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Post Office Limited — Strictly Confidential
POLB 13(15"")
POLB 13/125 - 13/142
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held on 27 November 2013
at 148 Old Street, London EC1V 9HQ
Present:
Alice Perkins Chairman (for items 13/125-13/139)
Neil McCausland Non-Executive Director (Chair for items 13/140-13/142)
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Alasdair Marnoch Non-Executive Director
Paula Vennells Chief Executive
Apologies:
Susannah Storey Non-Executive Director
Chris Day Chief Financial Office
In Attendance:
Alwen Lyons Company Secretary
Chris Aujard General Counsel (item 13/126)
Belinda Crowe Programme Director for Project Sparrow (item 13/126)
Lesley Sewell Chief Information Officer (item 13/127)
Colin Stuart Head of Commercial Finance (item 13/127)
Martin George Commercial Director (item 13/129)
Sue Barton Strategy Director (items 13/131-13/133)
Nick Kennett Director of Financial Services (items 13/130 and 13/140)
Kevin Gilliland Network & Sales Director (items 13/130- 13/132)
Sarah Hall Head of Financial Control and Compliance (item 13/135)
POLB 13/125 INTRODUCTION
(a) A quorum being present, the Chairman opened the meeting and
welcomed Chris Aujard General Counsel, and Belinda Crowe,
Programme Director for Project Sparrow.
POLB 13/126 UPDATE ON HORIZON
(a) The Board noted the progress report on Project Sparrow. The
Board discussed the number of cases submitted to the Working
Group for consideration, which were about twice those forecast,
and the effect this would have on timescales, resource and
possible compensation payments. Chris Aujard explained the
ACTION: different levels of risk to the Business. The Board asked for an
Chris Aujard analysis of the financial implications of:
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e the different risks crystallising; and
* additional resource costs to the Business of the increased
number of cases.
ACTION: (b) The Board asked for a regular update showing cases received,
Chris Aujard where they are in the process and the overall costs attached to the
claims where possible. This would be included in the CEO report.
(c) The Board discussed the past prosecutions and whether they
would be included in the mediation process. The CEO explained
that Sir Anthony Hooper, Chairman of the Working Group, had
originally thought this would be inappropriate, but was now inclined
to look at each case individually. The Board noted this and it was
pointed out that cases which had been through the Group would
almost certainly have to be handled differently from those which
had not.
(d) The Board discussed the approach to future prosecutions. Alasdair
Marnoch, Chairman of the ARC, reported that a paper on future
prosecutions had been discussed at the ARC but that no decision
had been taken. Chris Aujard explained that the Business had no
special prosecuting rights but brought cases in the way that any
individual could do. The CEO explained that prosecutions were not
brought lightly and the Business was reviewing its approach
alongside other deterrents, such as suspending, or giving notice, to
a sub-postmaster.
(e) The Board was reminded of the detail of the four cases in the
ACTION: significant litigations noting paper and the need to continue to
Chris Aujard/ prosecute when appropriate. The Board agreed that it would be
Angela V-D- Bogerd appropriate to consider the future approach to prosecutions at a
future Board alongside the improved support processes for sub-
postmasters which should see a reduction in cases.
ACTON: (f) The Board asked for a note from the General Counsel explaining
Chris Aujard who was named in past prosecutions and the liability for the
Business and individual Board members. The note should also
include information on both PI and D&O insurance cover.
(9g) The Board noted the progress report on Horizon.
(h) Chris Aujard and Belinda Crowe left the meeting
POLB 13/127 OPERATING MODEL AND STRATEGIC COST REDUCTION
(a) The Board welcomed Lesley Sewell, Chief Information Officer, and
Colin Stuart, Head of Commercial Finance, to the meeting.
(b) Lesley Sewell explained the work being undertaken including the
market testing she had undertaken with ATOS and NS&l. She
stressed the importance of finding the right Transformation Partner
and the work underway for this selection.
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ACTION: (c) The Board supported the approach and asked Lesley Sewell to
Lesley Sewell return to the February Board with a substantive plan with clear
milestones for consideration.
(d) The Board noted the approach outlined in the paper.
{e) Lesley Sewell and Colin Stuart left the meeting
POLB 13/128 ARC & RISK MANAGEMENT UPDATE
(a) Alasdair Marnoch, Chairman of the Audit, Risk & Compliance
Committee (ARC) reported that the Committee had recommended
additional resource for the Internal Audit team, and their use of
ACTION: external advisors for auditing the IT transformation. The Board ask
Company Secretary for the ARC paper on Risks and Internal Audit -IT Audit report to
be circulated.
(b) Alasdair Marnoch explained that Ernst & Young, the External
Auditors had been at the meeting and that after their input the ARC
had signed off the interim results.
(c) The Board received a Risk Management update, which had been
considered by the ARC. The CEO explained the approach the
Business was taking to its top 6 + 3 risks which were highlighted in
the Board paper, and added an additional digital risk making 6 + 4
in total. The Board supported the approach but encouraged the
Business to push forward with pace to get actions in place to
mitigate these risks.
(d) The Board questioned the risk highlighted as ‘tisk of regulatory or
reputational damage from FS mis-selling’ and asked the Business
ACTION: Chris to consider renaming it as the ‘tisk of delivering poor customer
Aujard/ Nick Kennett outcomes through FS mis-selling’. The Board asked for an update
on what actions were currently in place to mitigate this risk. The
CEO explained that The Business was currently undergoing a FCA
visit looking at Mortgage selling.
ACTION:
Virginia Holmes (e) The Board FS Sub Committee would consider this at its inaugural
meeting in January.
ACTION:
Alasdair Marnoch/ (f) The Board asked the ARC to review the risks at their meeting in
Company Secretary February and that risks be on the agenda for the March Board
Meeting.
(g) The Board noted the update on Risk Management and the actions
being taken as set out in the paper.
POLB 13/129 FIRST IMPRESSIONS FROM THE COMMERCIAL DIRECTOR
(a) The Board welcomed Martin George, Commercial Director, to the
meeting.
(b) Martin George gave a presentation of his first impressions on
joining the Post Office. The Board thanked him and supported his
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approach of focusing on customer and brand and strengthening the
marketing team.
(c) Martin George left the meeting
POLB 13/130 _—_—_—_—_—_—_—_—_—_—_—_—_—_—_—_—_—_—_—_—_—_—_—"_
(@)
(b)
ACTION: (©) I
Nick Kennett i H
(d) I
(I I
9) I
ACTION: / /
Nick Kennett ! '
(h)
POLB 13/131 GOVERNMENT FUNDING UPDATE
(a) The Board welcomed Sue Barton, Strategy Director to the meeting
(b) The Board thanked Kevin Gilliland and Sue Barton for their part in
securing the funding agreement with the Government and
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congratulated the Business.
(c) The Chairman explained that the Business was now entering a
different phase in its transformation and that the Board would need
to decide how it should contribute. Sue Barton explained that she
ACTION: was already in the process of producing a 5 and 7 year plan setting
Sue Barton out the transformation, highlighting the milestones and
commitments. The 2014/15 narrative and operating plan and
dashboard would then be generated from this plan.
(d) The Board discussed the merits of writing to the Secretary of State
(SoS) and decided that it would be more appropriate to meet him in
2014 when the Business and BIS understand the response to the
ACTION: funding announcement, and can discuss the progress made or if
Chairman necessary the likelihood of needing to use the ‘cliff’.
(e) The Chairman asked the Company Secretary to collate all the
Board papers and minutes along with any correspondence with the
ACTION: SoS referring to the Funding Agreement to ensure they gave a fair
Company Secretary reflection of the Board's position.
{f) The Chairman asked the Company Secretary to propose future
ACTION: Board agendas ensuring that they cover the Business
Company Secretary transformation and risks
POLB 13/132 CROWN AND NETWORK TRANSFORMATION PROGRAMMES
(a) Kevin Gilliland gave an oral update on the Crown and Network
Transformation programmes.
(b) Kevin Gilliland referred to the paper on ‘locals’ income which had
been circulated to the Board and explained that the mix of products
sold in the first locals had been different to that expected from the
modelling, with less of an emphasis on premium mails. This had
affected the income being generated, and although other products
had made up the majority of the shortfall, it was a position which
the Business believed it could rectify through modifying the training
provided. The new training would be in place from January.
(c) Kevin Gilliland pointed out that although the mix of income was
different, the cost savings to the Business from the introduction of
‘locals’ remained on track.
(d) Kevin Gilliland left the meeting
POLB 13/133
(a)
-. Irrelevant
Sue Barton
(b) I
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ACTION:
All
POLB 13/134
ACTION:
Kevin Gilliland
POLB 13/135
ACTION:
Martin George/
Nick Kennett/
Kevin Gilliland
ACTON:
CFO
POLB 13/136
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. Irrelevant
CHIEF EXECUTIVE’S REPORT
(a) The Board noted the Chief Executive’s report and discussed the
following specific items:
‘Irrelevant
(c) The CEO reported that the CFO believed the Business was close
to a deal with Fujitsu to offset the costs of IP ownership against
future spend in the contract. She also explained that she now has
weekly meetings with Fujitsu regarding the telephony problems
which were reducing.
FINANCIAL PERFORMANCE UPDATE
(a) Sarah Hall, Head of Financial Control and Compliance, joined the
meeting.
(b) The Board received a financial performance update for October
2013 and asked the Business to continue to focus on revenue
generation for the rest of the year. The Board asked for a detailed
paper on revenue generation, including performance against plan,
and new initiatives, for discussion at the next Board,
(c) The Board requested an addition to the CFO report showing the
revenue position in the current month compared to the previous
month and the effect of the changes on the full year forecast.
(d) Sarah Hall left the meeting.
MINUTES OF PREVIOUS MEETINGS AND MATTERS ARISING
(a) The minutes of the Board meetings held on 31 October and 26
November 2013 were approved for signature by the Chairman.
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POLB 13/137 COMMITTEE MEETING MINUTES FOR NOTING
(a) The Board noted the minutes of the Audit Risk & Compliance
Committee meeting held on 12 September 2013; the Remuneration
Committee meeting held on 4 July 2013; and the Pensions
Committee meetings held on 10 September and 7 October 2013.
POLB 13/138 STATUS REPORT
(a) The Status Report, showing matters outstanding from previous
Board meetings, was noted.
POLB 13/139 ITEMS FOR NOTING
(a) The Board noted the processes for managing external resources.
The Business was asked to include the number of consultants
ACTION: CFO being used alongside the Head Count data in the financial report.
(b) The Board noted the Significant Litigation report.
(c) The Board noted the Health & Safety report.
(d) The Board noted the Report on Sealings and resolved that the
affixing of the Common Seal of the Company to the documents
set out against items numbered 1086 to 1096 inclusive in the
seal register was hereby confirmed.
POLB 13/140
(b)
« Irrelevant
POLB 13/141 NEXT MEETING
(a) It was noted that the next Board meeting would be held on 21
January 2014, to be preceded by a Board dinner on 20 January
2014.
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POLB 13/142 CLOSE
There being no further business, the meeting was then closed.
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POST OFFICE LIMITED 27 NOVEMBER 2013 BOARD ACTION LOG
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REFERENCE
ACTION
BY WHOM
Network Transformation and Crown Offices
November 2013 Consider contingency plans for Supply Chain if long term strikes undertaken. Kevin Gilliland
POLB 13/134(b)
Finance
November 2013 Prepare plan for consideration on Operating Model and Strategic Cost Reduction. Lesley Sewell
POLB 13/127(c)
November 2013 Detailed paper on revenue generation, including performance against plan, and new initiatives. Martin George/
POLB 13/135(b) Nick Kennett/
Kevin Gilliland
November 2013 Include in CFO report revenue position in the current month compared to the previous month I Chris Day
POLB 13/135(c) and the effect of the changes on the full year forecast.
Strategy
November 2013 Provide note to clarify detail of ‘voice of the customer’ measure. Nick Kennett
POLB 13/130(c)
November 2013 Circulate external benchmarking of proposed FS incentive scheme, together with a table I Nick Kennett
POLB 13/130(g) showing the percentage of salary the incentive would represent for each salary band.
November 2013 Produce a 5 and 7 year plan setting out the transformation, highlighting the milestones and I Sue Barton
POLB 13/131(c)
commitments.
November 2013 Meet with the Secretary of State (SoS) in 2014 to discuss progress made or if necessary the I Alice Perkins
POLB 13/131 (d) likelihood of needing to use the ‘cliff.
November 2013 Collate all Board papers and minutes along with any correspondence with the SoS referring to I Alwen Lyons
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POLB 13/131(e)
the Funding Agreement to ensure they gave a fair reflection of the Board’s position.
November 2013
POLB 13/131(f)
Propose future Board agendas ensuring that they cover the Business Transformation and Risks.
Alwen Lyons
Information Security
November 2013 Provide analysis of the financial implications of Chris Aujard
POLB 13/126(a) ¢ The different risks of crystallising
¢ Additional resource costs to the Business of the increased number of cases.
November 2013 Provide regular update, within the CEO's report, showing cases received, where they are in the I Chris Aujard
POLB 13/126(b) process and overall costs attached to the claims where possible.
November 2013 Consider future approach to prosecutions alongside the improved support processes for sub- I Chris Aujard/
POLB 13/126(e)
postmasters.
Angela V-D-Bogerd
November 2013 Provide explanatory note of who was named in past prosecutions and the liability for the I Chris Aujard
POLB 13/126 (f) Business and individual Board members, and include information on both Professional Indemnity
and Directors & Officers insurance cover.
Risk
November 2013 Circulate ARC paper on Risks and Internal Audit — IT Audit Report. Alwen Lyons
POLB 13/128(a)
November 2013 Chris Aujard/
POLB 13/128(d) Nick Kennett
November 2013 ARC to review the top 6+4 risks at its February meeting. Alasdair Marnoch/
POLB 13/128(f) Include in Board agenda for March meeting. Alwen Lyons
Mutualisation
November 2013 Public Purpose Statement to be submitted to the January Board. Sue Barton
POLB 13/133(a)
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November 2013
POLB 13/133(c)
Input views on ‘Why does the Post Office do what we do’ — Sue Barton to facilitate by circulating
a video link and question.
Sue Barton