A business segment is a part of a company that can be identified by the products it provides or by the services or geographical locations it operates in. In other words, it a single part of a business that can be distinctly separated from the company as a whole based on its customers, products, or market places. Management often divide companies into business segments to help gauge what areas of the company are performing well and what areas need improvement. During times of slow economic growth, managements also separate company performance into segments to make decisions about what discontinuing operations in certain markets or cutting departments altogether.
Headquarters and central functions render services to the Businesses (Upstream Americas, Upstream International, Downstream, Projects & Technology) as well as other functions. They also provide support for the shareholder-related activities of Royal Dutch Shell. The services they render cover the areas of finance, human resources, legal advice, information technology, real estate, communications, health, security and government relations. They also assist the Chief Executive Officer and the Executive Committee. The central functions have been increasingly supported by business service centres located around the world. These centres process transactions, manage data and produce statutory reports, among other services. The majority of the headquarters and central-function costs are recovered from the Business segments. Those costs that are not recovered are retained in Corporate.
The BP Deepwater Horizon incident was a harsh reminder of the vital importance of effective risk management in the oil and gas industry. At Shell, we aim to drive down the total cost of risk by using robust methodologies and processes to assess, mitigate and manage risk. They include the valuation of risks so that this can be properly taken into account in decision making. It also requires the causes of losses experienced to be analysed and understood so that they can be reduced in the future. To support this, Shell’s insurable risks are mainly aggregated and retained within insurance subsidiaries, which means that Shell self-insures most of its risk exposures. The insurance subsidiaries form a key part of the Shell’s approach to risk management. They provide insurance coverage to Shell entities, up to $1.15 billion per event, generally limited to Shell’s percentage interest in the relevant entity. The type and extent of the coverage is equal to that which is otherwise commercially available in the third-party insurance market.