provides assurance on the HSSE & SP controls to the Audit and Risk Committee.

A further erosion of the business and operating environment in Nigeria could have a material adverse effect on us.

See "Upstream" and "Legal proceedings and other contingencies".

Risk description

In our Nigerian operations, we face various risks and adverse conditions. These include: security incidents affecting the safety of our people, host communities and operations; sabotage and crude theft; ongoing litigation; limited infrastructure; challenges presented by delayed government and partner funding and budget delays; and regional instability created by militant activities. Some of these risks and adverse conditions, such as security issues affecting the safety of our people and sabotage and theft, have occurred in the past and are likely to continue in the future, with a potential material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We test the economic and operational resilience of our Nigerian projects against a wide range of assumptions and scenarios. We seek to proportionally share risks and funding commitments with joint-venture partners. When we participate in joint ventures in Nigeria, we require that they operate in accordance with good industry practice. We monitor the security situation, and liaise with host communities, governmental and non-governmental organisations to help promote peaceful and safe operations.

Upon completion of the announced sale (subject to regulatory approvals and other conditions) of our onshore Nigeria business, our exposure to these risks is expected to reduce. Shell has other businesses in Nigeria that are outside the scope of the announced transaction.

We rely heavily on information technology systems in our operations.

See "Other central activities".

Risk description

Our continued focus on digitalising our business processes, and our increasing dependence on information technology (IT) systems for our core operations, mean that we are heavily reliant on secure, affordable and resilient IT services provided both in-house and by third parties.

Externally, we observe several developments impacting our IT and cyber risk profile: deterioration of the cyber security threat landscape represented by increasing volumes of attacks by sophisticated cyber actors, technology developments (such as artificial intelligence), geopolitical conflicts and increases in regulations across the markets in which Shell operates. We have observed an increase in social engineering (manipulation of individuals) as a method of financially driven cyber crime. Threat actors are targeting bank account changes, invoice settlement and identity fraud to extract money from corporations. Ransomware attacks on corporations continue to be widespread. These contribute to potential breaches and disruptions of critical IT services, such as the security incident involving the transfer of files which Shell experienced in 2023. If breaches are not detected early and responded to effectively, they could impact our operations and the safety of our staff and/or harm our reputation and/or result in material regulatory fines. This could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

Our global integrated Information Risk Management (IRM) and cyber defence teams are staffed with cyber security professionals that monitor, assure and defend our global IT landscape. Our cyber security capabilities are embedded into our IT systems, and our IT is protected by various detective and protective technologies. A structured approach to identify, assess and mitigate the IT and cyber security risks is built into our support processes and aligns to industry best practices. We continuously track cyber attacks, threat intelligence and vulnerabilities in our IT landscape and have a well-structured incident management and escalation process in place. The security of IT services, where operated by external IT companies, is managed through contractual clauses and additionally through formal supplier assurance reports for critical IT services. Shell engages an external party to perform periodic benchmarking of Shell's approach to cyber security risk management in comparison to industry and peers. We develop our cyber security capabilities, based on external dynamics, benchmarking outcomes and assurance results and take a risk-based approach in our investment decisions related to cyber security risk strategy.

Our information risk management practices, and cyber security risks and strategy are regularly discussed by and among our Chief Information Security Officer, Shell's Information and Digital Technology leadership, the Executive Committee, the Audit and Risk Committee and the Board of Directors. These discussions involve consideration of changes in the external environment, how Shell is responding to cyber security risks and implementation of further remedial actions as appropriate. In 2023, these reviews were supplemented by dedicated deep dives into areas such as the emerging risks (and opportunities) associated with generative artificial intelligence.

Our business exposes us to risks of social instability, criminality, civil unrest, terrorism, piracy, cyber disruption and acts of war that could have a material adverse effect on our operations.

See "Safety".

Risk description

As seen in recent years, these risks can manifest themselves in the countries where we operate and elsewhere. These risks impact people, our operations and assets. Risks which have materialised in the past include: acts of terrorism; acts of criminality, including maritime piracy, sabotage and tapping into our pipelines in Nigeria; cyber espionage or disruptive cyber attacks; conflicts, including war – such as Russia's full-scale invasion of Ukraine; civil unrest such as the 2023 political unrest in Pakistan; malicious acts carried out by individuals within Shell, such as data exfiltration during divestments; and environmental and climate activism (including disruptions by non-governmental organisations) especially in the USA and north-west Europe, where, for example, activists boarded and protested during the sailing of the Penguins floating production and storage and offloading (FPSO) vessel to Norway.

The above risks can threaten the safe operation of our assets and the transport of our products. They can harm the well-being of our people, inflict loss of life and injuries, and disrupt our operational activities. They can also damage the environment and negatively impact our reputation. These risks could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We seek to obtain the best possible information to enable us to assess threats and risks. We conduct detailed threat and risk assessments for Shell- operated venture assets, facilities, businesses, projects and activities, so that security risk mitigations achieve the principles of deter, detect, delay and respond. Further mitigations include strengthening the security of assets, reducing our exposure as appropriate and using journey management plans. We also invest in information risk management capabilities and crisis management and business continuity measures. We learn from incidents, in order to continually improve our security risk management in Shell.

The Groningen region in the Netherlands continues to experience earthquakes induced by historical gas production activities, affecting local communities.

See "Upstream" and "Legal proceedings and other contingencies".

Risk description

Shell and ExxonMobil are 50:50 shareholders in Nederlandse Aardolie Maatschappij B.V. (NAM). An important part of NAM's gas production comes from the onshore Groningen gas field, in which EBN, a Dutch government entity, has a 40% interest and NAM a 60% interest. The Dutch government issues annual gas production instructions for the Groningen field. As per the latest instruction, production ceased on October 1, 2023. However, the Dutch government has indicated to NAM it could decree a restart of minimal production in exceptional circumstances during the current gas year, which occurred on January 8-10, 2024, for a cold spell of several days.

The region is still experiencing earthquakes induced by historical gas production. This has resulted in damaged buildings in the region, which has led to complaints and lawsuits from the local community and promises of compensation from the Dutch government to the region. The Dutch State has taken over the handling of damage claims from NAM for all claim categories, as well as activities to strengthen buildings in the region, while NAM remains financially responsible insofar as the costs correspond to NAM's liability. While we expect the cessation of production from the Groningen gas field on October 1, 2023, to further reduce seismicity, any additional earthquakes, or the government passing on costs to NAM beyond NAM's liability, could have further material adverse effects on our earnings, cash flows and financial condition.

How this risk is managed

NAM is working with the Dutch government and other stakeholders to fulfil its obligations to residents of the area. These include compensating for damage caused by the earthquakes and paying to strengthen houses where this is required for safety. In 2022, NAM started arbitrations with the Dutch government to have its financial liability determined for costs which the Dutch government compensated to claimants and subsequently charged to NAM.

Shell and ExxonMobil intend to reach a final, all-encompassing settlement with the Dutch government on the new design of the Dutch "Gasgebouw" and the winding-down of natural gas production in Groningen. Shell, ExxonMobil and the Dutch government reached agreements in 2018 (Heads of Agreement) and 2019 (Interim Agreement), and subsequently have been engaged in discussions on the interpretation and implementation of these agreements and on a final and all-encompassing settlement. However, as these discussions have not led to such a settlement, in December 2023, the NAM shareholders asked an independent arbitration panel to rule on the interpretation and implementation of the agreements made in 2018/2019. The purpose of this arbitration is for a neutral third party to assess the situation and provide clarity. The arbitration is expected to take several years, and the judgment will be binding. The arbitration does not preclude a final and all-encompassing settlement, provided Shell, ExxonMobil and the Dutch government agree to pursue such a settlement.

We are exposed to treasury and trading risks, including liquidity risk, interest rate risk, foreign exchange risk and credit risk. We are affected by the global macroeconomic environment and the conditions of financial and commodity markets.

See "Financial framework".

Risk description

Our subsidiaries, joint arrangements and associates are subject to differing economic and financial market conditions around the world. Political or economic instability affects such markets.

We use debt instruments, such as bonds and commercial paper, to raise significant amounts of capital. Should access to debt markets become more challenging, the impact on our liquidity could have a material adverse effect on our operations. For example, some financial institutions have started to limit their exposure to fossil fuel projects. Group financing costs could also be affected by interest rate fluctuations or any credit rating deterioration.

We are exposed to changes in currency values and to exchange controls as a result of our substantial international operations. Our reporting currency is the US dollar, although, to a material extent, we also hold assets and are exposed to liabilities in other currencies. While we undertake some foreign exchange hedging, we do not do so for all our activities. Even where hedging is in place, it may not function as expected.

Commodity trading is an important component of our businesses. Processing, managing and monitoring many trading transactions across the world, some of which are complex and, depending on the terms of our commodity contracts, exposes us to operational and market risks, including commodity price risks. We use derivative instruments such as futures, options and contracts for difference to hedge market risks. Due to differences between derivative instruments available in the market to hedge market risks and the actual market risks we are exposed to, perfect hedging is not always achievable. Therefore, our hedging has from time to time not functioned as expected and may not function as expected in the future. We undertake commodity trading to optimise commercial margins or to profit from expected market price movements. Even with sound risk management procedures and controls in place, this activity involves forecasting and hence we are exposed to the risk of incurring significant losses if prices develop contrary to management expectations.

We are exposed to credit risk; our counterparties could fail or be unable to meet their payment and/or performance obligations under contractual arrangements.

Our pension plans invest in government bonds, so they could be affected by a sovereign debt downgrade or other default.

If any of the above risks materialise, they could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We use various financial instruments for managing exposure to foreign exchange and interest rate movements. Our treasury operations are highly centralised and seek to manage credit exposures associated with our substantial cash, foreign exchange and interest rate positions. Our portfolio of cash investments is diversified to avoid concentrating risk in any one instrument, country or counterparty. Other than in exceptional cases, the use of external derivative instruments is confined to specialist trading and central treasury organisations that have the appropriate skills, experience, supervision, control and reporting systems.

In effecting commodity trades and derivative contracts, we operate within procedures and policies designed to ensure that market risks are managed within authorised limits and trading can only be performed by staff with the appropriate skills and experience. We closely monitor developments in sanctions and export controls to ensure compliance with applicable laws and regulatory guidance. Senior Management regularly reviews mandated trading limits. A department that is independent from our traders monitors our market risk exposures daily, using value-at-risk techniques alongside other risk metrics as appropriate.

We have credit risk policies in place which seek to ensure that products are sold to customers with appropriate creditworthiness. These policies include detailed credit analysis and monitoring of customers against counterparty credit limits. Where appropriate, netting arrangements, credit insurance, prepayments and collateral are used to manage credit risk.

We maintain committed credit facilities. Management believes it has access to sufficient debt funding sources (capital markets) and to undrawn committed borrowing facilities to meet foreseeable requirements.

Our future performance depends on the successful development and deployment of new technologies that provide new products and solutions.

See "Other central activities".

Risk description

Technology and innovation are essential to our efforts to help meet the world's energy demands competitively. If we fail to effectively develop or deploy new technology, products and solutions, or fail to make full, effective use of our data in a timely and cost-effective manner, there could be a material adverse effect on the delivery of our strategy and our licence to operate. We operate in environments where advanced technologies are used. In developing new technologies, products and solutions, unknown or unforeseeable technological failures or environmental and health effects could harm our reputation and licence to operate or expose us to litigation or sanctions. The associated costs of new technology are sometimes underestimated. Sometimes the development of new technology is subject to delays. If we are unable to develop the right technology and products in a timely and cost-effective manner, or if we develop technologies, products and solutions that harm the environment or people's health, there could be a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

Shell's Projects and Technology organisation and the relevant business lines work together to determine the content, scope and budget for developing new technology that supports our activities. The new technology is developed using a robust technology maturation process, to systematically de-risk both technical and commercial risks, while ensuring portfolio alignment with Shell's strategic ambitions and deployment commitments. A significant proportion of Shell's technology contributes to our emissions reduction targets. We benefit from collaborations with leading academic research institutes and universities, and from providing access to mentors and subject matter expertise to start-ups. In our Shell GameChanger programme, we help start-ups and businesses on unproven early-stage ideas to mature early-stage technologies. In our Shell Ventures scheme, we invest in and partner with start-ups and small and medium-sized enterprises that are in the early stages of developing new technologies.

We have substantial pension commitments, the funding of which is subject to capital market risks and other factors.

See "Financial framework".

Risk description

Liabilities associated with defined benefit pension plans are significant, and the cash funding requirement of such plans can also involve significant liabilities. They both depend on various financial and demographic assumptions. Volatility in capital markets or government policies could affect investment performance, inflation and interest rates, causing significant changes to the funding level of future liabilities and/or short-term liquidity requirements. Changes in assumptions for mortality, retirement age or pensionable remuneration at retirement could also cause significant changes to the funding level of future liabilities. We operate a number of defined benefit pension plans and, in case of a shortfall, we could be required to make substantial cash contributions (depending on the applicable local regulations). This could result in a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

A pensions forum chaired by the Chief Financial Officer oversees Shell's input to pension strategy, policy and operation. A risk committee supports the forum in reviewing the results of assurance processes with respect to pension risks. Local trustees manage the funded defined benefit pension plans and set the strategic asset allocation for the plans, including the extent to which currency, interest rate and inflation risks are hedged, and the contributions paid are based on independent actuarial valuations that align with applicable local regulations. Pension fund liquidity is managed by holding appropriate liquid assets and maintaining credit facilities. Where appropriate, transactions to transfer pension liabilities to third parties are also considered.

We mainly self-insure our hazard risk exposures. Consequently, we could incur significant financial losses from different types of risks that are not insured with third-party insurers.

See "Corporate".

Risk description

Our Group insurance companies (wholly owned subsidiaries) provide insurance coverage to Shell subsidiaries and entities in which Shell has an interest. These subsidiaries and entities may also insure a portion of their risk exposures with third parties, but such external insurance would not provide any material coverage in the event of a large-scale safety or environmental incident. Accordingly, in the event of a material incident, we would have to meet our obligations without access to material proceeds from third-party insurers. We have in the past incurred adverse impacts from events, such as Hurricane Ida in 2021. We may, in the future, incur significant losses from different types of hazard risks that are not insured with third-party insurers, potentially resulting in a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We continually assess the safety performance of our operations and make risk mitigation recommendations, where relevant, to keep the risk of an accident as low as possible. Our insurance companies are adequately capitalised and they may transfer risks to third-party insurers where economical, effective and relevant.

Many of our major projects and operations are conducted in joint arrangements or with associates. This could reduce our degree of control and our ability to identify and manage risks.

See "Other regulatory and statutory information".

Risk description

When we are not the operator, we have less influence and control over the behaviour, performance and operating costs of joint arrangements or associates. Despite having less control, we could still be exposed to the risks associated with these operations, including reputational, litigation (where joint and several liability could apply) and government sanction risks. For example, our partners or members of a joint arrangement or an associate, (particularly local partners in developing countries), may be unable to meet their financial or other obligations to projects, threatening the viability of a given project. Where we are the operator of a joint arrangement, the other partner(s) could still be able to veto or block certain decisions, which could be to our overall detriment. Accordingly, where we have limited influence, we are exposed to operational risks that could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

For every major project where we share control, Shell appoints a Joint Venture Asset Manager, whose responsibility is to manage performance and create and protect value for Shell. The Joint Venture Asset Manager seeks to influence operators and other partners to adapt their practices in order to drive value appropriately and to mitigate identified risks. An annual review assesses how the joint venture's standards and processes align with those of Shell. The Joint Venture Asset Manager follows up on any gaps identified.

We are exposed to regulatory and conduct risk in our trading operations.

See "Living by our values".

Risk description

Commodity trading is an important component of our business. Our commodity trading entities are subject to many regulations, including requirements for standards of conduct. The risk of ineffective controls, poor oversight of trading activities, and the risk that traders could deliberately operate outside compliance limits and controls, either individually or as a group, has occurred. This has resulted in losses in the past and may result in further losses in the future. The rapidly changing regulatory environment creates a risk of insufficient, delayed or incorrect implementation of new or changes to existing regulatory requirements. Violations of such regulatory requirements could also expose us and/or our employees to regulatory fines and have an adverse effect on our licence to operate. These risks could harm our reputation and have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We maintain a trading compliance function managed by a Chief Compliance Officer, as regulated by the UK Financial Conduct Authority, the US Commodities Futures Trading Commission and the Securities Commission of The Bahamas, with adequate resources, including employees and budget; a comprehensive governance structure, including mitigating control measures; and established reporting lines. Employees in Shell's trading organisation receive clear guidance through the Shell Code of Conduct; the organisation's Trading Compliance Manual, supplemented with specific policies; a specific compliance website; mandatory training modules where completion is monitored; and additional training sessions. Shell leaders reinforce the importance of managing compliance and conduct risk in the trading organisation. Shell's Trading Compliance function has a dedicated monitoring and surveillance team, which has systems for trade surveillance and monitoring communication.

Violations of antitrust and competition laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.

See "Living by our values".

Risk description

Antitrust and competition laws apply to Shell and its joint arrangements and associates in the vast majority of countries where we do business. Shell and its joint arrangements and associates have been fined for violations of antitrust and competition laws in the past. This includes a number of fines by the European Commission Directorate-General for Competition (DG COMP). Because of DG COMP's fining guidelines, any future conviction of Shell or any of its joint arrangements or associates for violation of EU competition law could potentially result in significantly larger fines and have a material adverse effect on us. Violation of antitrust laws is a criminal offence in many countries, and individuals can be imprisoned or fined. In certain circumstances, directors may receive director disqualification orders. It is also now common for persons or corporations allegedly injured by antitrust violations to sue for damages. Any violation of these laws can harm our reputation and could have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We maintain an antitrust programme with adequate resources, a comprehensive governance structure and established reporting lines. Staff receive guidance on the requirements listed in Shell's Ethics and Compliance Manual, including via an antitrust-specific website; training modules, where completion is monitored; and messages from Shell leaders on the importance of managing antitrust risks. Staff must understand and comply with the Protect Shell Policy, which explains Shell's position on managing antitrust risks in engagements with parties external to Shell. In response to fast-moving external antitrust developments and trends, internal guidance is continually being monitored to ensure that it remains relevant.

Violations of anti-bribery, tax-evasion and anti-money laundering laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.

See "Living by our values" and "Legal proceedings and other contingencies".

Risk description

Anti-bribery, tax-evasion and anti-money laundering laws apply to Shell, its joint arrangements and associates in all countries where we do business. Shell and its joint arrangements and associates have in the past settled with the US Securities and Exchange Commission regarding violations of the US Foreign Corrupt Practices Act. Any violation of anti-bribery, tax-evasion or anti-money laundering laws, including potential violations associated with Shell Nigeria Exploration and Production Company Limited's investment in Nigerian oil block OPL 245 and the 2011 settlement of litigation pertaining to that block, could harm our reputation or have a material adverse effect on our earnings, cash flows and financial condition. Violations of such laws also could expose us and/or our employees to criminal sanctions, civil suits and other consequences, such as debarment and the revocation of licences.

How this risk is managed

We maintain an anti-bribery, anti-tax evasion and anti-money laundering (ABC/AML) programme with adequate resources, a comprehensive governance structure and established reporting lines. Staff receive guidance on the requirements listed in Shell's Ethics and Compliance Manual; an ABC/AML-specific website; training modules, where completion is monitored; and messages from Shell leaders on the importance of managing ABC/AML risks.

On July 21, 2022, the Dutch Public Prosecutor's office announced it had dismissed its investigation into bribery allegations related to OPL 245.

Violations of data protection laws carry fines and expose us and/or our employees to criminal sanctions and civil suits.

See "Living by our values".

Risk description

Data privacy and the management of personal data have become an issue of increasing importance and focus for companies and regulators in recent years. Following the implementation of the EU General Data Protection Regulation (GDPR) in May 2018, we have on a global basis seen updates to, or the introduction of, data privacy laws largely based on the GDPR. More than 100 countries globally now have data privacy laws. Shell companies are increasingly processing large volumes of personal data as we continue to acquire small companies with relatively large amounts of customer data. In doing so, we must consider how we manage personal data effectively and responsibly, including managing the associated cyber risks. In some countries that are key to Shell's business operations, such as China, relevant legislation continues to be amended or introduced. Shell must be able to adapt dynamically to such legislative changes and be capable of updating our internal programmes if necessary. Many countries require mandatory notification of data breaches often within short time frames (72 hours) in certain situations. In these circumstances we might be required to report to affected individuals and regulators in the relevant countries. Non-compliance with data protection laws could harm individuals and expose us to regulatory investigations. This could result in fines, which could be up to 4% of global annual turnover if under the GDPR; orders to stop processing certain data; harm to our reputation; and loss of the trust of existing and potential customers, stakeholders, governments, and employees. With regard to data breaches in the past, we notified a number of data privacy regulators of personal data breaches and have had fines issued against us and this could happen in the future. In addition to imposing fines, regulators may also issue orders to stop processing personal data, which could disrupt operations. We could also be subject to litigation from persons or entities allegedly affected by data protection violations.

Violation of data protection laws is a criminal offence in some countries, and individuals can be imprisoned or fined. Any violation of these laws could harm our reputation and have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

Over the last decade, the Shell Group has continued to invest in and develop a mature and robust privacy compliance programme based on our Binding Corporate Rules (BCRs). BCRs are perceived as a positive mechanism by data privacy regulators for enabling lawful data sharing and demonstrating accountability within large corporate groups. BCRs allow intra-group transfers of personal data without needing to enter into additional complex intra-group agreements. The overall objective of the programme is to enable the Shell Group of companies to collect, handle and manage personal data in a professional, ethical, and lawful manner.

Shell's Chief Privacy Officer also serves as the "Data Protection Officer" (DPO) under the EU's General Data Protection Regulation and other applicable data privacy laws, except where there is a requirement to have a locally based DPO, such as in China and the Philippines.

Our staff receive guidance on the requirements listed in Shell's Ethics and Compliance Manual, a website focusing on data privacy, training modules where completion is monitored and regular messages from Shell leaders on the importance of managing data privacy risks.

We monitor new and imminent data privacy legislation and seek to ensure we have a robust impact assessment process in place for the relevant businesses. We design our operations and processes based on the relevant data privacy requirements, and we build controls into our processes and practices which cover the handling of personal data.

We maintain a Group-wide incident management process designed to immediately identify and remediate data privacy breaches. The process also helps us to comply with country-level requirements for reporting breaches.

Some of our acquired companies are not yet in full compliance with our Binding Corporate Rules. Following assessments for each of those companies, specific actions are planned and put in place to achieve compliance, with regular updates made on their progress to management.

Violations of trade compliance laws and regulations, including sanctions, carry fines and expose us and our employees to criminal proceedings and civil suits.

See "Living by our values".

Risk description

We use "trade compliance" as an umbrella term for various national and international laws designed to regulate the movement of items across national boundaries and restrict or prohibit trade, financial flows and other dealings with certain parties, countries and territories. For example, the EU, the UK and the USA continue to impose comprehensive sanctions on countries and territories such as Syria, North Korea, and Crimea and other territories in Eastern Ukraine. The USA continues to have comprehensive sanctions against Iran and Cuba. The EU, the UK and some other nations such as Canada and Australia continue to maintain targeted sanctions against Iran. The EU and the USA introduced sectoral sanctions against Venezuela in 2017, which the USA expanded in 2018 and 2019 and relaxed temporarily in 2023.

Since 2014, the EU and the USA have imposed and increased restrictions and controls directed at defined oil and gas activities in Russia, as well as restricting access to EU and USA financing sources for certain Russian state-owned entities and military and dual-use controls. In February 2022, countries around the world began imposing additional sanctions and trade controls against Russia over its full-scale invasion of Ukraine, including regional trade bans, designations of entities (including Russian banks and state-owned entities) and individuals as Specially Designated Nationals and Blocked Parties, and restrictions on access by Russia to financial systems. In addition, the USA, the UK, Canada and Australia have introduced restrictions on the import of Russian-origin LNG. These restrictions are subject to different wind-down periods and limited exceptions. Furthermore, it is likely that sanctions against Russia will continue to escalate. Russia has in turn adopted a significant number of countermeasures, including making it an offence to take steps to comply with foreign sanctions.

Many other nations have adopted or expanded trade compliance programmes similar to those administered by the EU, the UK and the USA. Intergovernmental cooperation in this area has increased and there is growing pressure to enforce existing sanctions globally.

Abiding by all the laws and regulations on trade compliance is often complex and challenging because of factors such as: the expansion of sanctions; the frequent addition of prohibited parties as well as other measures; the number of markets in which we operate; the risk of differences in how jurisdictions apply sanctions; and the large number of transactions we process. Shell has voluntarily self-disclosed potential violations of sanctions in the past.

Any violation of sanctions could lead to loss of import or export privileges and significant penalties on or prosecution of Shell or its employees. This could harm our reputation and have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

We continue to develop and maintain a trade compliance programme with adequate resources, robust screening protocols, a comprehensive governance structure and established reporting lines. Staff receive guidance on the requirements listed in Shell's Ethics and Compliance Manual, a specific website for trade compliance, training modules where completion is monitored and messages from Shell leaders on the importance of managing trade compliance risks. The effectiveness of the trade compliance programme is assessed annually (or more frequently if necessary) and we are continually seeking ways to improve it.

The successful delivery of our strategy is dependent on our people and on a culture that aligns to our goals and reflects the changes we need to make as part of the energy transition.

See "Our People" and "Living by our values" and "Other regulatory and statutory information".

Risk description

Shell's culture is defined as the shared values, practices and beliefs of its employees. It is influenced by decisions on organisation structure and accountabilities, people and skills, how work is done using processes and systems and what mindset and behaviours exist. All these elements need to act in harmony to create our desired culture and ensure successful and sustained performance in line with our strategy.

As the energy system transforms and we reshape our portfolio, elements of our culture will need to change. For example, we will have to develop new skills, and adapt processes and systems, which, in some areas, will need to be different from those required for our traditional oil and gas businesses. We will have to continually leverage our learner mindset to anticipate and respond to the faster pace of change in the external market. However, we also will need to retain our shared values of "honesty, integrity and respect for people" to ensure trust and openness in how we do business, and to ensure staff feel valued and perform at their best.

If we fail to maintain a culture that aligns to our strategy, this could harm our reputation and have a material adverse effect on our earnings, cash flows and financial condition.

How this risk is managed

The Shell General Business Principles, Code of Conduct and Ethics and Compliance Manual help everyone at Shell act in line with our values.

Our Mindset and Behaviours framework, which emphasises psychological safety, is at the heart of our leadership programmes.

We have set clear goals for diversity, equity and inclusion and monitor these on a regular basis. We also continually assess our culture and staff engagement through tools such as the annual Shell People Survey.

People development is a priority for our organisation. We have increased learning offerings related to new skills that may be needed, including hydrogen production, carbon capture and storage, and energy management. Where appropriate, we recruit talent externally to add to the skills and experiences of our workforce.

In 2023, we introduced the Shell Performance Framework, replacing the Shell Control Framework with an aim to ensure that all elements of culture (structure and accountabilities, people and skills, mindset and behaviours and processes and systems) are leveraged to deliver on our strategy.

Investors should also consider the following, which could limit shareholder remedies.

The Company's Articles of Association determine the jurisdiction for shareholder disputes. This could limit shareholder remedies.

Risk description

Our Articles of Association generally require that all disputes between our shareholders in such capacity and the Company or our subsidiaries (or our Directors or former Directors), or between the Company and our Directors or former Directors, be exclusively resolved by arbitration in London, the United Kingdom. Our Articles of Association also provide that, if this provision were to be determined invalid or unenforceable for any reason, the dispute could only be brought before the courts of England and Wales. Accordingly, the ability of shareholders to obtain monetary or other relief, including in respect of securities law claims, could be determined in accordance with these provisions.

28th meeting of the Conference of the Parties to the United Nations Climate Change Conferences
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