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POLB 16(7%)
POLB 16/43 — 16/52
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held at 9.30am on 25 July 2016
at 20 Finsbury Street, London EC2Y 9AQ.
Present:
Tim Parker Chairman
Richard Callard Non-Executive Director
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Ken McCall Senior Independent Director
Carla Stent Non-Executive Director
Paula Vennells Chief Executive
Alisdair Cameron Chief Financial Officer
In Attendance:
Alwen Lyons Company Secretary
Rob Houghton Chief Information Officer (Minute POLB 16/47) I
Nick Kennett Director of Financial Services (Minute POLB 16/48) I
Martin Kearsley Banking Director (Minute POLB 16/48)
Apologies: None I
POLB 16/43 INTRODUCTION
(a) The Chairman noted that a quorum was present and opened the
meeting.
(b) Each Director confirmed that they had no conflicts of interest in
relation to the business to be considered at the meeting.
POLB 16/44 MINUTES OF THE PREVIOUS BOARD AND COMMITTEE MEETINGS
INCLUDING STATUS REPORT
Minutes
(a) The minutes of the meeting of the Board meeting held on 24" May
2016 and the Extraordinary meetings held on 29" June and 11" I
July 2016 were approved as accurate records and the Chairman
was authorised to sign them.
(b) The minutes of the Audit, Risk and Compliance Committee meeting I
held on 17th March 2016 were noted.
(c)
I
The minutes of the Post Office Advisory Council meeting held on
the 6'" July 2016 were noted.
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(d) The notes of the Board Away Day on 29" and 30"" June 2016 were
noted.
Status Report
(e) The Board noted the Status Report dated 18'" July 2016.
POLB 16/45 CEO REPORT
CEO Report
(a) The CEO introduced the CEO Report, focusing on the following key
points:
Irrelevant
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(h) Transformation Report. The Board noted the red status of the Back
Office IT transition. The CFO explained the timing issues and the
context of wider Back Office change.
(i) The Board noted the CEO report and the Transformation Report.
POLB 16/46 FINANCIAL REPORT
(a) The CFO introduced the Financial Performance Report for Period 3, I
June 2016, and reiterated the emerging risks which the CEO had I
highlighted. An example _being the predicted interest rate cut which
could cost the Business} in POca interest.
(b) The Board recognised the opportunities in the re-mortgage
ACTION: CFO market and asked the CFO to ensure that pressure was kept on
the FS targets.
(°) The CFO explained the movement in cash flow driven by the
iprefunded cash in the network as a contingency
it trols were now in
future borrowing
place which had led to a reduction of ireteva
requirements. ™
(d)
The Board discussed the scorecard, and the measure of internal
senior manager appointments. The CEO supported the intention of
the measure but stressed that some specialist areas, where the
Business needed to strengthen its capability, would continue to
require external recruitment. The Board asked if the external
recruitment would put pressure on the staff costs budget but were
reassured that this would not be the case as in most cases the new
recruits would be replacing interim appointments. The Board
recognised that the measure could be helpful for management but
©) did not consider it a primary measure on the scorecard.
The Board noted the financial performance report.
POLB 16/47 TECHNOLOGY STRATEGY
(a) The Chairman welcomed Rob Houghton, CIO, to the meeting.
(b) The CIO introduced the Technology Strategy for January 2017,
highlighting the three areas on which he was focusing: improving IT
functionality; reducing cost; and enabling the wider Business
strategy. The CIO explained the immediate need to improve the
performance of IT by greater visibility of live performance an
understanding of the risks and an improvement in controls.
(°) The Board discussed the operating model and asked the CIO his
opinion on the outsourced model and the service provided by the
suppliers. The ClO believed that some control had been lost by
outsourcing and would like to bring back in house control of IT I
security, architecture and delivery. The CFO explained that the
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ATOS integrator contract was due for renewal next year, which
would give an opportunity to change. The Board asked for more I
clarity on the commoditised areas which remain outsourced, and i
the areas which require more control and should be insourced.
(d) The CIO recognised that thi ost base was too high and
that he would be looking for o ies to reduce the cost but
explained that there was little leverage in the existing contracts and
any changes would be difficult to negotiate. However there were
areas where specifications could be changed to reduce the cost
and the ongoing cost base. The Board would welcome a business
case which invested money upfront to reduce future cash flows. I
(e) The Board recognised the size and complexity of the Fujitsu (FJ)
contract and believed that this should be an area of focus. The
CFO agreed and explained that he and the CIO were escalating
conversations within FJ to look at the speed of change and the run
costs. The CFO reminded the Board of the procurement risk
discussed during the Trinity process and the lack of flexibility
around the FJ contract which needed to be carefully managed. I
(f) The Board discussed the digital developments and the need to
focus on business propositions which deliver value. There was
agreement that the core digital proposition and customer journeys
needed to improve before the Business should consider My Post I
Office and cross sell activity. It was acknowledged that the
Business had delivered some good FS growth through the online
channel.
(9) The Board asked the CIO to update the principles highlighted
in the paper to ensure they were business focussed; based on
reducing costs; were clear on security; and improving
ACTION CIO customer journeys.
(h) The CIO agreed to present a paper on IT security and IT risk
appetite to the ARC. I
ACTION: CIO I
@ The CIO explained his plan to work to closer 6 month time
horizons. The Board asked the CIO to come to the Board every
6 months to ensure they are updated on the progress I
ACTION: CoSec/C1O I
The CIO recognised that his team was currently under strength but I
gave assurance that good progress was being made to introduce
new people and strengthen the capability.
@)
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(k) The Board supported the direction set out in the Technology
Strategy document, requesting an update on IT security (at the
ARC), and a further strategy update in January 2017. I
(Il) The CIO left the meeting.
POLB 16/48
POLB 16/49
(a) Nick Kennett presented the Project Peregrine negotiation mandate
as set out in the paper circulated to the Board. He explained the
areas which; would want from the. jati:
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(b) I
: Irrelevant.
(d)
(e) The Board supported the approach. The Chairman and CEO offere
to meet with their Bol counterparts to initiate the negotiation.
POLB 16/50 UPDATE FROM BOARD COMMITTEES (VERBAL)
(a) Audit Risk and Compliance Commitee
The Chairman of the ARC updated the meeting on the areas
which the ARC had discussed including the Horizon outage and
the fraud which had delayed the signing of the Annual Report I
and Accounts (ARA). It was hoped that the ARA could be signed }
at the ARC meeting following the Board, after feedback from EY I
on their additional work. Lessons learned from both issues would
be presented at the September ARC.
(b) Remuneration Committee
The Chairman of the RemCo updated the meeting and explained
that the 2016/17 STiP conditions had been agreed by the
Minister but were still awaiting Treasury sign off. The
recalibration of the LTiP for 2016/17 and agreement for 2018/19
still needed to be done.
The Chairman of the Remco stressed the need for rigour in the
accuracy of the 2016/17 final EBITDAS outturn as this would
drive the LTiP and STiP bonuses paid and asked whether the
external auditors be asked to sign off the fact that the bonuses
had been earned.
It was agreed that the CFO would prepare a RemCo paper on
ACTION: CFO this issue.
POLB 16/51 ANY OTHER BUSINESS
f@) I
Irrelevant —
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ACTION: CEO I
rrelevant
(b) Sealings I
The Directors resolved that the affixing of the Common Seal of the I
Company to the documents numbered 1422 to 1431 inclusive in the
seal register was confirmed.
(c) Confirmation of 2017 Board and Committee dates
The Board confirmed the Board and Committee dates for 2017,
with the exception of May 30" which would be changed. Board
dinners would be held on the evening preceding the Board in
ACTION: CoSec January, March, May, July, September and November.
POLB 16/52 CLOSE
(a) There being no further business, the Chairman declared the meeting
close.
Chairman . Date Teteees
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