03900
1030
1045
1145
1245
1315
1345
1415
1445
1455
1500
1515
1525
Post Office Limited — Strictly Confidential
POST OFFICE LTD BOARD MEETING (Company Number 2154540)
Meeting to be held at 9am on 26 February 2014
in the Boardroom at 148 Old Street, London EC1V 9HQ
1 Project Sparrow and Prosecuting Authority
BREAK
2 Business Transformation — Operating Model and
Strategic Cost Reduction Update
3 Mutualisation — Public Purpose Statement
LUNCH
4 Update on Network Transformation and Crowns/
Industrial Relations Update
5 Chief Executive’s Report
6 Financial Performance Update
7 Adoption/confirmation of Policies
8 Minutes of Previous Meeting and matters arising
Committee Minutes for noting
Status report update
9 Items for Noting
e« Data Centre Procurement
Cyber/Information Security Update
Significant Litigation Report
Health and Safety Report
Sealings
ecee
10 Any other business
Date of next meeting: 26 March 2014
CLOSE
POL00026629
POL00026629
Chris Aujard/Angela Van-Den-
Bogerd/Belinda Crowe
Chris Day/Lesley Sewell
Mark Davies
Kevin Gilliland/Neil Hayward
Paula Vennells
Chris Day
Alwen Lyons
Alice Perkins
Alwen Lyons
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
POST OFFICE LTD BOARD
Review of the Current Prosecution Policy
1. Purpose
1.1. This paper has been prepared following the recent meeting of the ARC in
order:
¢ to provide the Board with a summary of the discussions that took place at
that meeting; and
e to seek the Board’s approval to the implementation of a new Prosecution
Policy, “Option B” in the paper that was considered and endorsed by the
ARC at that meeting (a copy of which is attached to this paper as
Appendix A), and that the policy should be reviewed at least once a
year.
1.2 This paper also reflects comments made by the ExCo on this matter at its
meeting on 13 February at which it too endorsed Option B.
2. Background
2.1. The ARC first formally considered changes to the Post Office’s current
prosecution policy at its November meeting. Following an extensive
discussion on that matter it remitted the paper for further consideration and
asked for the broad options set out therein to be refined and the implications
explored.
2.2 On 11 February the ARC considered the attached paper and broadly
endorsed Option B - Pursuing a prosecutions policy more focussed on
more egregious misconduct - e.g. higher value cases/cases involving
vulnerable members of society/cases of involving particularly wilful
wrongdoing, and engaging with the police in relation to other matters - as set
in that paper but on the clear understanding that the policy would be regularly
reviewed (at least once a year) with a view to considering whether, in light of
the experience that had then been gained, any further changes would be
appropriate.
2.3. The ARC also commissioned a paper from the Communications Director
setting out the potential narrative that could be used to communicate the
change in policy on a reactive basis. A copy of his paper is set out in
Appendix B.
3. Activities/Current Situation
3.4 The ARC’s discussion was wide ranging and challenged the paper in a
number of areas. Although it was felt that Option C represented a simpler and
“cleaner” end state than Option B, on balance, it was agreed pro tem to
endorse Option B, with the discussion turning on a few key points, including:
Current Prosecution Policy Chris Aujard Page 1 of 4
February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
e The need to adopt a new prosecution policy which allows the optionality to
take account of the other planned developments in the business. In this
regard it was noted that through the Branch Support Programme, the Post
Office is changing its approach to contract breach, suspension and the
training and support it provides to SPMRs but that these changes had not
yet had time to work their way through the system. The full effect of the
Branch Support Programme was unclear, and ideally it would be helpful to
have a clearer understanding of how these changes interact with the
factors set out in the paper before making any decision which limits
optionality and allows, should it prove necessary, the potential to reverse
the decision. This issue was also discussed at the ExCo meeting held
immediately after the ARC meeting, and it was felt there that these
changes introduced by the Branch Support Programme would need very
careful monitoring. This programme is the subject of a separate paper
included with this Item.
e The fact that there are a number of factors which distinguish Post Office
from other financial institutions, all of which are content not to pursue their
own prosecutions. These include scale, our unique relationship with sub-
postmasters, the amount of cash that is handled by our branches (and in
many cases by individuals who are not employees), our large number of
vulnerable customers who are more easily defrauded, and the fact that
public money is at stake.
e The interaction between any change in policy and the current heightened
stakeholder interest in the mediation scheme (which is the subject of a
separate paper within this Item) and related matters. It was noted that any
change of policy may be closely scrutinised, with the possibility of an
erroneous inference being drawn that the Post Office had been wrong to
pursue prosecutions in the past (leading counsel had in any event
reviewed the paper and confirmed that such an inference would, as a
matter of law, be entirely incorrect). This was compounded by the fact
that the Post Office will shortly be launching the procurement process for
the replacement to the Horizon system — something which was due to
happen now in any case; again this factor pointed in the direction of a
more gradualist approach.
e The need to maintain an effective deterrent against wrong doing, given the
public trust placed in the Post Office. In this context it was noted the CPS
were currently very resourced constrained, and were unlikely to have the
appetite to pursue other than the most serious cases of theft or fraud
committed by SPMRs.
3.2 At both the ExCo meeting and the ARC meeting a discussion was had about
the civil recovery process and it was noted that the option of using the civil
courts to recover debts remained open to the Post Office in cases where,
under the current policy a prosecution would have be brought, but where
under the revised policy, it would not. It was noted that, in terms of recovery
rates, past performance was not necessarily a good guide to predict future
performance, given the often radically different circumstances in which these
cases were brought. The volume of other changes taking place in the
Current Prosecution Policy Chris Aujard Page 2 of 4
February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
network also meant that this type of extrapolation would, in any event, be
difficult. ExCo in particular felt that careful regular monitoring of recoveries
going forward was required.
3.3. The ARC requested information about the composition of the applicants in the
mediation scheme and the following statistics were (in advance of the
meeting) provided:
e Of the 147 applicants to the scheme, 49 applicants were subject to
criminal prosecution.
e Of those, no prosecutions happened within the last 2 years, but one
applicant was subject to criminal prosecution in 2011, 6 applicants were
subject to criminal prosecution in 2010 and 4 applicants were subject to
criminal prosecution in 2009.
¢ We believe (but are trying to verify) that 31 applicants were subject to
some form of recovery processes. This includes recovery via Post Office
Ltd’s “normal” debt recovery processes (e.g. by issuing a letter of
demand) and recovery through the use of full civil court proceedings.
« We are currently aware that, of those 31 cases, civil court proceedings
were issued against at least 16 applicants, of which 8 were dealt with in
the last 2 years.
¢ — External solicitors also recovered debts from at least 5 applicants (without
initiating court proceedings), of which 2 were dealt with in the last 2 years.
3.4 ExCo also discussed the impact that any change in prosecution policy would
have on the so called “stacked cases”. (These cases are ones where an
investigation into a loss or alleged loss, and the SPMR is waiting hear of the
outcome of those investigations). In accordance with the existing policy we
are already in the process of notifying around 10 SPMRs that no further action
will be taken in relation to their case. Of the remaining 30 cases, it was noted
that should the Board adopt Option B then each case will need to be
individually re-assessed against the policy, with the likely result that a number
of the stacked cases will not be taken forward; with the individual being
notified of this fact as soon as possible. This may generate further media
interest in the Post Office’s approach to prosecution either via the individuals
themselves or JFSA.
3.5 Finally the ARC discussed whether any policy change should not at this stage
be made available on Post Office’s website. The feeling was that the policy
should not be published, but that Post Office should prepare appropriate
reactive lines in case it was necessary to discuss the changes — for example if
directly questioned at the forthcoming meeting with James Arbuthnot and
other interested MPs. To support this, the Communications Director has
prepared the attached draft communications briefing paper (Appendix B)
which will be revised following feedback from the Board.
Current Prosecution Policy Chris Aujard Page 3 of 4
February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
4 Recommendations
The Board is asked to:
4.1 Note the summary of the discussions that took place at that the ARC and
ExCo meetings;
4.2 Approve the implementation of a new Prosecution Policy, “Option B”, as
detailed in Appendix A ; and
4.3 Agree that the policy should be reviewed at least once a year.
Chris Aujard
18 February 2014
Current Prosecution Policy Chris Aujard Page 4 of 4
February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
Appendix A
POST OFFICE AUDIT, RISK AND COMPLIANCE COMMITTEE
Prosecutions Policy
1. Purpose
The purpose of this paper is to:
. seek the ARC’s views on proposed changes to the prosecutions policy and the
way in which POL will prosecute criminal cases in the future; and
° update the ARC with respect to certain aspects of the Branch Support
Programme.
2. Background
2.1 At its meeting on 19 November 2013, the Committee considered whether or not
there was merit in formally amending the prosecutions policy and if so what the
substance of those amendments should be. It was agreed at that meeting that
before any firm decision could be taken in this regard:
(a) further work needed to be done to understand the financial and other
consequences of amending the policy, particularly if it were the case that the
amendments resulted in fewer cases being referred to the criminal courts;
(b) the Committee needed a clearer understanding of the work that was being done
as part of the Branch Support Programme and the impact this would have on
detecting (and preventing) losses at an earlier stage; and
(c) it would be helpful to understand how banks and other large companies dealt
with criminal loss caused by employees.
2.2 In this connection it is probably useful to note that in a report for POL Brian Altman
QC observed that, “Post Office Ltd’s prosecution role is perhaps anachronistic...”,
and that we are “the only commercial organisation (albeit Government owned) I
have been able to identify (apart from RMG that retains a prosecution function) that
has a commercially based, sophisticated private prosecution role, supported by
experienced and dedicated teams of investigators and lawyers. To that extent it is
exceptional if not unique.”
3. Acti
ies/Current Situation
3.1 The way in which prosecutions have historically been brought was set out in some
detail in the paper on prosecutions considered by the Committee in November. In
that paper it was noted that typically we prosecute subpostmasters for False
Accounting combined with Theft, and/or Fraud. The prosecutions are brought in
accordance with the Code for Crown Prosecutors and the choice of charge is
largely dependent on whether we have obtained an admission of guilt, or other
compelling evidence that the Defendant has taken money directly from us, or have
only secured evidence that the Defendant covered up losses by falsely recording
the branch's financial position (e.g. to avoid paying losses back and/or to keep their
branch) on the Horizon system. As will be recalled, typically Defendants plead guilty
to a charge of False Accounting, with the charge of Theft then being dropped.
Prosecution Policy Chris Aujard
February 2014 Page 1 of 7
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
3.2 In terms of the volume and cost of cases, over the past few years we have averaged
about 250 investigations into possible criminal conduct a year, of which about 50
resulted in criminal prosecutions. The financial losses (to POL) in those cases where
a prosecution was brought ranged between £1,738 and £175,260 per incident in
2012/2013, and £2,347 and £192,990 in 2013/2014. The average cost of bringing a
criminal prosecution the in 2012-2013 financial period was about £7,500 (£3,600 for
the costs of our internal security investigators, plus £3,900 for our external
solicitors).
3.3 The amount recovered from Defendants in respect of stolen, misappropriated or
unaccounted for stock or money in the cases closed so far in the 2013/2014 period
was £741,182, or approximately £10,500 per case. Total losses in those cases were
£1,603,932, implying a recovery rate of 46%. These figures must, however, be
treated with a degree of caution, as any amounts recovered must be seen as
coincidental consequence of the current policy on prosecutions. It is well established
that the purpose of criminal prosecutions is to punish and deter wrongdoing, not to
recover financial loss: this must be our guiding principle. Should we bring a
prosecution for any other reason, Post Office and its Board run the risk of being
accused of abusing the Criminal Justice System, with attendant reputational
damage.
3.4 POL does however frequently initiate actions in the civil courts for debts it believes
are due and owing to it by subpostmasters. In 2012/13, the civil debt team (a team
which is entirely separate to the criminal team) recovered approximately £1.9 million,
and instructed external lawyers in 100 cases, at an average cost per case in 2012-
2013 of about £1,200 (£400 for the costs of Former Agent Accounting Team, plus
£800 for our external solicitors). It is not proposed at this stage to review the civil
recovery process, as it outside the scope of the work undertaken by Project
Sparrow. That said, the way that POL interacts with subpostmasters generally is in
scope for the Branch Support Programme.
4. Options Considered
4.1 As noted in the November paper, broadly the options considered comprised:
(a) Preserving the status quo — i.e. retaining prosecutorial capability and
continuing with a prosecutions policy which is substantially the same as
that which has been used in the past;
(b) Pursuing a prosecutions policy more focussed on more egregious
misconduct - e.g. higher value cases/cases involving vulnerable
members of society/cases of involving particularly wilful wrongdoing, and
engaging with the police in relation to other matters; and
(c) Ceasing all prosecutorial activities but instead actively involving the
police/CPS etc where it is felt that they are likely to take matters forward.
4.2 For a variety of reasons, option (a) did not gain a large degree of support from the
Committee at its meeting in November and for that reason is not the focus of this
paper. Similarly, given that we have been advised by leading Counsel that, due to
budgetary constraints, the CPS is unlikely to have an appetite to prosecute all but
the most serious cases, and there would be a substantial lead in time as we would
need to open negotiations with the Director of Public Prosecutions about
implementation which would take time and still leaves us in our current position.
Also, if option (c) were commenced, it would not be for Post Office to implement or
review the policy but for the CPS. For these reasons option (c) is not discussed in
Prosecution Policy Chris Aujard
February 2014 Page 2 of 7
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
any great detail, though should the Committee decide that it is an option worth
exploring further much of the analysis in the following paragraphs, particularly with
respect to cost and financial implications will still be of relevance. Instead, the
balance of this paper focuses on option (b), and the possible “filters” that could be
applied to our prosecution policy in order to ensure that only cases displaying an
appropriate “fact pattern” are prosecuted.
4.3 One of the “filters” that could be applied is financial: currently there are no formal
financial limits set out in our prosecution policy (though in practice de minis amounts
are not pursued), an approach which gives us a run rate of approximately 50 criminal
cases a year. If a financial filter were applied then (based on our analysis of historic
cases) the number prosecutions would (be likely to) reduce as follows:
£15,000 - approx. 25 cases a year
£20,000 - approx. 20 cases a year
£30,000 - approx. a dozen a year
£100,000 - one or two cases a year (and these could possibly be of interest
to the CPS)
eoeee
In order to ensure that an appropriate balance is struck between providing a suitable
deterrent, and POL not being viewed as being too heavy handed, it is recommended
that a financial limit be introduced into the policy as a matter to “take into account”
when deciding whether to initiate proceedings. The significance of this “guide” figure
would be that cases involving losses of an amount less than it would not typically be
prosecuted save where there are highly compelling or special circumstances (e.g.
the victims of the conduct are elderly or otherwise vulnerable members). It is
proposed that this figure be fixed, initially, at £20,000.
44 lt is also suggested that factors other than financial ones should be expressly
introduced into any revised prosecutions policy. After discussion with our
prosecutions team and taking into account the fact patterns displayed in those cases
that are being considered by the mediation scheme, it is proposed that those factors
include:
. whether the losses in question have been repaid;
. whether the facts disclose a pattern of deliberate conduct designed to
materially benefit him/her, or whether the fact pattern discloses
inadvertence/poor book-keeping skills or “muddle-headedness”;
. the degree of sophistication of the alleged wrongdoing;
. the number of incidents;
° the extent to which any members of the public suffered loss, and if so
whether they were from vulnerable groups in society;
. the period of the alleged offending;
. the cost of bringing the prosecution; and
° whether there are any alternative, more suitable, remedies available to
POL.
4.5 It should be noted that, although POL is still currently able to bring cases where the
evidence concerned is extracted from the Horizon system, there is a strong risk that
in such cases a defence will be mounted to the effect that the Horizon system
cannot be relied upon. We have been advised that in these cases, there is a strong
likelihood that such a defence would be successful, at least until such time as a new
independent expert is identified and has familiarised himself with the system. This is
likely to take around 12 weeks, and cost up to £200,000. Accordingly, at least until
Prosecution Policy Chris Aujard
February 2014 Page 3 of 7
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
such time as the dimensions of this work are fully understood, as a practical (i.e.
evidential) matter court proceedings will not be started in such cases. In addition
there may be material on-going costs per case for the independent expert as the
systems change through the usual business change programmes.
4.6 For completeness, and at the request of the Committee, we have also considered
how other retailers, financial institutions and quasi-public organisations respond to
criminal conduct within their organisations. Although definitive information is hard to
obtain, it appears that:
. Most retailers and _ financial institutions © maintain in-house
security/investigative functions, which pass evidence of crime (often
CCTV footage) over to the police and then support any actions taken by
the external prosecutor (e.g. CPS). Other than Royal Mail Group, we
have not identified any commercial organisations that habitually bring
private prosecutions.
. Although Virgin Media recently conducted a high profile, high value (c.
£144 million) private prosecution of a set-top box fraud, this was
conducted with the police and appears to have been an exceptional step
rather than a “business as usual” activity.
. Quasi-public organisations (e.g. TfL) and charities (e.g. RSPCA) are also
known to bring private prosecutions. However these are typically brought
against external persons (e.g. fare dodgers or animal abusers), and not
employees or others involved in the organisations’ day-to-day operations.
47 In the November paper, a number of other factors were identified as possibly
relevant to our approach to prosecutions (e.g. brand inconsistency, engagement
with subpostmasters). In addition to these, which remain relevant, the following
should be noted:
. Cost of Compliance with Duty of Disclosure: The continuing duty to act
properly as a prosecutor required us (through our external solicitors) to
review the prosecutions of 325 individuals to ensure that the Second
Sight report did not affect the safety of any convictions. The cost of this
review was approx. £180,000. We will need to do similar reviews every
time new information comes to light which may call into question the
safety of a conviction. To seek to minimise the need for this, we have
instituted a weekly, cross-business conference call at which branch
accounting issues can be raised. The estimated external cost of these
calls is approx. £27,000 a year.
° Wasted _management_time and money: To date, we have spent
approximately £5million seeking to address the concerns raised over our
Horizon system and the criminal prosecutions. It has also taken up a
considerable number of man hours of senior management at a time of
significant, strategic and fast change in the company.
5. Commercial Impact/Costs
5.1 The immediate financial impact of the above policy approach, assuming that no
other changes are made, would be that the sums of money that are currently
recovered via the criminal law system (£741,182 in the 2013/2014 period), would no
longer be as readily recoverable. As explained in the November paper, however, it
would be open to us to use the civil courts to recover losses, though this is a more
time consuming process, and there is greater scope for assets to be hidden from
view. The recovery rate per case pursued through the Civil Courts will be difficult to
Prosecution Policy Chris Aujard
February 2014 Page 4 of 7
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
ascertain given that a number of Subpostmasters subject to criminal proceedings
are in financial difficulties, the impact of this on the recovery process is unknown.
5.2 However, if POL can deal with problems that arise in subpostmasters’ offices before
they turn in to significant financial losses, the financial impact of any change in the
prosecutions policy should be greatly reduced. This in part is the aim of the BIP, the
key elements of which include:
gathering better MI from the network systems;
providing better training and support to subpostmasters and branch staff;
identifying problem losses earlier;
liaising with the relevant persons sooner; and
reviewing how we respond when a subpostmaster has materially
breached his obligations to us.
eeoeee
5.3 Appendix A provides an overview of the Branch Support Programme and the actions
that have and will be taken.
5.4 It should also be noted that any decision made now with respect to the future
conduct of criminal prosecutions will have an immediate impact on so-called "in
motion” cases. These cases, which are the subject of the separate paper due to be
considered at the next meeting of the ARC/Board, are ones where no decision to
prosecute has been made, but where the subpostmaster concerned has been
interviewed under caution, and is waiting to hear whether or not a charge will be
brought. Given that a number of cases now date back to late summer last year,
when a decision was made to suspend all prosecutorial activity, POL should
communicate its decision in this regard as soon as possible. The working
assumption is that there could be some adverse publicity as and when the decision
is communicated to subpostmasters and if delayed too long could lead to our
management of the cases being called into question. It is anticipated that the
number of “in motion” cases will materially reduce if we were to apply the filters
referred to in this paper.
6. Proposal
6.1 It is proposed that:
a) A revised prosecution policy be implemented and applied against more
stringent financial and conduct criteria set out in paragraphs 4.3 and 4.4.
b) Consideration be given to whether the policy be published on our website
and if so what elements of it, to comply with best practice and transparency
while not undermining our ability to implement the policy.
c) The new policy, its interpretation and application be reviewed by a committee
of ExCo every twelve months.
d) An individual within Post Office Limited be appointed to take responsibility for
deciding whether or not an individual case should be prosecuted against that
policy (currently this accountability is shared across a number of individuals).
e) Any prosecutions be conducted through an external law firm.
f) The Communications team maintain a living strategy for dealing with all PR
issues arising from any and all prosecutions.
g) In conjunction with the Branch Support Programme, we work to improve our
civil recovery operation to maximise the losses it can recover.
Prosecution Policy Chris Aujard
February 2014 Page 5of 7
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
7. Key Risks/Mitigation
These pertain mainly to the potential increased risk of fraud, and being seen to be “soft”
with public money, but should be capable of being addressed by enhanced MI and
improvements to the control framework etc.
8. Long term considerations — horizon scan
8.1 Not taking action now in relation to the prosecutions policy could lead to, or
exacerbate, the impact of further adverse publicity regarding Post Office’s treatment
of sub-postmasters.
8.2 Taking this action may assist in developing better stakeholder engagement.
9. Communications Impact
9.1 The Communications team is already heavily involved in Project Sparrow, and they
have seen this paper.
10. Recommendations
The ExCo/ARC is asked to approve the proposals set out in paragraph 6 above.
Chris Aujard
7 February 2014
Prosecution Policy Chris Aujard
February 2014 Page 6 of 7
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
Appendix A
This appendix referred to the Branch Support Programme, on which a full Board paper is
included as part of this Item.
Prosecution Policy Chris Aujard
February 2014 Page 7 of 7
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
Appendix B
Prosecutions Policy Reactive Briefing (DRAFT)
1. Communications Recommendation
It is recommended that we take a reactive communications approach with regard to the
Prosecutions Policy. The rationale for this is that a proactive approach could be
misinterpreted and journalists could broaden their story and coverage of the Post Office
(Horizon, the Scheme, and approach to any cases of alleged criminality in the network). This
would have the potential to widen media coverage around the Scheme and into new areas
and with enhanced interest. We would also need to be mindful of the impact that
communicating any changes may have on the Network. We have discussed this approach
with the Network Team.
2. Key messages
Post Office constantly reviews its systems and processes, including its security and
investigations procedures, to ensure they are in line with changing business needs.
+ The people working in the over 11,500 Post Office branches across the UK are pillars of
the community and must act consistently with the position of trust they hold. The public
would be surprised if we did not take action where public money may have been
misappropriated.
+ The overwhelming majority of people who work in our branch network are professional,
honest and provide the highest standards of service possible.
+ We treat possible criminal conduct very seriously and will proceed with a criminal
prosecution where there is sufficient evidence and public interest in taking action.
3. Reactive Briefing to be used if there is a leak on changes to prosecution
process
How does the Post Office decide whether to prosecute?
The Post Office treats all suspected cases of possible criminal conduct very seriously, and
will consider each case on the facts of the individual case. In deciding whether a case
should proceed to criminal prosecution the Post Office must be satisfied that it meets the two
stages of the test set out in The Code for Crown Prosecutors. The first is whether there is
sufficient evidence to justify a prosecution and the second is whether the prosecution would
be in the public interest. A criminal prosecution will only be pursued by the Post Office if both
stages are satisfied in the specific circumstances of the individual case.
Have you changed your approach to prosecutions?/I’ve heard you’ve changed them
as a result of the investigation into the Horizon system?
Now that we are an independent business, separate from Royal Mail (April 2012) we are
undergoing one of the biggest transformation programmes in our history, as well as keeping
existing practices under review. Post Office constantly reviews its systems and processes,
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
including its security and investigations procedures, to ensure they are in line with changing
business needs and industry practices.
But if you have made changes you must feel that people have been wrongly
prosecuted or that there are unsafe convictions?
No, this is not the case. While we may make changes to ensure our processes are in line
with current business needs and industry practices, we have always pursued prosecutions in
accordance with the Code.
If pressed/or for use in MP/Opinion Former briefings
I am sure that our customers and stakeholders would expect us to take action where we
suspect criminal conduct within our network.
However, we must of course ensure that all our policies and practices, including those in
respect to security matters, properly reflect our business needs. We have therefore
reviewed our approach to prosecutions in line with these current needs and of course how
they fit with the public interest factors of the Code e.g. the harm caused to the victims of any
suspected criminal activity, its impact on the community, and whether prosecution is a
proportionate response.
For background In terms of costs the Code specifies that prosecutors should
consider:
“The cost to the CPS prosecution service and the wider criminal justice system, especially
where it could be regarded as excessive when weighed against any likely penalty
(Prosecutors should not decide the public interest on the basis of this factor alone. It is
essential that regard is also given to the public interest factors identified when considering
the other questions in paragraphs 4.12 a) to g), but cost is a relevant factor when making
an overall assessment of the public interest).” -
So is this a cost cutting exercise?
No, but in line with the Code, the costs of bringing a prosecution can be a factor along with
other public interest factors such as the vulnerability of any victims of the suspected activity
and its impact on the community.
Will this reduce the number of prosecutions?
Now that we are an independent business, separate from Royal Mail (April 2012) we are
undergoing one of the biggest transformation programmes in our history, as well as keeping
existing practices under review. It is too early to say what difference all of these changes will
have on the number of prosecutions we bring, which are in any event assessed on a case by
case basis.
Will cases currently awaiting trial be reconsidered against any change in policy?
The particular circumstances of each current case is constantly reviewed and assessed
against the Code’s test.
How many cases do you prosecute a year?
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
The majority of the tens of thousands of people who work in our branch network are
professional, honest and provide the highest standards of service possible. Currently we
bring around 50 prosecutions a year. This equates to less than 0.1 per cent in relation to the
number of people who work across our network.
You dropped a number of cases recently. Why is this?
As is prudent we continue to review the facts and circumstances of individual cases to
ensure they continue to satisfy the Code’s test. If at any time we consider that the test is no
longer met we will not proceed with the case — this is something that we have always done
and indeed are required to do.
4. The following Q&As to have on hold if JFSA become aware that a number of
cases are currently awaiting prosecution.
I have heard that a number of cases have been awaiting prosecution for some time.
You must be worried that there are issues with your investigation and prosecution
process?
We treat possible criminal conduct very seriously and will only proceed with a criminal
prosecution where this is sufficient evidence and public interest in taking action.
Investigating these cases can be complex and time consuming. Each case is dealt with
individually and is constantly reviewed to determine whether it meets the Code’s test for
prosecutions.
How many cases are on hold?
We don’t discuss cases which may result in prosecution.
Mark Davies
Communications Director
18 February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
POST OFFICE LTD BOARD
Initial Complaint Review and Mediation Scheme
1. Issue
1.1 This paper updates the Board on the challenges facing the Initial Complaint
Review and Mediation Scheme (the Scheme) and the steps being taken to
address them.
2. Summary
2.1 At the moment the Scheme faces a number of serious challenges that Post Office
are working hard to manage and mitigate. This paper covers the following
issues:
e Slower than expected Scheme performance
e Anincreasing expectation gap
« Ahigh cost base
e An attempt by both the Working Group and Second Sight to broaden their
scope
e General stakeholder management challenges
« ASecond Sight generic report
3. Consideration
Scheme Performance
3.1 Out of an original 147 applications, 139 are still in the Scheme at various stages.
Scheme performance is slower than expected due to a number of factors —
higher than expected application numbers, more complicated legal assurance
process (particularly in respect of risks around criminal prosecution) than
originally envisaged, a need to reinforce the Fujitsu team providing data to the
investigators and a learning curve for the new investigators around the style and
approach required. Currently there are five reports with Second Sight (with four
due on 27 February), 19 are undergoing legal assurance and 18 are currently
under Post Office investigation. 64 applicants are still to submit their detailed
case questionnaires, having had funding approved.
3.2 For Post Office there is a delicate balance to be struck in terms of the
thoroughness of the quality assurance necessary to manage risk on individual
cases and more broadly, learning the lessons from early cases and the speed of
processing the reports. We have revised the initial QA process now that initial
report quality has increased and learning has increased. This has reduced the
steps required and will save a small amount time.
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
3.3 The Working Group has also decided to add a “draft report’ circulation stage to
the overall process — which adds two weeks but gives Post office a right of reply
to findings in Second Sight’s reports and could add additional steps as cases
move through the process.
Increasing Expectation Gap
3.4 Our current estimate is that we will receive claims stated to be in the region of
£100M. Applying the settlement policy, Bond Dickinson has estimated the claims
to be valued at £6M. This figure comes with a significant health warning, as it is
calculated from a sample of 33 cases and generalised to a likely population of
130. It is also not based on the merits of a claim, but instead on the likely value
of a claim should it be fully successful.
3.5 The programme team has had limited opportunity to engage with advisors on the
substance of the claims, as the advisors limit their engagement with Post Office
to administrative matters. However, we have taken every opportunity to discuss
levels of claims with Second Sight and the Working Group when opportunity
arises. It is, however, likely that the gap will remain large due to high claims for
consequential losses and potentially negotiation positioning by advisors in terms
of the level of claim.
High Resource Demands
3.6 Currently there are 22 Post Office staff investigating cases, a programme team is
occupied full time administering the Scheme and supporting the weekly Working
Group case discussions and the monthly face to face meetings. Two sets of
lawyers are engaged reviewing the cases (Bond Dickinson providing civil and
general advice and Cartwright King reviewing from a criminal law perspective).
This has led to costs to date of £1.1M and a projected cost of around £5M,
excluding settlement costs.
Working Group and Second Sight Scope
3.7 Efforts have been ongoing to agree an engagement letter with Second Sight and
Terms of Reference with the Working Group. Currently both are being disputed
in terms of scope (with JFSA and Second Sight seeking wider scope than Post
Office is comfortable with) and with Second Sight seeking to water down the
clause restricting their ability to act against the Post Office in the future. It also
appears that the Chair is amenable to a wider scope for the Working Group.
3.8 Both issues have been escalated to ExCo, and the Chief Executive is due to
meet Second Sight and the Chair of the Working Group on Monday to discuss
these issues. Post Office has alerted BIS, and are working through a number of
scenarios to strengthen the resource available to the Scheme to ensure that
Second Sight remain engaged in the Scheme and that the Scheme completes in
a timely manner.
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
General Stakeholder Management
3.9 The Post Office Chairman and Chief Executive have held a positive meeting with
James Arbuthnot MP. James will be holding a follow up meeting with MPs on 24
March where Post Office will brief them on progress on the Scheme. The
professional advisors are also proving difficult to manage and there are signs that
at least some are attempting to act as a collective to challenge the timelines and
fee levels imposed by the Scheme although we do not know whether that will
materialise.
3.10 The programme team are working closely with the Communications Directorate
to plan for the Arbuthnot meeting, and have engaged the Chair of the Working
Group to deal with issues relating to the advisors.
Second Sight Reports
3.11 The Second Sight team are due to submit the first of their individual case reports
to the Working Group on 27 February. They are also working on a generic report
designed to travel with the individual reports, although it is unlikely that will be
ready for 27 February. Our working assumption is that the reports will be critical
of Post Office (whether evidenced or not) and from the time those reports are
submitted there is the potential for them to become public, and will and this
likelihood increases when the reports are presented to the applicants potentially a
week later. We are working with the Communications team in preparation for
that.
4. Conclusion
4.1 The programme currently carries a substantial level of risk which is being
managed with support of colleagues across the business, including ExCo. It will
be important to maintain this focus as we move into a critical delivery phase for
the programme.
4.2 This paper is intended to inform a Board discussion of the latest developments,
including an update from the Chief Executive following her meetings with the
Chair of the Working Group and Second Sight, and the various options for
managing the risks and issues set out above.
Belinda Crowe
20 February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
POST OFFICE LTD BOARD
Branch Support Programme
1. Purpose
The purpose of this paper is to:
1.1 Update the Post Office Board on the Branch Support Programme.
2. Background
2.1 The Branch Support Programme was initiated in July 2013 to review the level of
support the Post Office provided to subpostmasters to operate their post offices
and to introduce improved levels of support having taken feedback from
subpostmasters.
2.2 As the findings of the Branch Support Programme unfolded it became evident
that the scope of this programme needed to be wider to ensure that the required
cultural change is to be embedded within the Post Office.
3. Branch Support Programme — Purpose and Scope
3.1 The purpose of the Branch Support Programme is to improve the
effectiveness and efficiency of the support we provide to our subpostmasters
and operators in the running of their Post Offices from an operational and
engagement perspective.
3.2 What is in and out of the scope of this programme is detailed below:
In Scope
Out of Scope
Cash, stock & stores management
Finance Service Centre (FSC)
NBSC & HSD
Training — design & delivery
Audit — design & delivery
Communications
Structure design for the network and
admin support function touch points
IT
Spmr/operator selection process
Spmr contract breaches
Sales support — delivery methods
Product design, delivery & Comms
Crown — where the touch points are the
same for the Crown network then these
are in scope
Refinement of network operating models
Crown network as an entity
Supply Chain as an entity
NTP as an entity
Wider business organisational design
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 1 of 7
20" February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
Programme Outputs — Quick Wins
In the process of mapping the “As is” and “To be” processes “Quick wins” have already
been / will be implemented by end March 2014. Our focus has been on addressing the
key issues raised in the Second Sight interim report and some of the themes from the
Mediation Scheme cases (which is the subject of a separate Board paper), although a
number of these improvements were already in train within the Post Office.
44 Subpostmaster Contract Breaches - we have reviewed our approach to how
we respond to material contract breaches by subpostmasters and made the
following improvements:
e Where a potential breach of contract has occurred our approach is to
work with the subpostmaster to establish the facts and then take the
appropriate action, keeping the subpostmaster in post and the branch
operational, unless in the usually low number of cases where not to
precautionary suspend the subpostmaster would carry a high risk of
damage to POL’s reputation and / or a high risk to POL’s assets or where
a customer has been directly involved in a potential fraud by the
subpostmaster. This has resulted in a significant reduction in
precautionary suspension and termination cases as evidenced at
appendix 1. Examples of some of the cases are detailed at appendix 2.
These branches are then monitored so if the initial problem were to
reoccur we can respond quickly.
¢ If the precautionary suspension rate were to continue at the Q3 run rate
of 14 i.e. 56 p.a. this would result in a reduction of c.900 process hours
p.a. This could increase to a saving of 1400 process hours p.a. if appeals
were to continue at emerging run rate of 12 p.a.
e Based on what we are seeing from recent cases, this new approach
should have a positive impact on the recovery of losses, as for the
subpostmaster to remain in post they would need to either make good
the loss in full or agree repayment terms. A sample check of seven
recent cases showed 60% of loss paid in total and repayment terms
agreed for 40%. The net effect on P&L for former and current agent debt
is a credit of £235k at period 10 (cumulative position) and whilst there
would be other factors affecting this position the new precautionary
suspension process will be one of the contributing factors.
e In March we are introducing suspended termination, a new category of
action in dealing with material breaches of contract. This is where the
subpostmaster has materially breached the contract and would have
previously had their contract terminated. The new Suspended
Termination category is where mitigating circumstances are such that the
decision is to award a suspended termination is made; the subpostmaster
remains in post on the condition that if a further material breach of
contract occurs in an agreed period (set by the nature of the first breach
and typically a year) then the contract termination may be triggered.
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 2 of 7
20" February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
42 Early Identification Tool - this is a real-time data tool from Fujistu.
e It will support earlier identification and intervention of accounting and
transactional anomalies which could be an indicator of non-conformance
or fraud.
¢ The real-time element will enable analysis to be undertaken at the point it
happens rather than waiting for historical data to be gathered.
¢ The pilot called HORice will be run in March and if the results are as we
expect this tool could highlight problems and associated losses at a
significantly earlier stage; there have been specific historical cases of
significant losses (for example £185k) where having this data would have
identified a pattern within one to two months rather than after 1 year.
4.3. Accounting Losses Support — we have refined our processes to react more
responsively to reports of unexplained losses from subpostmasters:
e Where unexplained accounting discrepancies are raised by
subpostmasters either via NBSC or some other route e.g. flag case
these are passed to the Branch Support Team for resolution.
¢ The Branch Support team will assess whether the case is satisfactorily
closed or whether further training is required.
¢ If further training is required the Branch Support team will action this.
«If further investigation is required the Branch Support team will pass to
the Mediation Case Managers for assessment and further investigation
as appropriate.
¢ Longer term, calls to NBSC will be categorised and analysed
to establish root cause and resolution.
44 Training - we have improved the training approach by:
¢ Introducing an introductory call to the new subpostmaster two weeks
before they take up post.
* Having earlier contact with the Subpostmaster following their initial
training and replacing the month 1 telephone call with a branch visit.
e Reviewing the effectiveness of the balancing work-aid to help
subpostmasters identify and hopefully resolve balancing problems
earlier.
* Longer term, we are considering options on how best to optimise e-
learning in our initial training to subpostmasters and on an ongoing
basis.
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 3 of 7
20" February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
Programme Outputs — Longer Term
5.1. The Branch Support Programme has 9 work streams that capture all the
touch points the subpostmaster has with Post Office in running their branch.
These are: pre-appointment process; operational support; physical support;
performance management; training; communication; IT; early
warning/intervention approach; leavers process.
5.2 The milestone plan including costs and benefits for each of the workstreams
will be completed by the end of March 2014, with interdependencies
mapped.
5.3 The proposed ways of working for each workstream will include an ongoing
review mechanism that ensures continuous improvement is embedded
into business as usual.
Commercial Impact/Costs
6.1 The business case for this Programme is being developed and will be
presented to POLIC for consideration in due course. Indicatively, benefits of
c. £9m have been identified, to be realised over 14/15 and 15/16. However,
as the majority of the benefits relate to headcount reduction, plans and
therefore the associated cost of realising them (e.g. VR costs) are yet to be
determined. This will be worked through following the completion of the
workstream milestone plans at the end of March. As well as affordability, the
implementation of the Programme will also be subject to the plans of the wider
Business Transformation Programme.
Success Criteria
7.4 The Programme has two main key performance indicators (KPIs) — Agent
Engagement and Operational Cost Reduction:
e Agent Engagement - the formal measure is the subpostmaster annual
engagement survey and in particular the support category of the survey.
This will be supplemented with Pulse surveys undertaken at quarterly
intervals.
¢ Operational Cost Reduction - the cost of support to the network will be
baselined as part of this Programme. Headline numbers suggest that
40% of the current support to the network is spent on recovery support ie
correcting things that haven’t been done right first time
7.2. Each of the nine workstreams will have performance measurements that feed
into the two main KPIs.
Interdependencies
8.1 Other business programmes identified as having key interdependencies with
this Programme are:
e Initial Complaint Review and Mediation Scheme.
Sponsor — Chris Aujard. Programme led by Belinda Crowe
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 4 of 7
20" February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
¢ Network Transformation.
Sponsor — Kevin Gilliland. Neil Ennis, Programme Director.
¢ Business Transformation.
Sponsor — Lesley Sewell. Programme led by Brian Deveney.
9. Key Stakeholder Communication
9.1 The NFSP — has been engaged on two fronts:
e Asa stakeholder in the Branch Support Programme and has input to the
gap analysis stage of the process.
e Inthe high level thinking on a revised approach to Subpostmaster
material breaches of contract.
9.2 Wider Communications — the development of branch communication plan is
underway to listen and respond across the broad business spectrum. This
includes:
* The link between the Branch Support Programme and the Initial Mediation
Scheme with any improvement opportunity being impact tested and/or
aligned with “The Scheme” before being implemented.
* The Branch User Forum
« The Agent Engagement Survey.
10. Governance
10.1 The Branch Support Programme will operate with a formal programmatic
approach supported by the necessary governance and resource. The rationale
for this is that a cultural change in behaviours will be required and therefore the
right support in each of the workstreams and business areas will be needed to
ensure that the changes are managed effectively and successfully embedded
within the organisation with pace.
10.2 The Programme Board will meet monthly with monthly updates provided to
ExCo and POL Board.
11. Recommendations
The Board is asked to:
11.1 Note the update and actions set out above.
Kevin Gilliland
20" Feb 2014
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 5 of 7
20" February 2014
POL-0023270
In Strictest Confidence
Appendix 1
Agents suspended
POL00026629
POL00026629
200
150
een agents suspended
100 “
50
°
2007/08 2008/09 2008/10 zog/ta poniyt2 O23 —-2013/14 Periods 1 2013/14 Periods 7
106 t09
250
~~ Agents suspended
ae summary Termination
‘was Resigned to Avoid Termination
——Reinstated
poorjoe 009/09 aww/toeNaya—aoN/A2aowaia_y_ZOLNAA I gota
“Agents suspended 4190 Er a eC} ist 188 4a
‘Summary Termination oa a 94 90 aa ay 30 T 4
Reslgredto Avoid Termination, 60 33 id 48 a2 a cn!
feeviateat “ae a boa
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 6 of 7
20" February 2014
POL-0023270
POL00026629
POL00026629
In Strictest Confidence
Appendix 2
Subpostmaster Contract Breaches — New Approach Examples
No Precautionary Suspension Examples — these are where under the previous approach
precautionary suspensions would have happened.
Date of Audit I Decision in respect of Contract breach
Audit result was £1112.98 short. As this was over the £1K threshold this
Sept 2013 would have previously led to a precautionary suspension pending
Risk Based investigation. Three cheques totalling £800 were missing — the response from
Audit Spmr was vague in relation to where they were. Rather than suspend, upon
making good the full amount of the loss on the day the branch was re-opened
and service maintained. The Spmr later attended a meeting with the
Contracts Advisor in relation to the contract breach.
Audit result was £5401.44 short which would have led to automatic
October 2013 I precautionary suspension. Spmr claimed historic stamp shortage (2008) and
Risk Based part Transaction Correction had been disputed. The loss was made good on
Audit day. The Spmr was kept in post. The investigation and the interview with the
Spmr taking place at a later date. Written warning was issued.
Audit result was £17,818.42 short. It was clear from Field Support Advisor
November (auditor) on site that this was down to OIC who failed to appear with safe keys
2013 which would have previously led to automatic precautionary suspension. The
Audit Spmr accepted full responsibility and undertook to repay at earliest
following opportunity in full (received within 7 days). The Spmr was kept in post and
cash check interviewed at a later date. The Spmr has since left as part of a commercial
escalation transfer.
Audit result was £36148.04 short. Staff member had been manipulating
December cheques within the account — these cheques were not being received by the
2013 processing centre. The staff member was son of the Spmr who had left him in
Special charge without proper controls. The Spmr accepted full responsibility for loss,
Request Audit I removed her son from the branch and entered into repayment arrangements
with us to repay the loss. Previously the Spmr would have been precautionary
suspended whilst the investigation was completed but in this instance the
investigation was but was done on the day. As the Spmr is a pluralist if
suspended she would have been suspended from both branches.
Precautionary Suspension Examples ~ these are cases that under the new approach
warrant precautionary suspension
Date of Audit I Decision in respect of Contract breach
Audit result was £33,388.14 short. During the audit the Spmr admitted taking
November £29k and giving it to his brother to buy a car. Precautionary suspension took
2013 place and following interview with Contract Advisor the Spmr’s contract was
Risk Based terminated. The debt is still outstanding. A temporary Spmr is running the
Audit branch.
Audit result was £7488.00 short. The Spmr admitted misuse of funds to keep
September business running as struggling to maintain. He was precautionary suspended
2013 because no reasonable explanation and funds would have continued to be at
Risk Based risk. He later resigned to avoid termination
Audit
Branch Support Programme Update — Feb 2014 Kevin Gilliland Page 7 of 7
20" February 2014
POL-0023270
POL00026629
POL00026629
CONFIDENTIAL
POST OFFICE LTD BOARD
Business Transformation Programme
1. Purpose
The purpose of this paper is to update the Board on progress to date with the Business
Transformation Programme (the programme).
2. Background
2.1. The 2020 Strategy is based on the four key pillars as shown in the diagram below. A
key tenet of this strategy is the development and introduction of a new organisation
and operating model that is streamlined and cost effective.
will have an ff
organisation
xp and operating
I digital service model th
streamlined
and cost
effective
Enablement
2.2. In 2013 we performed extensive market testing, including a trip to India. The advice
from the market testing was that we should procure a Transformation Partner(s) to
help maximise the benefits of the new business operating model. The partner will
bring the capacity and experience that we will need to deliver the operating model.
2.3. In November 2013 we updated the Board on the findings. This programme was
commissioned to examine the business case for engaging a Transformation
Partner(s).
2.4. The programme would also seek to understand the preferred engagement model and
prepare for a partner(s) selection exercise in April 2014 (assuming the business case
is compelling).
2.5. We engaged Alsbridge Consultants, who are experts in this area, to support us in
analysing the partner market, building a business case and preparing to go to market
in April.
2.6. In January a second Post Office delegation, including Paula Vennells, travelled to
India to visit a number of transformation delivery organisations. The group were again
impressed by the capability of these organisations and could see significant
Business Transformation Programme Chris Day & Lesley Sewell Page 1 of 5
February 2014 19 February 2014
POL-0023270
POL00026629
POL00026629
CONFIDENTIAL
opportunities to assist in not only reducing our cost base but also increasing our
revenue.
3. Options Being Considered
Target Operating Model (TOM)
3.1. The Target Operating Model (TOM) design is a key element of both the 2020 Strategy
and our ability to successfully complete the Business Transformation Programme. We
recognise there are options in developing an appropriate TOM for Post Office. The
approach the programme proposes to develop the TOM and achieve the timelines
required by the 2020 strategy is:
e Develop a high level options paper to define the next level of the TOM within
the three tier framework laid out in the 2020 Strategy (Corporate, Customer,
Service Delivery)
¢ Utilise the best practice input from the market and tailor this to reflect the Post
Office requirements and the 2020 Strategy
e Further refine the model with input from a Business Process Mapping partner
(see detail in 3.5 below)
e Finalise the TOM with the Transformation Partner(s) to ensure we have full
and joint accountability for the delivery of the 2020 strategy.
3.2. At all stages of the proposed journey the ExCo will have the opportunity to approve
the TOM development and the Board will be kept updated. Several key areas of focus
will be (this list is not exhaustive):
e Customer Experience
¢ Brand Purpose
« Customer Value Propositions/ SME
e¢ Channel Strategy
¢ People, Culture & Ways of Working
e Branch Support Programme (subpostmasters)
e Standardisation and Shared Capabilities.
3.3. There is a broad scope of business transformation activity already underway in Post
Office under these headings shaping the TOM. We continue to work with the major
programmes across the business to determine the optimum phasing to merge them
into the business transformation programme and ensure we deliver a single, effective
solution that is targeted on the future TOM. NB work from the Branch Support
Programme will continue but will eventually be incorporated into the Business
Transformation process, the first stage being the Business Process Mapping (BPM).
3.4. A key consideration is to align the current operating plans by pillar to ensure a
customer lens is applied, this work is currently underway.
Business Transformation Programme Chris Day & Lesley Sewell Page 2 of 5
February 2014 19 February 2014
POL-0023270
POL00026629
POL00026629
CONFIDENTIAL
Business Process Mapping
3.5. Detailed Business Process Mapping (BPM) is a pre-requisite activity for any
transformation programme. We plan to procure an independent partner to support this
process. There are benefits of doing this early and with a separate partner to the
Transformation Partner(s). They include:
e The output will be used to inform the procurement dialogue process with the
Transformation Partner(s) allowing more contractual certainty
« We will use the expertise of this partner to further refine the TOM. The BPM
partner will also provide a high level transformation plan for comparison with
the final plan from our future Transformation Partner(s)
e Based on our current timelines this will accelerate benefits delivery from the
Transformation Partner(s) by circa three months as we will have established
our “As Is” processes in key areas
e Any quick wins identified as part of the BPM process will be actioned and
delivered to secure benefit in FY 2014/15. These will be included in the
business operating plans.
3.6. We intend to complete detailed mapping on seven business areas: Product Design
and Introduction; Product Sales and Support; Supply Chain (Not Cash); Financial and
IT support. These areas cover the main activity from product concept through to
product sales and support, and have been chosen as they provide the bulk of our
activity and cost based on the scope. Part of the BPM product and sales reference
will be to improve the processes for subpostmasters, so that they become more
effective and efficient at product introduction and sales.
3.7. This work is planned be carried out between March and June 2014 by an
independent partner who will be identified and engaged over the next two weeks. We
will update the Board on this point at the meeting
Transformation Partner(s)
3.8. In order to achieve the required timelines for benefits realisation the programme has
commenced preparation of the procurement process for a Transformation Partner(s).
The early work will be carried out in parallel with the TOM & BPM work and the output
of both will inform the relevant stages of the procurement process.
3.9. Several options are currently being considered and examined to determine the best
market engagement strategy for a partner. The options of multiple partners, multiple
lots and single partner are being analysed against time, complexity, cost and public
procurement rules.
3.10. We are also considering the different disciplines and specialisms in the supplier
market such as IT, BPO, Customer Insight and Contact Centre and how Post Office
requirements align to these. Post Office is already addressing some of these areas:
¢ Weare currently in the market to transform our IT Supply Chain by aligning to
a towers model. This will bring best of breed IT services to Post Office and
create a competitive tension between suppliers
¢ Customer Insight is being addressed through the Customer Management
programme
¢ The Contact Centre strategy is currently being scoped. Again, this will be
aligned to the overall TOM.
Business Transformation Programme Chris Day & Lesley Sewell Page 3 of 5
February 2014 19 February 2014
POL-0023270
POL00026629
POL00026629
CONFIDENTIAL
3.11. Also included in our analysis of the options will be our requirement to have the
Transformation Partner(s) provide investment in terms of people, process and
technology and to be rewarded based on their performance and delivery of benefits.
This model is now becoming accepted by leading players in the market as indicated
in 4.1 below.
3.12. Full details of the analysis to date and the criteria used are provided in Appendix 1
identifying the Pros & Cons for the various options. Our requirement is for the
partner(s) to be jointly accountable for delivering alternative sourcing strategies,
efficiencies through end to end process redesign, innovation and investment in our
transformation journey. On this basis, early output of the analysis is indicating that the
best solution for Post Office is a single transformation partner.
4. Long-term Horizon Scan
4.1. Alsbridge completed an independent and unattributed market engagement on behalf
of Post Office with four market leaders in this area; Accenture, Capgemini, HP & IBM.
Key feedback included:
¢ All four are interested in the opportunity;
¢ All four are willing to invest if the scope is wide enough;
e Remuneration tied to business outcomes is acceptable to all;
¢ None are currently willing to consider large scale transfer of Post Office staff
as this model is no longer usual practice for the four organisations contacted.
4.2. The programme has currently developed a high level business case and will report
back to the Board in March with a full business case.
4.3. In order to finalise the business case and the procurement scope, any constraints on
potential long term solutions (e,g outsourcing, offshoring, franchising, joint venture
etc) need to be identified and agreed by ExCo and the Board.
5. Risk Management
5.1. Timelines for the programme and securing a partner(s) are very aggressive; securing
a dedicated team of Post Office subject matter experts is a critical requirement and
we are working through the resource requirements in conjunction with ExCo.
5.2. Post Office currently does not have sufficient supplier management skills across the
organisation to let commercial contracts and ensure we manage the partner(s) and
our own people to drive continual benefit from the contract, not least because market
dynamics are changing quickly. We will ensure this skill set is developed as part of
the retained organisation.
5.3. The risk that Industrial Relations may be strained by the implications of business
transformation will be addressed through Stakeholder and Communications plans
5.4. The timing of the programme and the potential solutions may have a political impact
around the 2015 general election. The Public Affairs team are looking at this further
as part of their current communications/stakeholder plan.
6. Communications
6.1. Due to the sensitivity of the programme and the potential people impact
communications is a major work stream. This includes internal, stakeholder and press
Business Transformation Programme Chris Day & Lesley Sewell Page 4 of 5
February 2014 19 February 2014
POL-0023270
POL00026629
POL00026629
CONFIDENTIAL
relations. The Communications and Corporate Affairs team is developing the
programme’s communications strategy and plans.
6.2. The overall programme plan will govern the timetable, methodology and content for
communications activity.
6.3. A scoping session with the relationship owners for our critical stakeholder groups
(Union, NFSP, Press, Gov/BIS) will be held by the end of February to inform the
above.
7. Schedule of Board Updates
7.1. The Transformation Programme will return to the Board as follows:
e March - to seek approval of the business case and authorisation to proceed
with procurement
e June - to update on progress as we finish PQQ evaluation and shortlist for
competitive dialogue
e September - to update on progress as we complete dialogue and issue
Invitations to Submit Final Tender
e November - to seek approval to award contract.
8. Recommendations
Board is asked to:
8.1. Note the progress made to date.
8.2. Support the proposed approach for TOM development; BPM approach;
Transformation Partner(s) procurement.
8.3. Confirm any programme constraints (ref 4.3).
Business Transformation Programme Chris Day & Lesley Sewell Page 5 of 5
February 2014 19 February 2014
POL-0023270
POL00026629
POL00026629
CONFIDENTIAL
Appendix 1
Business Transformation Programme
1. The key requirements that we have identified from our transformation partner(s) are as follows:
+ Proven business wide transformation capability.
+ Rapid achievement of benefits.
+ Investment — ability to financially engineer the upfront costs and smooth the cost to POL.
+ Innovation — ability to bring best practice / leading edge solutions to POL across all areas of
the business.
+ Appetite to be contracted on business outcomes:
* Cost reduction targets
+ Revenue growth
+ Margin improvement
+ Ability to leverage spend across the entire POL business; including any areas that are
currently out of scope.
Solution supports the 2020 Strategic objectives.
Solution supports the vision of one view of the customer.
+ POL need to retain access to perpetual licences around IPR on exit.
2. Aseparate design and delivery partner model would have the following profile:
Pros
+ Quicker commencement of design phase for transformation plan.
+ More certainty around TOM design - clearer gateway control at end of design phase.
+ Possibility of POL implementing some quick wins during 2nd phase procurement process
for the delivery partner.
+ Easier to specify requirements for both design and delivery contracts.
+ Larger potential supplier market for the design option — focus on consultancy rather than
‘run’.
(2)
ons
Potential rework between design and delivery partners. Validation of transformation
strategy and TOM and its deliverability may fundamentally alter the deal economics and
therefore the design of future solutions.
+ Transformation responsibility split between design and delivery partners — future liability for
non-performance especially if TOM is outcome specific can lead to significant contractual
friction and non-performance.
There is a risk that you may not attract the key suppliers in the transformation market if they
are only being asked to deliver a plan that is not their own.
Slower to delivery commencement & benefits realisation due to 2 stage procurement.
More stringent ‘requirement’ definition; the ‘Design’ becomes a firm requirement for the
delivery partner; this reduces the deliver partners ability to deliver innovative solutions in
the future.
More expensive — design fees have to be paid up front, cannot then be leveraged against
‘run-rate’ reductions.
Potentially more difficult to get delivery partner investment — separating ‘continuous
improvement from execution of agreed ‘transformation’ to achieve the TOM.
* Two procurement phases will increase cost and time as well as putting significant additional
resource demands on POL personnel.
+ Potential loss of IP if the design partner withdraws after design completion — how do you
know enough to implement what they design.
Business Transformation Programme Chris Day & Lesley Sewell Page 1 of 2
17 February 2014
POL-0023270
POL00026629
POL00026629
CONFIDENTIAL
3. Asingle transformation partner model would have the following profile:
Pros
+ Single partner responsible for realising transformation benefits, this allows us to contract for
outcomes based on the joint transformation plan.
Quicker to delivery commencement & benefits realisation — only one procurement process.
No upfront design fees — design costs can be amortised and built into overall run costs.
+ Possible to financially engineer the overall transformation deal.
+ No potential rework between design and delivery partners.
+ Transformation responsibility sits with single partner clear line of accountability for
performance / non-performance.
+ Potential for business outcome SLA’s & financial reward.
IO
ons
+ More difficult to specify requirements for transformation contract.
Less certainty around TOM design until the partner is selected.
Smaller qualified supplier market — transformational partners vs ‘best-in-class’ process
execution, may not be the most cost effective in terms of ‘run-rate’ reductions.
* Risk of ‘lock-in’ to a supplier's proprietary solution, balanced against incremental business
benefit.
4. To mitigate the risks we have identified in a single partner model, we propose to take the
following mitigating actions:
+ Ensure the contract contains sufficient requirements definition and tie supplier rewards to
required outcomes.
+ Ensure the contract contains requirements for joint working and sufficient gateway
approvals during design phase to facilitate a jointly developed TOM.
Build glide-path cost reduction commitments into the contract. Incorporate workable
incentivisation mechanism for sharing additional savings below committed target levels.
+ Ensure the contract contain non-exclusivity and provides for partial termination and
protection in terms of IPR licences / transfer upon exit. Also, ensure robust exit provisions
and termination assistance in place.
+ Secure a partner to complete Business Process Mapping and to scope the transformation
plan and TOM in advance of the transformation partner.
5. Multiple lots across multiple suppliers
+ The option of splitting various elements such as HR, F&A and other specialisms to create
multiple suppliers is being considered.
+ The current view is this would create complexity in the procurement and dilute the overall
attractiveness of the deal to the larger transformation suppliers. It is acknowledged that this
approach may deliver some additional benefits, however, given the limited size and scale of
this activity in Post Office the additional benefits of this approach were outweighed by the
overall benefits available from a single partner.
Business Transformation Programme Chris Day & Lesley Sewell Page 2 of 2
17 February 2014
POL-0023270
POL00026629
POL00026629
Confidential
POST OFFICE LTD EXECUTIVE COMMITTEE
Statement of Public Purpose
1. Purpose
1.1. The purpose of this paper is to invite the Board to:
* note the results of the research undertaken as part of the Public
Engagement Exercise into the Public Purpose of the Post Office;
* approve the proposal and arrangements for the next steps in publishing the
Public Purpose of the Post Office;
* agree governance arrangements for monitoring of the public purpose; and
« note the developments in the creation of the Post Office Advisory Council.
2. Background
2.1 In the response to its consultation ‘Building a Mutual Post Office’ (July 2012)
Government set out that a definition of the public purpose, developed
collaboratively with stakeholders, should be undertaken as a first step towards the
potential mutualisation of the Post Office.
2.2 The response set out the Government's wish for the Post Office to engage with
stakeholders to create a statement capturing the business’ public benefit, referring
to the social need behind many of its services alongside the role of the network at
the heart of many communities.
2.3. The response stated that ‘mutual businesses...require a clear vision around which
the wide ownership base can coalesce”, citing Arup’s mission as a commitment to
good design, and John Lewis Partnership's stated purpose as being the happiness
of its members. The response went on: “For the Post Office, defining an appropriate
level of service and those customers’ needs it must meet, alongside the interests of
those within the business who work to meet those needs, will be a vital prelude to
mutualisation. This will enable codification of the Post Office’s purpose within a
future mutual’s constitution.”
3 Activities/Current Situation
3.1. The Post Office established a Stakeholder Forum in October 2012 comprising
stakeholders and experts from a range of organisations to begin defining its public
purpose. Paula Vennells chaired the Stakeholder Forum, which comprised the
NFSP, CWU, Unite, Age UK, Consumer Futures, CAB, British Youth Council, Mutuo
and the BBC.
3.2 Two working groups were established to produce the content of the public purpose.
One group looked at the Public Purpose from the perspective of those delivering
post office services, the other from the perspective of the consumer. These
discussions resulted in two versions of a Public Purpose Statement and Principles
Annex 1. It was agreed that these two statements and principles would be tested
Public Purpose Mark Davies Page 1 of 12
18 February 2014
POL-0023270
3.3
3.4
3.5
3.6
POL00026629
POL00026629
Confidential
with the public and wider stakeholders through an engagement study across a
range of audiences.
A research agency, Truth, was appointed by the Post Office to conduct the research
and report back to the Public Engagement Working Group (this included the
communication leads for each of the members of the Stakeholder Forum).
The Public Engagement Working Group started an engagement and research
exercise on 30" August 2013 to get the views of the public and wider stakeholder
groups. The result of this was a very comprehensive piece of research which
covered all nations and included colleagues, subpostmasters, the general public,
customers, small businesses and those members of the public that are traditionally
hard to reach (elderly and the digitally excluded). The research included surveys,
workshops and interviews — a short selection of quotes from the research are
included in Annex 2. The full research document will be available on Boardpad.
The conclusions from the research were presented to the Public Engagement
working group in November and the Stakeholder forum in December 2013. The
research identified three broad themes which resonated with those who took part;
those of community, trust and accessibility,
We have reviewed the research, comments from the public engagement working
group and the Stakeholder Forum and drafted a Public Purpose Statement at
Annex 3. The statement seeks to capture the essence of the Post Office, draw out
the commercial reality of the business and show how our public purpose sets us
apart from other businesses.
4 Options Considered
41
42
In developing this proposal we have (a) considered what other organisations say
about their Public Purpose, (b) sought to ensure that the language used is clear
and simple to understand, and (c) considered where the Public Purpose
complements the Post Office’s Securing the Future: 2020 Strategy.
We have also considered governance issues in relation to the Public Purpose
statement. It will be critical, for the public purpose to succeed, that a range of
metrics sit behind it, which can be published externally to show progress in relation
to delivery. A number of potential measures could be utilised in relation to delivery,
ranging from network accessibility criteria to customer satisfaction scores and
engagement data. A summary of potential measures is at Annex 4 with a draft
scorecard at Annex 5.
5 Proposal
5.1
5.2
Subject to Board approval, the statement will be put to BIS ministers before
launch. Options are set out in point 7.5 below.
The Board's view on governance arrangements is sought. At its meeting in March,
the Board judged that it would be appropriate for the Board itself, or the Audit, Risk
and Compliance Committee to take the responsibility for monitoring delivery
against the public purpose. Views are sought as to whether this remains the view
of the Board.
Public Purpose Mark Davies Page 2 of 12
18 February 2014
POL-0023270
POL00026629
POL00026629
Confidential
6 Key Risks/Mitigation
6.1
6.2
6.3
There is the risk that that the Public Purpose may be misinterpreted or misused by
some organisations / individuals. In addition, there may be parties that do not fully
agree or sign-up to the Public Purpose statement. However, a thorough process
and research project has been undertaken, stakeholders were invited to take part
in that process and there was broad consensus on the key themes that should be
included in the Public Purpose statement.
There is a further risk that it is used by organisations or individuals to suggest that
the Post Office should not pursue commercial aims: we have sought to mitigate
this, and Exco is satisfied that this has been achieved, by stressing our
commercial position in the first sentence: it is important to stress that without the
commercial business, the Post Office cannot achieve its public purpose.
We have also considered the interplay with the Post Office Advisory Council. The
council will hold its first meeting on March 19 and an update on progress towards
establishing the council is at Annex 6. There is a risk of members believing they or
the Council ‘hold’ the public purpose statement. We will ensure this is avoided
through handling at the first meeting, through an interactive session which
explores the way in which the Council will sit alongside the public purpose but not
have a role in holding the business to account for its delivery. Nor will the Council
have a role in defining or amending the Public Purpose statement.
7. Communications Impact
7A
7.2
7.3
74
75
For the first time in our history we will have a clear definition of why the Post Office
exists and its public purpose: a definition forged by our customers and our people.
The Public Purpose represents a powerful opportunity for our organisation,
particularly within the context of the development of mutual ways of working. It will
present a vision around which we have the opportunity to motivate colleagues,
subpostmasters, stakeholders and most importantly customers.
Ultimately the Public Purpose statement will play a key communications role in
challenging perceptions about the business and will provide a vehicle around
which we will be able to articulate the ways in which we are different from other
businesses. Alongside the development of our brand through marketing activity, it
will support commercial priorities through demonstrating to our customers (existing
and new) that the Post Office is unique because of our public purpose.
The Public Purpose also strongly relates to the development of mutual ways of
working. We can use the Public Purpose statement to galvanise colleagues in all
parts of the business around a common purpose to increase engagement and
bring a renewed emphasis on customer excellence.
We will launch the public purpose with a full external and internal communications
strategy which will include an integrated campaign assessing what customers
want most from their communities and linking this back to the public purpose.
There are a number of factors to consider in terms of timing. While we could
launch this initiative alongside the launch of the Advisory Council, there is the
potential for creating an unhelpful link between the two initiatives which is
inappropriate (as set out in point 6.3 above). There are also other communications
factors to consider in the weeks ahead such as the Sparrow mediation scheme
and the industrial relations climate. We would like to maximise coverage and
Public Purpose Mark Davies Page 3 of 12
18 February 2014
POL-0023270
POL00026629
POL00026629
Confidential
internal engagement around the public purpose and avoid a collision with other
issues. As such we propose to develop further options for launch, including the
potential to do so around the Annual Report and Accounts (on which the proposed
theme is ‘heart of the community’).
8. Recommendations
8.1 The Board is asked to:
* note the results of the research undertaken as part of the Public
Engagement Exercise into the Public Purpose of the Post Office; and
« consider and agree the proposed Public Purpose statement and
arrangements for the next steps in its publication and its governance.
Mark Davies
Communications Director
February 2014
Public Purpose Mark Davies Page 4 of 12
18 February 2014
POL-0023270
Confidential
POL00026629
POL00026629
Annex 1
Stakeholder Forum Output
As a mutual Post Office we will be accountable to the public, customers. our people and their representatives for the delivery of the
Public Purpose
Public Purpose from the perspective of those who deliver
Post Office services.
Public Benefit Purpose
The Post Office exists to deliver trusted, vital and valued
products and services which are universally accessible
We will do this by
* Making a positive contribution to all of the communities we
seve
* Developing a dynamic, enterprising, ethical and
commercially sustainable business by continually evolving -
investing in our infrastructure, products, services and people
to ensure we secure the business for the future.
+ Keeping our customersat the heart of what we do, building
relationships based on trust and integrity.
+ Staying true to our core of financial, government and postal
services, continuing to modernise and expand into new
markets; ensuring we are always praviding our customers with
relevant, value for money services.
+ Providing a high quality, responsive service that offers choice
to meet the needs of our customers.
+ Inspiring, engaging and fairly rewarding our people.
Developing them to ensure they have the highest standards of
excellence and professionalism. They are proud to be a part of,
the Post Office.
‘The public purpose from the perspective of the Consumer
The public purpose of the Post Office
‘The Post Office is accessible and accountable to all its
customers, treating them fairly and offering them the
products and services that they need and can trust.
Key elements
«Promises to provide the services people want and treat people
fairly
+ Member involvement in the direction of the organisation
+Sustainabilty
+Future-proof business planning
«Ethical attitudes in its behaviour towards its customers and its
dealings with business partners
Public Purpose
Mark Davies
Page 5 of 12
18 February 2014
POL-0023270
POL00026629
POL00026629
Confidential
Annex 2
Public Purpose Research Quotes (from the Public Engagement Exercise)
“In our community it provides a much needed banking system. [Our] nearest town [is] 17 miles
away. It provides a person to answer many questions both financial and social.” Source:
Customers, qualitative questionnaire
“The Post Office plays such an important role in the communities they serve. They are often the
social fabric that glues the community together.” Source: Those delivering the service,
qualitative questionnaire
“I have given a score of 9 for both statements because I believe that the products and services
the Post Office provides are very important and affect the quality of life of many members of our
society.” Source: Customers, qualitative questionnaire
“It is not just a commercial set up like a supermarket the staff are normally local and care very
much about providing the ultimate service to their neighbours in the community.” Source:
Customers, qualitative questionnaire
“Always being open and honest, and always fighting to give customers the best customer and
best products and service.” Source: Customers, qualitative questionnaire
“PO provides access to key services associated with Government in a familiar and secure
environment The brand is one that most people recognise, and more importantly trust.” Source:
Customers, qualitative questionnaire
‘The Post Office is the heart of most communities, it's not just about the service we offer it is a
social experience for many people as well, sometimes the only time some people get out and see
anyone’ Source: Those delivering the service, qualitative questionnaire
‘It is a focal point of any community as it deals with all aspects, pensions car tax, insurance,
posting letters and parcels. It is vital to all our communities as it keeps people together.” Source:
Customers, qualitative questionnaire
“I highlighted ‘keeps’ as well, because you want to keep your customers. I think you've got to
focus on how to keep them, throughout every Post Office not just individually.” Source:
Customers, qualitative workshop, Cardiff
“It's all about involvement. If you cut out your customers from your decision-making processes
you're going to alienate them.” Source: SMEs, qualitative workshop, Cardiff
“Everybody looks for value for money. And you feel you get it at the Post Office.” Source:
Customers, qualitative workshop, Belfast
“What's relevant to one person isn’t going to be relevant to another. It feels like a descriptive
word that doesn’t really have any value.” Source: SMEs, qualitative workshop, Belfast
“This is about everybody being treated the same, Black, White Protestant, Catholic etc.“
Source: Customers, qualitative workshop, Belfast
Public Purpose Mark Davies Page 6 of 12
18 February 2014
POL-0023270
POL00026629
POL00026629
Confidential
“This is about more than just the service. It’s about the extra stuff — the meeting point, the
information point, the place that people can come and talk. More than the sum of its parts.”
Source: Customers, qualitative workshop, Belfast
“I kept thinking promises can be broken. I don’t know why, it was at the back of my mind so I just
didn’t like the word.” Source: Those delivering the service, qualitative workshop, Cardiff
“What you want may not be possible.” Source: Customers, qualitative workshop, Belfast
“Most of it is about things you need not things you want. Post Office is straight-up, its not going to
come up with these ‘Buy One Get One Free’ type thing.” Source: Customers, qualitative
workshop, Belfast
“It's about good standards, morals, fair. It's not like the banking service.” Source: Customers,
qualitative workshop, Belfast
“I like the word ‘secures’ the business. It’s got to be secure. I like ‘future’. No future, no
existence.” Source: Those delivering the service, qualitative workshop, Cardiff
“Its fine for them to grow, just keep the customer at the heart.” Source: Customers, qualitative
workshop, Belfast
“I don’t really care what it invests in its infrastructure; I just want the service to be provided for
me.” Source: SMEs, qualitative workshop, Belfast
“Every other part of the high street is evolving and sometimes Post Office feels archaic. Its
important it evolves as otherwise it become s obsolete.” Source: SMEs, qualitative workshop,
London
“I thought it doesn't really belong in the Public Purpose. The public going into any place, a shoe
shop or a Burger King, will expect the people there to be trained to do what they're doing. ”
Source: Those delivering the service, qualitative workshop, Edinburgh
“We don’t know what the future holds. We have a ten-year deal with the Royal Mail so maybe we
won't stay true to that, but we should stay relevant to providing services that customers want, that
are more important. ” Source: Those delivering the service, qualitative workshop, Belfast
Public Purpose Mark Davies Page 7 of 12
18 February 2014
POL-0023270
POL00026629
POL00026629
Confidential
Annex 3
The Public Purpose of the Post Office — draft
The Post Office is a commercial multi-channel business set apart by its public purpose: that of
providing customers with key products and services through an unrivalled community presence
across the UK.
Our public purpose is driven by a belief in the power of communities and the crucial role they play
in all our lives in bringing collective focus which supports the common good.
To deliver our Public Purpose we will run our organisation by following four principles:
1. Keep customers at the heart of everything we do
2. Build relationships based on trust
3. Treat everybody with fairness, honesty and respond to different people’s needs
4. Make a positive social and economic contribution to all the communities we serve
As an organisation we pledge to:
¢ Maintain ethical attitudes in all our behaviours
e Provide access to vital and valued products and services in our branches, online and on the
phone
¢ Invest in the organisation to secure the business for the future
e Listen to the views of customers, colleagues and those with a special interest in the Post
Office
¢ Develop and engage ourselves and our partners to ensure they provide the highest level of
service
Public Purpose Mark Davies Page 8 of 12
18 February 2014
POL-0023270
Confidential
POL00026629
POL00026629
Annex 4
Measuring our performance against the public purpose
The chart below sets out potential metrics for measuring our performance against the public
purpose statement.
Principle
Potential measures
Keep customers at the
heart of everything we do
Customer Panel
Customer Surveys and feedback
Government accessibility criteria (including for key groups)
Assisted Digital development
Customer Satisfaction Scores
Customer Helpline numbers results
Build relationships based
on trust
BREC Brand Study
Government Services offered
Engagement data/tools
Treat everybody with
fairness and honesty and
respond to different
people’s needs
Product Development: Customer Value Propositions
Customer satisfaction figures
Make a positive social and
economic contribution to
all the communities we
serve
CSR strategy/Your Charity
Community Enterprise Fund
Community index report
Investment in NT, Crown and Community branches
Product / Service awards won
Industry metrics
Pledge
Maintain ethical attitudes
in all our behaviours
Post Office staff values and behaviours
Engagement metrics
Provide access to vital
and valued products and
services
Product development and growth
Invest in the organisation
to secure the business for
the future
Strategy 2020
Community branch investment/development
Development of customer propositions
Business transformation
Listen to the views of
customers, colleagues
and those with a special
interest in the Post Office
Mutual Ways of Working:
- Post Office Advisory Council
- Branch User Forums
- Subpostmaster Engagement Survey
- Communications framework
-__Engagement metrics
Develop and engage
ourselves and our
partners to ensure they
provide the highest level
of service
Post Office Learning and Development Policy
Employee engagement survey
Public Purpose
Mark Davies
18 February 2014
Page 9 of 12
POL-0023270
POL00026629
POL00026629
Confidential
Annex 5
Example Public Purpose Scorecard
Example of the translation of the Public Purpose measures into a scorecard — it’s for illustration
purposes pending finalisation of the Public Purpose statement. It’s designed to demonstrate that
clear measurement tracked over time can be undertaken with respect to the Public Purpose.
Key Performance Indicator
Post Office Pu
Principle
Keep customers at the heart of everything we do
Customer Satisfaction Scores
As part of the Love Where
You Live Campaign we will
be producing an annual
Community Index Report
which will enable us to
measure the role of the Post
ity for key groups e.
BREC Brand Measures
Office in local communities
as well as other community
measures of interest to the
public and media.
Maintain ethical attitudes in all our behaviours
Post Office staff vaiues and behaviours
Develop and engage ourselves
Employee engagement surve}
Public Purpose Mark Davies Page 10 of 12
18 February 2014
POL-0023270
POL00026629
POL00026629
Confidential
Annex 6
Post Office Advisory Council
In parallel to our work defining the Public Purpose, substantial progress has been made to
establish the Post Office Advisory Council. The aim of the Council is to provide a formal
mechanism for the Post Office to engage customers, staff and stakeholders on matters of mutual
interest and to improve stakeholder understanding of, and engagement in, Post Office business.
A “call to action” advert asking individuals to apply to join the Council was placed in the national
press in early January. Membership opportunities were also advertised through our internal and
external channels, as well as via a range of stakeholder networks.
Applications closed on 31st January, with more than 300 received from a broad range of
customers, employees and sub-postmasters. A substantial number are of a very high quality. A
sifting process led to a shortlist of 30, with interviews to be completed by February 21.
In addition to the wide range of applications from customers, staff and subpostmasters, there has
been interest in membership of the Council from organisations as diverse as Google, the British
Youth Council, E-on and John Lewis.
We also have invited four key stakeholders to nominate one representative each to sit on the
council: CWU, CMA/Unite, NFSP and Consumer Futures.
The working group set up to establish the Council has a high degree of confidence that it will
represent a diverse range of interests, and provide a suitable balance of interests.
The proposed membership will be discussed with the Non Executive Directors on the POAC
working group and will be finalised by 28th February with letters of appointment sent shortly
afterwards.
The inaugural meeting will take place on 19th March. The aim of the first meeting will be to build
understanding of the role of the Council and Post Office strategy.
Post Office Advisory Council - Shape
Category Potential member
1 I Customer 1 Pensioner
2 I Customer 2 Ebayer
3 I Customer 3 SME
4 I Customer 4 SME
5 I Customer 5 Working age benefits claimant
6 I Customer 6 POL Website user
7 I Customer 7 FS Customer
8 I Post Office Employee - Crown
9 I Post Office Employee - Head Office
10 I Subpostmaster - Main
11 I Subpostmaster - Local
12 I Multiple Tesco
Public Purpose Mark Davies Page 11 of 12
18 February 2014
POL-0023270
Confidential
13 I Multiple McColls
14 I Business organisation John Lewis
15 I Commercial / Marketing Individual I E.ON
16 I Financial Individual
17 I Digital individual Google
18 I Special interest Group British Youth Council
19 I Special interest Group
20 I Voluntary/Community Leonard Cheshire
21 I Voluntary/community
22 I Academia/Think Tank Royal Society of Arts
23 I CWU nominee
24 I Unite nominee
25 I NFSP nominee
26 I Consumer Futures nominee
Public Purpose
Mark Davies
18 February 2014
POL00026629
POL00026629
Page 12 of 12
POL-0023270
POL00026629
POL00026629
POST OFFICE LTD BOARD
Network & Sales
1. Purpose
1.1 To update the POL Board on progress with Network Transformation, discussions with
the NFSP and Crown Transformation.
2. Network Transformation
2.
The programme is on target to meet this financial year’s original targets, beating the
reduced targets that were foreseen as a result of the announcement of the revised
strategy. At 31% January, there were 2730 contracts signed against a target of 2571.
This includes the deal to convert 191 McColls branches to the local model, which is
confirmation that the local model is attractive to good retailers. As well as the ongoing
pipeline of new operator and independent converter contracts, further deals are under
discussion with Blakemore and Tesco for their Locals, and One Stop and McColls for
their remaining Mains.
2.2 At 31% January, there were 1577 Main and Local branches open. The programme is
confident it can deliver the required beat rate of 47 a week to meet the year-end target
of 1950. We have placed a very strong focus on openings this financial year, so a peak
beat rate is now scheduled for late February and March of consistently over 60 a week,
which would give us over 2000 openings.
2.3 As expected, there was a big increase in agents completing the retail surveys just
before the deadline at the end of January. At survey close, over 8,000 agents had
submitted — a 96% response rate, which was at the upper end of expectations. A whole
series of communications were used over the two month period; this included letters,
Horizon alerts, Subspace online, branch focus articles, field engagement, workshops
and repeated outbound calls as the deadline approached. A further period of one week
is being used to try once more to contact the 300 or so agents who have not yet
responded.
2.4 The programme is currently analysing the results of the survey in detail. Overall results
are in line with expectations; the most positive outcome is that the number of branches
whom we may need to advertise compulsorily is around half the number previously
projected. This is both because new branches have come forward to convert, while
also many branches with poor retail have recognised voluntarily that leaving the
business with enhanced compensation is their best option.
2.5 Locals who the survey shows have limited retail but who have not volunteered to leave
will either need to submit their plans to create a strong retail or Post Office will advertise
their branches. Careful engagement is planned to handle these branches over the
coming weeks, while the Communications team is prepared for the expected media and
stakeholder interest.
2.6 As planned, the closure of the survey allows the programme to refine its estimates for
future volumes — and therefore to refine the Stratplan targets with BIS. Following these
conversations during February/March, targets will be set for the next financial year.
NT, NFSP & Crown Kevin Gilliland Page 1 of 4
February 2014
POL-0023270
POL00026629
POL00026629
3. Long term relationship with the NFSP.
3.
We are progressing towards completion the draft MOU prepared in late 2013 and the
subsequent framework agreement. We have had a series of meetings over the last
couple of weeks with NFSP and the main focus of these has been to resolve the main
issue raised, namely establishing pre-agreed parameters which enable the NFSP to
maintain their independence and make challenges to Post Office whilst receiving
payments from us that represent their main source of income.
3.2 The original draft MOU made reference to NFSP not engaging in activities which are
actively detrimental to the Post Office. NFSP were looking to put some parameters
around this, as were we. The key point here is that whilst we would not expect them to
be silent on all issues, anything that undermines our commercial position and the
implementation of NT would not be acceptable.
3.
It is clear that NFSP want to complete the deal and we are currently considering with
the Post Office legal team which provisions can be included in the MOU to (i) address
the issue outlined at 3.2; (ii) refer to a dispute resolution/escalation process that will be
detailed in the subsequent framework agreement; and (iii) if a dispute cannot be
resolved following the DR process, provide termination rights for Post Office in the
event of NFSP disclosing confidential information or inciting subpostmasters to breach
their contracts, and/or engaging in activity opposed to Network Transformation. The
position on these points has been discussed with the NFSP but not yet agreed.
3.2 George Thomson seems committed to completing the rest of the discussions (primarily
in conjunction with our respective lawyers) to enable signing of the MOU in early March.
Our current thinking is that the subsequent framework agreement will be launched
publicly after NFSP conference (i.e. in June) — this minimises the possibility of
challenges and tensions in the most sensitive period around March and April.
3.3 To enable this, the detailed framework agreement will be drafted through the course of
March/April/ May. This agreement will outline in detail the Dispute Resolution Process,
joint review process and support/grant payment mechanisms.
3.4 As well as the long term agreement, George Thomson's main focus externally since
special conference has been on ensuring that his team are delivering support to the
Network Transformation workshops Post Office ran in December and January.
Feedback from Post Office teams at all of these events is that this support from NFSP
has been very strong. They have been ‘on message’, proactive and prepared to stand
up to challenges from attendees.
3.5 We are working through with them how we engage on other aspects of the
implementation. This is primarily through: joint workshops to define their role in support
for delivering non-viable exits; identification of potential new locations for volunteer
exits; participation in community/commercial transfer/model type review panels; and
working groups in refining model design, models product set and opening hours.
3.6 This is likely to take place in earnest now the retail survey is complete. NFSP are
updated regularly on the statistics via the NT team. These workshops will also enable
us to keep in dialogue around any issues they have (largely coming from specific offices
and anecdotally) around the shape of the network (i.e. number of Mains vs. Locals) and
model complexity (i.e. keeping them informed of our intent towards product
simplification).
NT, NFSP & Crown Kevin Gilliland Page 2 of 4
February 2014
POL-0023270
POL00026629
POL00026629
3.7 The new Network Transformation structure includes a dedicated team analysing data
on each model’s performance to refine and continue to develop our thinking. George
Thomson has had an initial meeting with the new General Manager Network
Transformation, lan Kennedy. Model performance information will be reviewed as part
of the programme and the NFSP will be able to input into and shape any action that is
needed following this analysis. He is happy with this level of engagement.
4. Crown Transformation
4.
The full programme of branch transformations to the new Crown branch blueprint got
underway in September 2013. The programme delivered 46 completed transformations
by the end of Q3 against a target of 45. The programme is confident that the target of
117 transformations by the end of the financial year will be met.
4.2 Staff training to support transition to new ways of working in transformed branches is
well underway, with over 750 staff trained as at 31st January, and an average of 80
staff a week currently going through CTP’s two day off-site training programme.
4.3 Significant progress has been made in the process to deliver cost savings required in
the 292 Crown branches that are being retained. A Voluntary Redundancy (VR)
preference exercise was oversubscribed and we have used this to work with the CWU
and select applicants for redundancy. All applicants have now been notified whether or
not they have been selected for VR. Staff savings total 503 Full Time Equivalents —
meeting the target of 500 needed to hit our £12.7m target for counter staff savings.
4.4 Securing CWU support for the redundancy process required extensive engagement
during the talks of the last two months. The programme's confidence in its required staff
savings has increased significantly now that the VR offers have been issued, and that
this has been done with CWU support.
4.5 A large proportion of the staff saving benefit is linked to the rollout of a new NCR Self
Service kiosk which will replace the existing Wincor Post & Go kiosks in greater
numbers and with a wider product offering. The first new kiosk has been in live
operation in the Model Office since November. A small number of defects emerging
from live testing, together with a small number of changes required by Royal Mail in
order to secure their concurrence are being addressed prior to commencing the rollout
to branches..
4.6 Branch mergers and relocations at Houndsditch, Derby, Sheffield and Milton Keynes
were successfully completed in May and June 2013. Five other mergers have entered
the public consultation process since then (Brazennose, Stockwell, Kennington Park,
Highbury / Islington, and Sutton). As consultations complete, feedback is reviewed and
engagement made with Consumer Futures before any announcement is made.
4.7 The franchising project has moved on significantly since the last update, with 22 of the
70 branches in scope to franchise now forecast to ‘go live’ with new partners by the end
of March. The first franchise branches under CTP (Cannock and Uckfield) opened to
customers on 30th January. 32 franchise opportunities were re-advertised in November
2013, creating c150 new expressions of interest which the franchising team are working
through.
NT, NFSP & Crown Kevin Gilliland Page 3 of 4
February 2014
POL-0023270
POL00026629
POL00026629
4.8 It should be noted that we are seeing an unprecedented demand for detail from
Consumer Futures on the design for each franchise branch, as well as formal requests
for information used to justify the original decisions made as to which branches would
be franchised versus retained. The programme is working with the Exco and legal
teams to find a middle ground on information sharing with Consumer Futures, such that
it does not introduce new programme risks, nor set onerous precedents for future
programmes.
4.9 Despite the progress of the programme, the Crown P&L for FY 13/14 is likely to outturn
at around a £27m loss versus our target of a £23m loss.
e On income, performance has been lower than projected for this financial year.
The £23m target was dependent on an increase in income of £2m, however we
now forecast to see a decrease in income of c£2m, resulting in a net gap of
c£4m against our start of year target.
e Oncosts, there have been a number of variances, both positive and negative
from the start of year plan. Although there have been delays to in-year staff
savings, these have been mitigated by other cost savings not in the start of year
projections.
4.10 The programme remains high risk but our target of a break-even P&L run rate by the
end of FY14/15 is still achievable. To achieve this will require income and central cost
targets to be achieved in line with next year’s budget.
Kevin Gilliland
17" February 2014
NT, NFSP & Crown Kevin Gilliland Page 4 of 4
February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
POST OFFICE LTD BOARD
Chief Executive’s Report
1. Mails
While mails income performance improved in January and was £0.9m above budget for
the month, overall the year to date figure of £289m remains £18.7m behind budget (94%).
We are targeting further performance improvements in Q4 through additional staff
incentives for Special Delivery and Parcel Force Worldwide products, active prospecting
to attract more small business customers, flash campaigns at Valentine's Day and
Mother's Day and a tie-in with RM’s ‘We Love Parcels’ campaign in March.
We now have over 19,000 Drop & Go customers, with annual average expenditure on
each account of £1,440 which has generated income of £1.9m over the year to date
(125% of budget). A network incentive has been agreed to drive further sign-ups, with a
focus on both encouraging regular account usage and capturing data to support a more
targeted approach to selling mails and other services to SMEs.
We are expecting to launch the Ebay returns service in July (subject to them meeting their
own development timetable), which will give us non-exclusive access to their projected
volumes of 17 million items per year. In addition, Amazon, ASOS and a number of
smaller retailers have agreed in principle to use our Click & Collect service and are now
working on the technical developments required for integration, which should mean they're
ready for launch by the summer. Landing these retailers will be essential to underpin the
assumption made in our 2014/15 budget that we will deliver a £15m increase in income
from collections and returns. We would still like to see a more urgent and collaborative
approach from RM to securing other retailers in this fast moving marketplace, a point
which was emphasised at a joint workshop last week with senior RM executives (including
Emily Pang, who is close to Moya Greene). We will keep the Board closely updated on
developments with these discussions.
2. Financial Services (FS)
The current account pilot was successfully extended to 110 branches on 20 January, with
balanced PR coverage and smooth implementation of the staff training programme and IT
developments. Applications have been averaging at over 30 a day, in line with our initial
expectations for the extended pool of branches, and we now have over 1,400 accounts
open in total. We are closely monitoring the rate of sales conversions and providing
branches with additional support to improve their customer targeting and data capture
processes to reduce the number of failed applications. An outdoor advertising campaign
commenced in the relevant areas on 10 February and we are launching a 6 week gift card
switching incentive to encourage primary account holding.
The full year outturn for mortgage lending is forecast to be around £1bn — short of the
original target of £1.2bn but still a substantial increase on last year’s figure of £675m and
on track to deliver our income target of £3.05m for the year. Importantly the sales
momentum is continuing to build as we approach the new financial year, with the
additional value generated by the mortgage specialists and wider FS sales structure
starting to take effect. This was demonstrated by the fact that in January - normally a
CEO Report Paula Vennells Page 1 of 3
February 2014 19 February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
quiet month for mortgages —- we achieved a record £18m of in-branch applications,
contributing to a total of £102.5m (including direct applications) which was just ahead of
budget. Alongside the TV, digital and press advertising campaign launched on 20
January, we will be extending the use of direct marketing activities for mortgages, credit
cards and other FS products, incorporating the lessons from our data analytics trial which
improved the customer response rate from less than 0.01% to 4.8% with the support of
scripted follow up calls.
Following ratification by the FS sub-committee, we have now finalised the new contract
with MoneyGram for international money transfers, which should generate additional
revenue of £34m over the next 7 years.
We have made good progress in our bilateral negotiations with NS&I on the extension of
the Premium Bonds contract. Once these discussions are completed the next step will be
for NS&I to negotiate with Treasury the underpinning funding arrangements. While the
precise outcome of this process remains uncertain, we are increasingly confident that a
satisfactory solution will be found.
3. Government services
It appears that a degree of consensus was reached on the continuing need for a POCA
style product beyond 2017 at a ministerial meeting on 29 January attended by lain
Duncan-Smith (Secretary of State DWP), Vince Cable (Secretary of State BIS), Danny
Alexander (Chief Secretary to the Treasury), Steve Webb (Pensions Minister) and Jenny
Willets (Post Office Minister). However, there is still clearly an element of DWP that would
prefer to keep their options open for as long as possible, and so the final shape of any
announcement before the election remains to be determined.
We are continuing to work with DWP officials in the meantime to develop a proposition
that best meets their requirements while being commercially viable for the Post Office. In
the case of pensioners this is likely to be a simple product much like the existing POCA,
which can be procured under our existing framework contract for counter services.
However, for working age customers who will qualify for Universal Credit DWP remain
interested in a product with additional budgeting facilities — but they are not yet committing
the long-term funding required to make this commercially sustainable and it would fall
outside the scope of our framework contract. We are therefore proceeding cautiously on
this issue, engaging constructively where we can but not making commitments that could
prove to be unprofitable. Given the wider uncertainty over the timetable for Universal
Credit, it may be that DWP change their thinking on this in any case.
Following a series of meetings with DVLA, including with their new Chief Executive (Oliver
Morley) on 11 February, we have agreed to work together in order to explore options to
return our contract with them to the agreed level of profitability (11.8%), offsetting the
impact of the proposed removal of tax discs and other volume shortfalls. This will start with
a full day commercial workshop at the beginning of March. While we are reassured by
their commitments, we will need to maintain the pressure on them to ensure this translates
into tangible improvements in the contractual terms.
CEO Report Paula Vennells Page 2 of 3
February 2014 19 February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
4. HomePhone and Broadband
« Call centre performance has been stable throughout January and February with over 80%
of calls answered in less than 20 seconds and abandoned calls less than 5%, in line with
the SLA targets. There has been a slight increase in the number of abandoned calls in
February as we ramp up the collections processes and we are also closely monitoring
technical support due to the flooding issues across the country. Whilst the levels of
complaints is still higher than we would like, the number of new complaints continues to
decline across all channels and are being dealt with within the agreed timescales.
e Levels of sales are beginning to pick up as confidence recovers in the service.
Encouragingly, we are seeing strong growth in our online sales where we are running 60%
above target, driven by improvements in the customer journey, endorsements from Martin
Lewis of moneysavingexpert.com and the trialling of pay per click advertising which has
delivered encouraging preliminary results. We will continue to push this channel during
Q4 and the next financial year.
e The re-launch plan for the service has also been finalised, starting with a £50 bill credit
offer for customers signing up from 31 March. New pricing will come into force from 14
April, with HomePhone line rentals increasing by £1 per month to £13 but our combined
phone and broadband rentals reducing by up to £1.80 per month. Together with a re-
alignment in our calls pricing, these changes will improve the competitive positioning of
our broadband services and increase our profitability across the portfolio whilst
maintaining our price differential with BT on HomePhone. We are also running sessions
with the network to restore confidence and drive engagement with the product set,
including through a new offer where colleagues can receive free broadband when they
take our phone service.
CEO Report Paula Vennells Page 3 of 3
February 2014 19 February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
POST OFFICE LIMITED
Performance Report
January 2014
Produced By : Financial Control and Compliance Team
For Queries & Comments Contact : Sarah Hall or Kam Bassra
CONFIDENTIAL
Commercially Sensitive and not for onward circulation
This document contains commercially sensitive information that is likely to cause damage in the event of unauthorised disclosure
It shor e copie : s entire purpese and on! neople who understand the consequences of
12 have signed a josure agreement
Jt is normally only circulated to the Senior Leadership Team and Finance Professionals within the Post Office,
Period 10 Performance Pack - Chris Day 26th February 2014 Page 1 of 11
POL-0023270
POL00026629
POL00026629
Strictly Confidential
( >)
Contents
Page
Headlines 3
Profit & Loss Statement 4
CFO High Level Profit Forecast At Period 10 5
Crown Profit & Loss Statement 6
Cost Management update 7
Cashflow Analysis 8
Business Scorecard 9
Network Transformation Scorecard 10
Change Management Overview 11
X J
Period 10 Performance Pack - Chris Day 26th February 2014 Page 2 of 11
POL-0023270
Headlines Strictly Confidential
January 2014
Va
Profit & Loss
P10 operating profit of £17.3m was £7.0m favourable to budget.
* P10 net income was £0.4m adverse with mails (excluding Retail and Lottery) £0.8m favourable so showing a small
main products with a shortfall against budget continue to be second class labels £0.8m, Lottery £0.7m and ATMs
£0.5m,
* P10 costs were £6.3m favourable comprising of £0.6m lower staff costs due to bonus provision reduction, £3.1m
favourable subpostmaster costs due primarily to lower sales and £2.5m lower non staff costs due to purchase order
scrutiny carried out in the period resulting in a write back across non staff and projects costs for work completed
below its original cost.
budget (mainly Mails £18.8m and Lottery £6.1m)
* YTD staff costs are on track although the managers’ unconsolidated lump sums in lieu of pay award are yet to be
confirmed and accrued.
£3.3m (parcels), £2.2m WHS provision and £2.7m budgeted for 2013-14 but incurred in 2012-13
* YTD non people costs were £10.7m favourable to budget, driven by £6.3m VAT recovery relating to H1 and the last
to Horizon costs originally budgeted for in the prior year.
* YTD Project costs were £3.8m favourable with the underspend driven by the movement of separation costs to
exceptional iterns and some client funding and delays compared to original plan in Financial Services
Following a P10 review of risks and opportunities the CFO FY PBIT forecast was increased to £110m driven by cost
improvements despite the continued income shortfalls.
Cashflow
The YTD cashflow was an inflow of £189m which is £154m favourable to the P10 budget of £35m and £55m
favourable to the latest FYF of £134m. The main driver for the favourable variance is the slower than planned capex
and exceptionals expenditure on the transformation projects.
Crown P&L - YTD
The Crown loss is £2.1m adverse to budget. Income was £2.2m adverse and costs were £0.3m adverse, whilst the
share of JV was £0.4m favourable.
Note: The non staff figure now consolidates Interbusiness into this one line reflecting the change in relationship with
Royal Mail which is now treated as a third party supplier.
Ne
recovery from P9, The main drivers of the adverse variance were Financial Services (£0.9m) and Lottery (£0.7m). The
YTD operating profit at P'10 was £103.4m, which was £18.6m favourable to budget of £84.8m, and flat with prior year.
* YTD net income performance of £728.3m remains the key concern with an adverse variance of £28.7m compared to
+ YTD subpostmaster costs were £30.5m favourable to budget, mainly due to lower sales income £18.1m and sales mix
year and £6.1m due to the scrutiny of purchase orders mentioned above, which is offset by the adverse variance due
~
7
Period 10 Performance Pack - Chris Day
26th February 2014
POL00026629
POL00026629
Cumulative EBIT pre exceptionals
£m
200 Actual ee Buiet
80
60
40
20
0 T T T T T
VP YY wy 2 1D ny AY
SSEEEESEEERS
Total Net Income - Budget to Actual Bridge
£m
7574 ] 0.4
25.1) (0.8) (1,9)
es) 9) a 728.3
2013-14 YTDMails & Retail Financial Government Telephony I Other 2013-14 YTD
Net income Services Services Net income
Budget ‘Actual
Financials
Total Net Income (excl NSP) £m (Bonus)
Operating profit £m (Bonus)
Free cashflow £m
Crown Profit (Loss) £m (Bonus)
Non Financials
Queue time % <5 minutes - Top 1k branches
NT Conversions - (Mains & Locals) (Bonus)
Page 3 of 11
POL-0023270
Profit & Loss Statement Strictly Confidential
January 2014
Current Month Prior Year Period Year to Date Prior Year YTD Full Year Prior Year IPrior Year
lem Actual Budget Variance I Actual Variance I Actual Budget _ Variance I Actual Variance} , 07. Budget Variance I Outturn I Variance
[TOTAL GROSS INCOME 38-883 as) I 84a 23 I 6220 8524 Bad a7) I 9988 i0ia2 710236
Cost of Sales (e3)__(9.9) 11 (03)___15 (93.6__(95.01 (90) 54 I (112) (132.2) (224.2)
[TOTAL NET INCOME 78.0 784 (0.4) Th 39 728.3 7571 750.8 (22.5) 887.6 900.0 902.4
Staff Costs (22.4) (23.0) 06 (24.0) 16 (216.0) (216.5) L - (213.2) (2.8) (259.2) (256.1) (257.4)
Subpostmaster Costs (38.7) (41.9) 31 (39.3) 06 (376.4) (406.5) I= (394.9) 18.9 (468.9) {480.0} (478.1)
INon-Staff Costs (including interbusiness) (29.5) (22.0) 25 (23.3) 38 (209.4) (220.1) b3 - (207.4) (2.4) (261.2) (257.6) (260.7)
[Depreciation (0.0) (0.4) O1 (0.1) 00 (0.3) {o.8) (os) 05 (0.8) (0.9) (0.4)
Total Expenditure (pre POOC) (80.6) (86.9) 63 (86.7) 61 (801.8) (843.9) L (816.3) 14.5 (990.1) (994.5) (996.7)
FRES - Share OF Operating Profits 13 14 (04) 14 (os) I 295 2243 I 236 09 I 330 315 319
BIT - BAU = (ayy $4 Gia 38. [3.97 158.67 Gea) 7a) I (69.5) (63.0) (62.4)
lOne off Project costs (POOC) (0.6) (1.8) (4.3) { (21.9) (25.8) (34.3) 12.3 (28.5) (35.0) (53.4)
= sts TTD ae ee OC
Network Payment 19.2 19.2 19.8 (0.6) 169.2 169.2 174.3 (5.4) 200.0 200.0 210.0
ee EE EEE.
Interest 02 (0.5) 07 OL 0.2 27 40) I 6m (0.9) 36 2.0) 6.0)
Impairment (14.4) (17.4) 3.0 (8.3) (6.4) (73.7) (130.6) fe I (48.2) (25.5) (240.0) (167.5)
IExceptionals & Redundancy & Severance Costs (21.4) (18.4) (3.0) (5.6) (15.8) (17.4) (251.6) (45.4) 277 7.9) (184.4)
Government Grant Utisation 427-223 20h 98 329 I 228 2760 652 1566 I 2531 3469
ProfitLoss) On Asset Sale 09 090 09 00 09 34 09 S] eo 14 I 25 00
[Colleague Share/ Business Transformation Payments 0.0 0.0 0.0 0.0 0.0 00 0.0 I os 0.0 0.0 0.0 0.0 00 _
I Profiy/(Loss) Before Tax Se FS OCW TA Rd PC
Period vs. Budget (ro vs. Budget (a0 vs. Prior Year
Operating profit (EBIT) of £27.3m was £7.0m
favourable to budget.
BAU was £5.8m favourable:
* Lower subpostmaster pay of £3.1m. £1.3m
related to lower sales and £0.9m related to
a better than expected VAT recovery rate
and £0.6m WHS provision release,
+ Lower non staff costs of €2.5m due
primarily to the scrutiny of purchase orders,
offset by increased marketing costs, and
* Lower staff costs of £0.6m reflecting the
reduced bonus provision
Offset by.
* Lower income of €0.4m, due primarily to
Financial Services.
One-off variance of £1.2m favourable relating
to slower POOC expenditure in the period.
Below EBIT
Impairments were favourable due to slower
progress than plan on NTP.
Operating profit (EBIT) of £103.4m was £18.6m favourable to budget.
BAU variance of £14.7m favourable was mainly due to:
* Lower subpostmaster costs of £30.5m mainly due to; £18.1m relates to lower sales income,
£3.3m sales mix (parcels), £2.2m WHS provision and £2,7m budgeted but incurred in 2012-13,
‘+ Lower non staff costs of £10.7m due to VAT recovery relating to H1 and prior year of £6.3m,
purchase order efficiency drive of £6.1m as in period commentary, offset by Horizon costs
originally budgeted for in prior year, but incurred this year,
+ Lower staff costs of £0.5m, and
‘s Higher FRES JV income of £1.3m,
Offset by:
Lower income of £28.7m, mainly Mails £18.8m and Lottery £6.1m, Mails performance was
impacted by lower parcel volumes following the RM price changes in April, but new parcel formats
have been introduced at the end of October. Lottery continues to underperform.
Project One-off variance of £3.8m favourable. The underspend is driven by the movement of
‘Separation costs to exceptionals and slower spend in previous periods.
Below EBIT
Exceptional costs are favourable mainly due to a £102m unbudgeted credit relating to the change in
pensions terms. The underlying variance is due te slower pace of capital spend and operating
exceptionals, including agents compensation, compared to budget. Government grant utilisation
follows this trend, but also included utilisation against the remaining 2012/13 exceptional costs. The
profit on sale related to the lease surrender of Midway House.
Ne 7
Operating profit (E8IT) of £103.4m was £0.1m favourable to prior year.
Like for like BAU adverse variance of £7.1m was mainly due to
+ Lower net income of £22.5m. The variance versus prior year is driven primarily by the stamps
buy forward ahead of last year’s price increase and lower parcel volumes this year. Government
Services also decreased as a result of lower rates from the new DVLA contract and falling Card
Account customers. NS&I income fell as NS&I migrated its customers to its online channel.
* Higher staff cost of €2.8m adverse to prior year due to higher pension costs, pay awards and
increased headcount, and
‘Higher non staff costs of €21m due to increased IT costs (mainly Horizon), timing of marketing
spend, and the removal of the FX bureau rebate received in H1 last year partially offset by the
increased VAT recovery this year.
Offset by:
+ Subpostmaster costs £18,9m favourable variance to POL; £11.9m due to lower sales,
predominantly Mails including buy forward pre price increase, £2.8m lower fixed pay from
Lunfreezing the Core Tier Payment and roll out of Locals and £3.2m accrual release relating to
the DVLA rate accrual, partially offset by £1.0m increase in Mails Segregation payments,
‘Higher JV income of £0.9m,
Non like for like favourable variance of £7.2m was due to:
* Lower project costs of £12,3m, and
* Lower Network payment of £5.1m,
Below EBIT
NT exceptionals including compensation are ahead of the equivalent pace in 2012/13. 2013/14
grant utilisation includes £30m against 2012/13 exceptional costs not covered by the 2012/13,
grant,
\ /
Period 10 Performance Pack - Chris Day
26th February 2014
POL00026629
POL00026629
Page 4 of 11
POL-0023270
POL00026629
PoLove26629
. stiety Confidential °
CFO High Level Profit Forecast At Period 10 ¥
January 2014 Period 10 Explanation of items P10vP9
£m Income JV Income Costs NSP EBIT BIT var
[Eaaget fi 9007 32030) 200 302
Downsides
Mails income (27) (27) Worsening trend requires greater recovery action. (4)
Lottery income a (7) Continuing trend wth no mproveret °
Gov't Serves income @) (6) NIDA income -£2m; POCA £m, Metoring Elm °
FS income 8) (5) ATM-£2m, unassigned income -E2m,Oter products -€2m °
Other income/ POC contingency 6) 5 oO Income challenge £5m matched with POOC budget. oO
Staff efficiency (2) Original Co agreed task (vas £3m) 0
Staff cost risk on phasing of CTP (1) Delay to VR eters during urion negotiations costing £00k pr week °
Fujtau costs @ (2) Expected ast yar °
IT&C efciency tack @) (3) States accepted task °
Mails segregation penalty @) (3) Full likely penalty taken but offset by mitigating action to negotiate 2)
income bow
Bonuses (1) a PY flowthrough oO
Agents pay - sales impact 2 2
NT Locals delays @ °
Agents segregation payments (2) tm budgeted and £2m expected °
POOC overspend (2) Underlying overspend - Sparrow 0
VAT on expenditure with Royal Mail (1) RM charge incur VAT From October net of saving fom VAT recovery °
rate improving in H2
Non staff savings task (2) _ Finance task rot underpinned
(a) 8 (40)
Mitigating actions
Mais income - dangerous goods 6 6 Additional income, not as high a8 £7.8m onignally expected w
Mails income - format changes/campaigns: 2 2 ‘Shoebox from end Oct and international conformance reduced in P10 (4)
reflecting performance
Mas segregation 3 3 Income to negotiate for cerecting action (to oft penalty above) 3
Lotery price rise (0 Camelot ace rice from 3rd October has not had desired impact 0
Gov't - UKBA Cost of Sales correction 0 Now confirmed no correction required @
Govt - volume trends 2 2 Passports ard UKBA AEI volumes °
DVLA change control 1 1 Release income for work elated to tax de removal 1
(0A 1 1 Opportunity ta reclaim investment cnt from Gort programme 1
FS income ~ Santander volumes 2 2 Horizon volumes higher than clients now taken and comaleted 0
FS income ~ Junction deat 3 3 £25m backdated adiionl commissions when Junction del signed. °
Deal now signed and booked in P&
FRES upside (higher ATV's) 1 1 Aligns to FRES budget, could be further upside as higher ATV's - on 0
track
PhotoMe income 1 1 £m backdated income naw mostly recognised °
Supply Chain external income 2 2 Volume relate °
ITEC savings 3 3 °
Telephony implementation 2 2 drmanth saving from amortisation of setup cots, due te delayed °
migration. Taken in ¥ID
Agents mix 5 5 Budgeting point an mie °
Agents DVLA timing 3 3. _DVLAlump sum payments were acrued lat year but budget dl nat °
assume this n YTD postion
Pooc 5 5 Separation to exceptional, Cust Mgt to capex °
Contingency Removed at P20 as the forecast was refined 3
Agents VAT 1 1 o
Agents pay ~ sales recovery a) (4) Esimated 4
Agents WHS provision utilisation 3 3 Provision relating to original contrac uid but notin budget 3
Other savings 1 1 1
VAT upeide 5 5 Impact ot higher recovery rate in 12-13 and H1 13-14 now fly 2
brought forecast
2 2
[Latest View at P20 i 875 33 (998) 200 io E f I] Eee
Period 10 Performance Pack - Cris Day 26th February 2014 Page 5 of 1
PoL-0023270
POL00026629
POL00026629
Crown Profit & Loss Statement “
January 2014
Period Prior Year Period. Year To Date Prior Year YTD Full Year Prior Year
lem Actual Budget Variance ‘Actual Variance I Actual © Budget I Variance I Actual Variance I Q3 Forecast Budget Variance I Outturn
Income and Distributions
Variable income
Mails 36 36 (00) 32 04 33736730) I 378 4.8) 397 43235) I aa
~ Financial Services 24 23 01 22 02 m2 239° «02 I 25745) 285 282 03 304
- Government Services 21 18 03 22 (0.0) 178 16.5 13 20.9 (3.4) 212 20.2 10 26.4
= Telephony 01 01 (0.0) 01 (0.0) 06 09 = 3) I 12 (05) 08 13 (0.4) 13
Fixed income 27 2.2 o5 24 03 215 20.6 09 23.5 (2.0) 25.5 24.8 O7 28.2
Gamma/ Other 06 09 (0.3) 11 (0.5) 10.0 123 (2.3) 91 10 12.0 147 (2.7) 10.9
Renewals and Retentions 16 16 (oo) 14 02 155 4470987 68 15 1778 m1
c ding Gammalother) I 143.0425) 0S II ides) 0.50] 4es41 ly aes.6n medi] 4268 ln (a4)) Ip aeee) ll asoa) (so) I dese
Direct Product Costs (0.3) (0.3) {0.0) (5.2) (5.2) (0.1) (5.9) 07 (4.8) (5.0) 01 (8.3)
Branch costs
= Staff aoa) 9.9) (02) (11.0) 09 12) 905) 07) I 974 ~~ 62 (2065) (2060) 04) I (117.9)
- Property (5) (33) (03) (3) (02 I (296 = (298) 02 I (293) (04) (353) (354) 00 (69)
= Other branch costs (03) = 03) (00) (0.4) 00 5) G2) 03) I 5) 10 (43) GD 04 (63)
Infrastructure costs (1.8) (1.7) (0.1) (1.9) o1 (18.5) (17.9) (0.7) (18.1) (0.4) (22.7) (22.9) 01 (22.5)
Allocated central costs (9) (aa) 02 (07) (02) 67) 70) 43 I 63) (04) 9.0) eo oo I 77
Total Expenditure 7a) (46.7) (03) I 80) 10 I (453.9) (53.6) (0.3) I (1606) 67 (282.6) (482.2) (04) ‘I (499.7)
JV Share of Profits 04 04 (00) 04 00 86 82 04 I 74 11 96 91 05 96
[Statutory PBIT Cue a Gel G2) 15a.) 9.8) 2] (26a) ae (268) (23.0) 3.8) I 7.0)
‘Summary
Income £2.2m less than plan.
+ Mails - An on target performance was delivered in the month as the phasings issues from Period 9 reversed. The Retail income gap was closed further as full opportunity was taken to maiximise sales of
commerative coins with focus activity within the Chinese community.
+ Main drivers of favourable Government income are UK Visa & Immigration (UKVI) (due to backlog in applications) £0.8m, ID Services £0.8m. Passports delivered an uplift in P10 of £0.2m as the main sales
spike got underway brining the YTD position to £0.4m, this is offset by Motorist services (DVLA Licences and AEI) which are £0.6m behind target.
+ Financial Services - Savings continue to deliver an above target performance with all products in the portfolio delivering on target performance in the month.
Costs are £0.3m higher than plan:
+ Staff overspend due to delays in CTP partially offset by savings from industrial action.
* Other mainly driven by VAT recovery and a purchase order efficiency drive.
FYF is £3.8m adverse to budget reflecting the lower Mails income.
Period 10 Performance Pack - Chris Day 26th February 2014 Page 6 of 11
POL-0023270
Strictly Confidential
Cost Management update
January 2014
Cost reduction opportunities: Confidence and value FY14/15
Progress since P9 update £50m
Value and confidence an
+ £1.6m of Marketing savings in FY14/15 have been re-allocated to fund marketing for £40m I
the new mobile phone offering and have been removed. : m Low
+ Negotiations have restarted on Official Mail (following Royal Mail disengagement) to £30m
finalise price reductions that will deliver savings of £1.2m in FY14/15 Ae) 1 Mediurn
+ The net impact on Value in FY14/15 is a decrease of £1.6m to £42.1m. £20m I High
Delivery and governance i)
Analysis of FY14/15 budget submissions shows that, of the £42.1m of potential savings £10m
identified, £34.2m has been incorporated (82%). The change from the previous £36.2m
is principally due to the marketing reallocation noted above. £0m
The graph to the right shows a "Delivery Status” based measure which analyses: Sep13 Oct13_ Nov13 Dec13 Jan14 Feb14 Mari4 Apr 14 May14 O1-Jun
+ Initiatives that are in delivery (i.e. savings are accruing): Currently. initiatives ae .
contributing £6.2m of cost reductions in FY14/15 are already in delivery. £50m FY14/15 cost reduction initiatives, by stage of delivery
+ Initiatives that are in the budget, but are not yet in delivery.
+ Initiatives that are at an early stage and are not in the budget. £40m,
This will be used to illustrate the impact of initiatives as they are delivered in FY14/15 ' Potential early-stage savings identified, not
and to track the development of early stage ideas into delivery. 30m in Budget
Next steps are to finalise implementation plans for all initiatives commencing Q1 oO ‘© Savings from initiatives in FY 14/15 Budget
FY14/15 and to consolidate people-change plans for an organisation-wide view. o but not yet in Delivery
Strategic initiatives for FY15/16 and beyond £20m Saunoef . pyi4/15 Budoct
The strategic cost transformation programme is making good progress in defining our nae due udget
requirements of a strategic transformation partner, and is on track to go to market in Q4 £10m every
FY13/14. As planned, the team will return to the Board in February 2014 with an
update, and in March 2014 for approval to go to market. om
plo Pll PI2 PL PPB
update update update update update update update update update
FY14/15 (Em)
Overview of high impact initiatives " FTE Confidence Delivery .
(excluding CTP) Directorate impact status Significant changes since P9 update
L M H Total
I- Procurement savings in Network and Supply Chain
(26m Facldes Maneverient 1m Fleet Maintenance £1.5m Orda I Newark S Supp a2 I 08 I op EN biere i oorkceaveanes
Mails, £1.0m Branch consumables etc) ae Pieeay
- Reduce cash delivery frequency and move to single person operation ‘Supply Chain 50 1.8 1.8 I Planning I£0.2m increase in benefits to reflect full year impact.
E Progress has been made on epayslips. Negotiations on
Reduce cost and volume of Official Mail Finance 13 13 price restarted, following Royal Mail disengagement.
I- Restructure Commercial to reduce duplication and increase customer focus. Commercial 10 11 14 Planning
- Manchester Cash Centre Closure ‘Supply Chain 20 a7 0.7 07 Initiative is in delivery - FY14/15 impact £0.7m.
- Restructure Audit and Training team in the Agency network Network 20 O7 0.7. I Planning
I- Deliver remainder of Finance Roadmap Programme savings Finance a6 0.7 0.7 Planning
- Restructure call centres transferring from Royal Mail and improve efficiency Network 20 0.6 I 0.6 I Planning
Period 10 Performance Pack - Chris Day
26th February 2014
POL00026629
POL00026629
Page 7 of 11
POL-0023270
POL00026629
POL00026629
. Strictly Confidential ®
Cashflow Analysis
January 2014
(Cashfiow
YTD Cashflow The YTD cash inflow of £189m is £154m favourable to budget of £35m
21s This favourable variance is forecast to be maintained and outturn at c.£130m at year end.
£m 7 ‘The current favourable variance is mainly due to:
-
I 189 * Capital expenditure and exceptionals combined are £100m favourable to budget due to lower
I than planned NTP and CTP expenditure.
:
* Client balances are £49m favourable driven by DVLA balance favourable contractual settlement
changes.
* Operating profit is £19m favourable to budget.
* Working capital is net £12m favourable,
Offset by:
GotFurdng Freecefow I 1 6 Network Cash balances are £25m adverse to the budget which is driven by higher cheque and
debit card transactions due to HMRC self assessment payments paid at branches being higher
than expected.
YX
i 100
YTD Cashflow Variances vib Full Year
fm
7 CFO a3 j
£m Actual Forecast Budget Variance
9 / [Working Capital 1033 102.0 102.0 00
" Working Capital (44.5) (42.2) (41.2) 0.0
» E Client Balances 19 (11.4) (44.4) 33.0
35 es 12 a
© 8 BW ew ew —. Network Cash 53.7 114.6 114.6 00
(25) Capital Expenditure (738) (110.0) (167.5) 575
MD Budo " Opeatngpet Natron Werkng pte” Cam Gaurer: aptiand_ "DA Government funding 215.0 215.0 215.0 0.0
vim fen any NSP in advance 308 0.0 0.0 0.0
) \Exceptional Items (115.4) (141.5) (198.8) 573
Network Cash Other 93 1.2 (1.3) 25
£m Prior Year I Mar-13 P10 Free cashflow before interest, tax 180.3 128.7 (21.6) 150.3
P10 Opening I Actual Budget var Interest (5) (2.0) (5.9) 30
Retail, Cash Centres 538 650 518 522 a [Tax 10.2 103 10.3 0.0
Bureau 53 59 48 44 (4) Free Cashflow 189.0 137.0 (46.3) 153.3
Cheques, debit cards 75 161 250 225 (25)
Network Cash
Headroom (£m) 838 923
Period 10 Performance Pack - Chris Day 26th February 2014 Page 8 of 11
POL-0023270
Business Scorecard
January 2014
Strictly Confidential
POL00026629
POL00026629
Key Performance Indicators Current Month Year to Date Prior Full Year 2012-13
Act Target Var Act Target Var Year Latest view Target Var Outturn
Growth
Total Net Income (excl NSP) £m (Bonus 20%) 78.0 78.4 728.3 7571 750.8 875.0 900.0 902.4
Operating profit £m (Bonus 25%) 17.3 10.2 103.4 84.8 103.3 110.0 102.0 0 94.2
Earnings before ITDA and Subsidy £m* (1.9) (8.9) (65.5) (83.6) (70.3) (89.2) (97.2) (415.4)
Free cashflow £m 677 29.3 189.0 34.5 231.6 137.0 (16.3) 132.2
Customer
Customer Satisfaction** 85.4% 88.0% 87.3% 88.0% 87% 87% 88% 87%
Easy to do business with (Bonus 20%)** 36% 44% 42h 44 N/A 43% 44% N/A
Net Promoter score** (2) 5 (3) 5 N/A 3) 5 N/A
Queue time % < 5 minutes - Top 1k branches 84.4% 85.1% 81.8% 80.2% 80.4% 81%
Horizon availability 99.8% 99.7% 99.9% 99.7% 99.8% 99.9%
Branch - Compliance (new basket) 90.4% 98.0% 97.6% 98.0% 98.6% 98%
People
Engagement Index % (Once a year) (Bonus 10%) 51% 56% 51% 56% 55% 51%
Ke of EME appemniments over total recruits at senior leadership 20% 4% 11% 4h NVA 10%
Ne ‘ol Female pontmens over total recruits at senior leadership 60% 0% 50% 40% N/A 4%
Modernisation
Crown Profit (Loss) £m (Bonus 12.5%) (3.7) (3.8) (21.9) (29.8) (26.3) (26.8)
NT Conversions - contract signatures (Mains & Locals) (Bonus 12.5%) 323 210 2.730 2579 672 3,000
NT Branches Open (Mains & Locals)*** 110 113 1,577 1,723 N/A 1,950
Bonus worthy metrics
* ITDA Interest, Tax, Depreciation, Amortisation
** Monthly = 3 month average. YTD = 12 month average
"YTD and FY = cumulative including prior years
Period 10 Performance Pack - Chris Day 26th February 2014 Page 9 of 11
POL-0023270
Network Transformation Scorecard
‘Stety Confidential
Mains
Financial performance
Income against all areas including the control group are showing a decline between pre (2021/12) and post
(2013/14) conversion due to a change in trading weeks between the month of December. Agents Pay has also
‘been affected by this but toa lesser extent due to the pay cut period
Income
‘+ 6-12 months are generally performing stronger than control group on focus products. in particular Special
Delivery & International Express, Cash Withdrawals, Growth Bonds and insurance products. Focus products
require a more sophisticated sales conversation.
12-24 months & 24-36 months are a much smaller sample size with mixed results. However Cash
Withdrawals and Travel Money are performing stronger than the control group in mast branches.
Agents Pay
*+ Overall increase across all groups is in line with the combination of income performance and enhanced pay
rates for Mains contracts,
Non financial performance
+ Customer satisfaction in both Mains and Locals continues to be consistently above 90%,
January 2014 Reporting prior months data (ie. one month in rears)
Current Months Te Fe perbranch
Control Contra
Key Performance Iniators oe ee
MAINS
ance Rpprved Tevet por Was £00 = = = Tea
ota! ncome: Post vs Pe Conversion
Branches hve 6-12 month ws (12 31s I (780) (995)
Branches ive 12-26 months ase 2k Gk 21 I 478) 995) a2)
Po. Branches ve 24-36 months tor We 6 I 1223 G27)
Focus incom: Post vs Pre Conversion
Branches ve 6-12 month % as I a7 a)
Branches ve 12-26 monte nC 2 I) 6) 6a
Branches ve 24-36 months ak 6 229 118
Pgents Ramneration: Port ve Pre Conversion
Branches ive 6-12 morte oe ais I aan (4a)
Branches ve 12-26 months ae 2 I 76 (402)
ranches ve 24-36 monte awe 6 [isis 236)
[Gator Sessions
Fett Branches ive 6-12 marth ale 315
Branches ve 12-26 months (mG Ey
Sanches ve 24-36 monte as We 6
[pera Fedback on Real Sales Performance o a
operator Satetacion 78% 107
‘ual Target Var _[Acul Sanoe Sr
Forage even F Opera Hous Br 20r war
Customer Iouctomer Satefacon 98% 90% 30
oun Tes 2m t8s_¢5 mins iat Assn ral
5k reduction
Coat Tonia cxpecation
LOCALS fet SE ar Picstsensi] act SE ar
nance Bppraved Teaver per Loar E000 = ~ Tray ca)
rota! Net impact: Pst vs Pre Conversion
‘Branches ve 6-12 mnths
Income am aa os I 12 I 8) os) en) I a)
Actual Fed py savings 910
Actua Net impact 345 (405)
ae Branches ve 12-24 months
Income aK ak ek 64 I «732 408) (038)
Actual Fed py saving ase
Actual Netinpact 42% (405)
Branches ve 24-36 months
Income GR OR 22 I 7H (203)
Actual Fed py savings 5850
Actua Netinpact 510__(403)
[customer Sessions
Branches ive 6-12 months % tt m2
Branches ve 12-26 monte “Gh 64
leet Branches ve 24-36 months ae 22
[peratar Feedback on Real Sales Performance iit g
operter Satefcton 70% 23
AetialTorget Var _ [ics sinoe Se
Drage creme Opera Hous Tit — aor 37
Customer Ioustomer Satetacon 96% 90% 30
Joseung Tee tm ite _¢5 mine 31
Locals >)
Financial performance
Income against al areas including the control group is showing a decine between pre (2011/12) and post
(2013/14) conversion due to a change in trading weeks between the month of December.
Total Income
+ The Local model assumption was that income would reduce by c5% due to the removal of certain
products
+ Branches open between 6 & 24 months are showing a decline against control group of BX.
+ Products such as bill payments. etop ups, cash withdrawals and moneygramn continue to perform stronger
against control group.
‘+ Growth in these products ~ with associated footfall - has been offset in income terms by poorer
performance on more complicated products
+ Loss of income has been more than offset by savings in agents fixed pay.
Non financial performance
Customer sessions
+ Retailers are benefiting from greater footfall that should support their retal growth,
+The footfall is dlivering quicker but lower value Post fice sales which in turn should allow the retailer to
utilise their staff indifferent ways or reduce their staff costs,
+ Customer Satisfaction and extended opening hours all remain positive.
Operator Satisfaction
+ Recognition that Local operators want more support after openingto ensure they manage their post office
effectively within the retail environment. A new (but small team of Local relationship managers has recently
been established (Ded), but clearly there isa lot of work to do to meet this need. )
1421 ve branches within the 2407 contracts signed - End Dec 2013
[NB The scorecard includes 427 branches ofthe 1094 (6-12 months), 85 branches of
(0-6 Months July 13- Dec 13) - 610, 6-12 Months (Jan 13 ~June 13) -484, 12-24 Months (Jan 12- Dec 12) - 186, >24 Months (prior to Jan 2012) -141
86 (12-24 month) and 28 branches ofthe 141(24-36 mond
Financials are compared against the control group (2399 Maing and 4879 Locals) Customer metrics are against programme targets, Customer Sessions are based on actuals wansactions capturedin the Horizon system, Operator and Customer satisfaction scores are conducted through branch surveys.
). Branches with a breakin customer session or branches that had previously received overscale payments have been excluded.
Petiod 10 Performance Pack - Chris Day
26tn February 2014
Page 10 of 1
POL00026629
oL.09026629
POL-0023270
POL.00026629
PoLo0026629
Change Management Overview Strictly Confidential
January 2014
Highlights heatmap status of key transformation programmes, and points of escalation to Transformation Board on selected projects including resulting
Transformation Board action / guidance. Also highlights wider points of discussion / action
‘Summary of key items of TB Discussion
IT&CT - Transformation Board discussed the review of the Data Centre procurement, that concluded it would not deliver the necessary quality and
price objectives needed and was therefore cancelled without award. More detailed impacts on ather programmes such as remaining Towers, the
IT portfolio and Separation (including Finance Roadmap) is currently being undertaken by the programme and wil be reported back to the
Transformation Board
Red
[Collections & Returns ~ Transformation Board discussed the latest position with the initial retailer that has been live since November Transaction
‘volumes have been small, however this has enabled live testing of systems and processes to enable refinement for next retailers. Operational
issues that have been identified are being atldressed between Network and Commercial with Royal Mail
Difficulty in ability to demonstrate to potential clients a consistent performance as well as a clear understanding of network avaitability (opening
haurs) are impacting Royal Mais confidence in Post Office's ability to provide a quality service and therefore putting future client take on at risk
PO Energy (Spark) - Transformation Board were made aware of an emerging view from the programme team to delay this programme due to
challenges around network capacity. the potential lack of an assisted sales model, the continued political attention around energy and potential
regulatory changes. A paper will be submitted to the 18th February ExCo to summarise latest position and agree recommendations
Amber
Future Branch Services - Transformation Board discussed the delay to issuing requirements for the EUC (End User Computing) procurement
'whilst the future branch operating model are defined. This analysis is being co-ordinated by the Commercial team working with Network and
driven by commercial requirements.
Programme Spend
‘Titan - The Transformation Board discussed the review of the programme by Peachtree partners, who are developing a TargeV/Business
Operating Model and associated changes to the Business Case and Delivery Plan.
[Pre Paid Card - Transformation Board were made aware that the product was soft launched on 30th Jan 2014 though there is currently some
uncertainty of timescales for real-time load build and Vocalink changes required to support full launch,
Network Transformation - Transformation Board discussed the classification of Network Transformation programme ac Red for benefits. It was
felt that although financial benefits will not meet original 2013-14 budget (set before programme targets were agreed), the status was not an
accurate representation of the programme's progress to deliver benefits and wider achievernents. It was agreed that a review of how delivery is
illustrated in Transformation Board material would be undertaken.
Enterprise wide themes - A number of enterprise themes were identified which are currently presenting a potential risk to achieving the
objectives of our major change programmes. key areas being:
+ Improving sales capabiity including sales model and ability to operationalize our plans
+ Engagement of our people {hearts and minds)
+ Industrial Relations
+ Third party dependencies
Green Amber Red
Delivery to Baseline Milestones
Colour of Circle reflects 2013-14 financial benefits ‘* Third party capabilityHow we can improve our performance of managing key business partners
+ Capability of achieving the 2014-15 change plan
+ Ablity of receiving business to absorb 2014-15 change plan
$O
Shows movement from last period
‘These themes will be discussed in more detail at the March Transformation Board where next steps will be agreed
]HP&BB [Home Phone & Broad Band migration
Polo ICurrent Account
caR IMails Collections & Returns
FRP Finance Roadmap Plan
INT Network Transformation
FOoG _IFront Office of Government
im&.ct__IiTand Change Transformation
ISP Independence & Separation Programme:
Wave IMobile proposition
Titan [Travel insurance delivery model
Ipc IOigital & Multi Channel
spark [Energy proposition
Period 10 Performance Pack - Chris Day 26n February 2014
Page 11 of 11
POL-0023270
POL00026629
POL00026629
Confidential
POST OFFICE LTD BOARD
Policy Adoption
Purpose
1.1. The purpose of this paper is to inform the Board of the Anti-Bribery Policy,
External Data Protection Policy and Data Sharing Policy recently adopted by the
ExCo.
Background
21 At the meeting on 13 February 2014 the ExCo reviewed and adopted the
following policies:
° Anti-Bribery — This policy outlines the approach and responsibilities and sets
the out the expected standards of behaviour to minimise the risk of bribery for
the Post Office. The policy includes an updated gifts and hospitality
procedure which identifies that the Risk & Compliance team will maintain a
register of all gifts and hospitality given and received. The register will be
regularly reviewed and an annual summary reported to the Risk &
Compliance Committee
. External Data Protection Policy (Information Security) — This policy
outlines the approach and commitment to managing the personal information,
whether provided to us directly by our customers or by our business partners,
in a manner compatible with the obligation to comply with the Data Protection
Act 1998. It sets out the Post Office's mandatory expectations of all those
persons who have access to personal information held by Post Office and
how to handle such personal information.
° Data Sharing Policy (Information Security) —- This policy sets out Post
Office’s approach to sharing information with 3rd party organisations and
where that shared data is personal information ensures this is shared in
compliance with obligations under the Data Protection Act 1998.
2.2 Full policies are attached as appendices A —C.
Act
ies/Current Situation
3.1 These are new policies for the Post Office. They are to be held centrally on the
Post Office Intranet and will be subject to review on an annual basis.
Recommendations
4.1. The Board is asked to note and confirm the adoption of the policies listed above.
Alwen Lyons
19 February 2014
Policy Adoption Alwen Lyons Page 1 of 1
19 February 2014
POL-0023270
Post Office
Anti-Bribery Policy
POL00026629
POL00026629
The purpose of this Policy is to set standards of behaviour that minimise the risk of bribery for
Post Office. The principles underpinning this Policy are the same in every country in which we
operate, regardless of business sector, local customs and practices. Anyone who is employed by,
or performs services for, or on behalf of, Post Office anywhere in the world in any capacity
(including contractors, agents and operators, and their assistants) is bound by this Policy.
Version History
Version Number Date Editor Status
01 16/12/13 Georgina Blair Draft
0.2 31/12/13 Georgina Blair Draft
0.3 08/01/14 Georgina Blair Draft
0.4 09/01/14 Georgina Blair Draft
1.0 16/01/14 Rob Bolton Final
Anti-Bribery Policy Version 1.0 Final
Page 1 of 6
POL-0023270
POL00026629
POL00026629
Version History
Date Version Updated by Change summary
16/01/2014 1.0 Rob Bolton Amended to identify
as final version
Document Location
The latest version of this document can be found in the Post Office SharePoint Policy Library
For Sign-off - This document has been approved by the following people:
Name Title - Department Date of Sign off
David Mason Head of Risk Governance 13/01/2014
Chris Aujard General Counsel 16/01/2014
Risk & Compliance 20/01/2014
Committee
ExCo
For Information - This document will be distributed to the following people:
Name Title - Department
This policy will be reviewed annually. Next review date January 2015.
Anti-Bribery Policy Version 1.0 Final Page 2 of 6
POL-0023270
POL00026629
POL00026629
Contents
1. Purpose 4
2. Scope and definitions 4
3. Governing principles 4
4, Business dealings and contacts 4
5. Reporting concerns 5
6. Roles and responsibilities 5
7. Risk 5
8. Contact 5
Appendix (A) Gifts and Hospitality Approvals Procedure 6
Anti-Bribery Policy Version 1.0 Final Page 3 of 6
POL-0023270
POL00026629
POL00026629
1. Purpose
The purpose of this Policy is to set standards of behaviour that minimise the risk of bribery for
Post Office. The principles underpinning this Policy are the same in every country in which we
operate, regardless of business sector, local customs and practices.
Business partners are expected to act ethically and may be required to comply with this Policy in
all their dealings with or for Post Office.
2. Scope and definitions
This policy applies to anyone who is employed by, or performs services for, or on behalf of, Post
Office anywhere in the world in any capacity (including agents, operators and contractors).
A bribe is any advantage (financial or non-financial) which is promised, offered or given and is
intended to induce improper performance (even if ineffective). /mproper performance means
carrying out a function or activity in breach of an expectation of good faith, impartiality or trust.
3. Governing principles
Post Office has a zero tolerance policy on bribery. Anybody employed by or performing services
for or on behalf of Post Office
must never promise, offer or give a bribe
e must never request or accept a bribe.
No employee will suffer demotion, penalty or other adverse consequences for refusing to pay or
receive bribes or for reporting the suspicion that bribes may have been offered or accepted to
Post Office, even if the refusal may result in Post Office losing business
All employees must adhere to the standards contained within Post Office’s Gifts and Hospitality
Approvals Procedure and the Conflicts of Interest Policy.
Any breach of this Policy, or any procedure implementing it, will be treated as a very serious
matter by the company and may result in disciplinary action, including termination of employment
and reporting to the appropriate authorities.
4. Business dealings and contacts
All dealings with public officials or private individuals and enterprises must be open and
transparent and conducted in a proper and appropriate way. This will ensure that no bribery or
corruption takes place, and will also avoid any appearance or suggestion of improper activity.
Post Office only works with business partners who have been approved as required by Post
Office's risk-based due diligence processes. Such third parties must agree contractually to comply
with this Policy or have an equivalent Policy in place.
Contractors must be asked to ensure that any subcontractor will comply with the principles set
out in this Policy and so on throughout any supply chain.
Anti-Bribery Policy Version 1.0 Final Page 4 of 6
POL-0023270
POL00026629
POL00026629
Any remuneration payable to agents, operators, contractors or other business partners acting on
behalf of Post Office must be appropriate for the services carried out (which is to be determined
objectively as far as possible). All payments must be paid through bona fide channels, must not
be made in cash and must never be made through off-shore accounts.
5. Reporting concerns
Any Post Office employee with any knowledge of or suspicions that bribery or corruption has
taken place or may do so, anywhere within (or related to) Post Office, must immediately report
their concerns to
. their line manager in the first instance;
. the Risk & Compliance team if the line manager cannot be contacted or cannot resolve
the query; or
. the external Speak Up line in complete confidence (Tel: b
All reports of suspected bribery must be passed to the Risk and Compliance team to log.
6. Roles and responsibilities
All Post Office employees are responsible for complying with this Policy and with the Gifts and
Hospitality approvals procedure at Appendix A.
The Risk and Compliance team maintains a register of gifts and hospitality, and of suspected
incidents of bribery, and this is reviewed regularly and an annual summary provided to the Risk
and Compliance Committee and to the Post Office Board.
Any serious incidents of bribery will be escalated by the Head of Risk Governance to the Chairman
of the Audit and Risk Committee.
7. Risk
Post Office has zero tolerance for bribery and all processes and procedures are designed to
minimise the risk of bribery occurring. A risk assessment has been completed and the areas of
the business at highest risk of bribery have been identified as Commercial, Procurement and the
branch network. This policy is designed to target those areas but also applies throughout the rest
of the business
8. Contact
For further information about this policy contact the Risk and Compliance team on
riskandcompliancet Hi
Anti-Bribery Policy Version 1.0 Final Page 5of 6
POL-0023270
POL00026629
POL00026629
Appendix A
Post Office Limited Gifts and Hospitality Approvals Procedure
Gifts
No gift should be offered or accepted if it is intended to induce improper behaviour. In general
the giving and receiving of gifts is not permitted with the exception of low value promotional
items costing under £25 each, such as pens, calendars, diaries, notepads and paperweights.
e Ina situation where refusal to give or accept a gift would cause embarrassment or offence, such
as when giving or receiving a gift from an overseas postal administration in an official capacity as
a representative of Post Office, the gift must not appear lavish or extravagant and should not cost
more than £200.
e Before giving any gift costing more than £25, written approval must be obtain:
manager and forwarded to the Risk & Compliance team at riskandcompliance.,
e If you receive a gift worth more than £25 you must notify your line mana
forward the details to the Risk & Compliance team at riskandcompliancé™
¢ The Risk & Compliance team will maintain a Register of all Gifts given and
Hospitality
Hospitality may only be given and accepted where it has a clear and demonstrable link with a
legitimate business purpose, e.g. an organised event or a meal at which business is to be
discussed. In relation to offers of hospitality, numbers on both sides should be limited to those
whose presence is necessary to progress the business in hand. The giving and receiving of
hospitality and entertainment is subject to the following rules:
e You must obtain prior permission from your line manager before accepting or giving hospitality.
e The hospitality must be reasonable (not lavish or extravagant), proportionate to its purpose and
must ordinarily be below £100 per person in value.
e You must send details of all hospitality offered and accepted, including details of the host business
(if not Post Office Limited), the number of people attending and the businesses they represent (if
Post Office Limited is the host), with details of the location of the hospitality and the cost per
person, along with written approval from your line manager, to the Risk & Compliance team at
riskandcompliancé. 3
e The Risk & Compliance team will maintain a Register of all Hospitality given and received.
You must beware of accepting any hospitality and entertainment which might compromise your
performance of official business, or which might reasonably appear to have improperly influenced
a business decision. Any attempt at entrapment, blackmail, or any suggestion that preferential
treatment or divulgence of confidential information is expected in return for hospitality and
entertainment, must be reported to your line manager and the Risk & Compliance team.
Anti-Bribery Policy Version 1.0 Final Page 6 of 6
POL-0023270
POL00026629
POL00026629
EXTERNAL DATA PROTECTION POLICY
Document Control
clo Head of
Information
Security
December 2013 02/12/2013
December 2014
1. Overview
2. Revision History
I V1 Sep 2013 I Jacqueline Initial Draft
I Gazey
I
I V2 Dec 2013 I Michael Hall I Minor corrections and version history added
I
Data Protection Policy
POL-0023270
POL00026629
POL00026629
Contents
1 Introduction...
2 Purpose
3. Scope...
4 — Status of this policy
5 Responsibility for compliance
6
7
8
9
Governing principles...
Accountability...
Post Office’s Privacy Governance Structure .
Further advice
10 Policy Review .
Appendix (i) Supporting Information
Requests for access to persona
Responsibilities of Post Office Representatives
Training ......ceceeeeeeseeees
Risk assessments and audits .
Other Post Office standards, policies and procedures relating to data protection.
DADAADUUUNUHADEAWWY
Data Protection Policy
POL-0023270
Post Office Limited
External Data Protection Policy
1 Introduction
The processing and protection of personal information is of paramount importance to Post
Office Limited (Post Office) in order to safeguard its reputation as one of the countries most
trusted brands.
This Policy documents our approach and commitment to managing the personal information in
our care, whether provided to us directly by our customers or by our business partners, in a
manner compatible with our and our business partners' obligations to comply with the Data
Protection Act 1998. It sets out Post Office's mandatory expectations of all those persons who
have access to personal information held by Post Office on how to handle such personal
information.
Adherence to this policy and associated standards is a mandatory requirement for all Post
Office Representatives). Failure to comply with this policy may affect our reputation and cause
our business partners not to trust our ability to manage the personal information which we
hold. Compliance with this policy is essential to maintaining the confidence in our brand and
our service.
2 Purpose
This Policy is aimed at all Post Office Representatives that handle personal information
The purpose of this policy is to outline the manner in which Post Office should process
personal information. It sets out Post Office’s expectations of its employees, sub-postmasters,
agents, contractors, consultants, suppliers, partners and other contracted third parties (Post
Office Representatives) when processing personal information entrusted to Post Office, in
meeting its governing principles (set out below in section 6) relating to the use of personal
information across Post Office, whether the information relates to Post Office Representatives,
customers or other individuals.
3 Scope
This policy addresses all processing of personal information by Post Office Representatives
whether this is information we hold directly on our customers or information we hold on
behalf of our business partners.
Personal information includes all information, whether processed in electronic or structured
paper form, relating to a living individual who can be identified from that information.
Processing of personal information includes the collection, use, processing, transmitting,
disclosure or storage and retention of personal information. Post Office, its suppliers and
contracted third must adopt procedures necessary to comply with this policy.
Data Protection Policy
POL00026629
POL00026629
POL-0023270
4 Status of this policy
This policy has been approved by the Post Office Board. It is managed and maintained on
behalf of the Board and the Executive Team by Post Office’s Privacy Team.
5 Responsibility for compliance
Post Office handles personal information on its own behalf as well as that of its business
partners. The controller of the information is the party who is legally responsible for
complying with the Data Protection Act 1998.
Post Office is the controller of personal information relating to individuals such as its
employees, customers and prospective customers. In some cases this responsibility for
customer information is shared with our Joint Venture partners who are the providers of the
products and services we offer.
Where Post Office handles personal information on behalf of its business partners as a Data
Processor, such as our Front Office of Government proposition, the compliance requirements
will be dictated to Post Office by the appropriate Data Controller.
6 Governing principles
Personal information must always be handled by Post Office Representatives in accordance
with the obligations placed on us by the Data Protection Act 1998 whether directly or through
contract. This means that personal information must be:
© processed fairly and lawfully
© processed solely for the purposes it was collected for or where Post Office processes
personal information on their behalf as instructed to Post Office by our business
partners
kept relevant, accurate and, where necessary, up to date
e Retained only for as long as it is necessary for the purposes it was collected, or as
instructed by our business partners
© Processed in accordance with the rights granted to individuals by the Act
o The right to access personal information about the individual
© The right to demand the data controller cease processing likely to cause
unwarranted damage or distress
o. The right to stop direct marketing
© Rights in respect of fully automated decisions that significantly affect the
individual
Right to claim compensation for damage (or damage or distress) caused by a
failure to comply with the Data Protection Act.
© be kept secure against unauthorised or unlawful access and against accidental loss,
destruction or damage by using appropriate technical and organisational measures —
this includes the following:
Data Protection Policy
POL00026629
POL00026629
POL-0023270
°
the processing of personal information should not be outsourced to agents or
processors of Post Office without proper controls and contract clauses in place
as established by Post Office’s Privacy Manager (and the permission of the
relevant business partner, where necessary).
personal information should not be disclosed to any 3° parties without
consideration to the privacy and confidentiality commitment we have or
where Post Office processes personal information on behalf of its business
partners, the prior consent of that relevant business partner where required.
Managed in accordance with Post Office’s policies and procedures and where
Post Office is a Data Processor, with any specific instructions provided to Post
Office by the relevant Data Controller business partner.
Not transferred overseas without additional controls being adopted to protect the
rights and freedoms of the individuals as agreed with Post Office’s Privacy Manager or
where Post Office processes personal information on behalf of its business partners
the prior consent of the relevant business partner where required
7 Accountability
Each member of the Executive Committee is responsible for compliance within their area of
responsibility. Post Office’s Privacy Team has responsibility for supporting the delivery of this
policy and monitoring compliance with it. However, each Post Office Representative has
responsibility for ensuring that they adhere to the policy.
Any Post Office Representative who considers that this policy has not been followed should
raise this matter with the Privacy Team.
8 Post Office’s Privacy Governance Structure
This needs to be appended once POL Exco have agreed approach
9
Further advice
Further advice may be obtained from your Post Office’s Privacy Team who can be contacted by
email at dataprotectioni,
10 Policy Review
This policy is scheduled for review December 2014.
Data Protection Policy
POL00026629
POL00026629
POL-0023270
Appendix (i) Supporting Information
Requests for access to personal information
Any individual is entitled to make a subject access request for details of personal information
held about them. Where Post Office receives such requests for personal information
belonging to our business partners, the process for meeting such a request sits with that
business partner and Post Office will handle such requests in accordance with the instructions
from our business partner.
Responsibilities of Post Office Representatives
If any Post Office Representative has access to or uses personal information about other
people (e.g. customer or employee personal information) he or she must comply with this
policy and the requirements set out in all other Post Office data protection standards, policies
and procedures (see below).
Each Post Office Representative is responsible for ensuring that any personal information
which he or she accesses or uses is kept securely and not disclosed in any way to any
unauthorised third party.
Training
Where appropriate, training will be provided to Post Office Representatives on data protection
issues and the handing of our business partner’s personal information. Where required by our
business partner to deliver specific training, such as the business partners own data protection
training, Post Office will ensure that appropriate staff receive such training.
Risk assessments and audits
Periodic data protection risk assessments and audits may be carried out to assess compliance
with this policy and data protection laws.
Other Post Office standards, policies and procedures relating to data protection
° Post Office Data Protection Policy (Internal)
. Code of Business Standards
° Conduct Code
. Information Security Policy & Guidance
Data Protection Policy
POL00026629
POL00026629
POL-0023270
POL00026629
POL00026629
&
Data Protection — Data Sharing Policy
Document Control
1. Overview
Head of
Information
Security
01 Feb 2014
December 2013 02/12/2013
December 2014
2. Revision History
Vi Sep 2013 I Jacqueline Initial Draft
Gazey
v2 Nov 2013 Ole Christensen I Draft with corrections
V3 Dec 2013 Michael Hall Minor corrections and version history added
Data sharing Policy V3 FINAL PUBLIC
POL-0023270
POL00026629
POL00026629
Contents
Introduction
Background ...
Data Sharing
Scope...
Policy...
1. Limitations on use of the data ..
2. Obligation to ensure proportionality...
3. Obligations on the parties in respect of data quality ....
4. Rights of the individual ...
5. Security ....
6. Overseas Transfers...
7. Data Sharing using Data Protection Act 1998 exemptions...
8. Status of this Policy
Appendix (i): Obligations on Recipient Organisations ...
Appendix (ii): Recipient Organisations.
Data sharing Policy V3 FINAL PUBLIC
POL-0023270
POL00026629
POL00026629
Introduction
This Policy sets out Post Office’s approach to sharing information with 3” party organisations
(Recipient Organisations) and where that shared data is personal information ensures this is shared
in compliance with obligations under the Data Protection Act 1998. Post Office will share
information in connection with:
¢ The Prevention & detection of crime and prosecution of offenders
The prevention and recovery of any loss to Post Office or one of its business partners
¢ National Security matters
e Anti-Money Laundering
¢ The protection and safety of missing or vulnerable people
Any sharing by Post Office of information to 3 party organisations will be subject to considerations
of sensitivity, confidentiality, privacy, ownership and copyright. In becoming a recipient of Post
Office information, 3" party organisations agree to process that information in line with this Policy.
Post Office information consists of personal information and business sensitive information —
together referred to in this policy as “Shared Data”
Background
The Data Protection Act 1998 covers the processing of personal information and establishes rules to
protect individuals in respect of the security and use of their personal information.
Post Office shares information with a number of 3" party organisations in its endeavours to protect
its business, staff, customers, other individuals and its associates.
Data Sharing
Data sharing involves the disclosure of information from one or more organisations to a third party
organisation or organisations. Specifically for Post Office, data sharing can take the form of:
¢ a systematic disclosure of information collected by Post Office to its key contacts on a
regular basis such as text blasts and reports
e Post Office and other organisations pooling information and making it available to each
other for a common purpose
exceptional, one-off disclosures of personal data by Post Office in unexpected or emergency
situations
© exceptional, one-off requests by 3“ party organisations, such as solicitors, for information
held by Post Office
Data sharing Policy V3 FINAL PUBLIC
POL-0023270
POL00026629
POL00026629
Scope
This Policy covers all Post Office departments and 3” party organisations that share Post Office
personal information and business data for the purposes highlighted in section 1 below.
For the purposes of this Policy, personal information is considered to be any information that relates
to a living individual who can be identified directly from the information, or from the information
and other information, which is in the possession of, or is likely to come into the possession of, Post
Office or the recipient organisation. This includes any expression of opinion about the individual(s)
and any indication of the intentions of the Post Office or any other organisation in respect of the
individual(s).
Responsibility
It is the responsibility of the signatories to this Policy to ensure it is followed in respect of the
processing of shared data.
Policy.
1. Limitations on use of the data
Post Office will share information for the following purposes:
The Prevention & detection of crime and prosecution of offenders
The prevention, investigation and recovery of any loss to Post Office or one of its business
partners
National Security matters
Anti-Money Laundering
The protection and safety of missing or vulnerable people
By accepting shared data from Post Office, 30 party recipients agree to limit their use of the shared
data to these purposes only.
Where the shared data is sensitive personal information relating to:
.
.
health information,
racial or ethnic origin,
religious or other similar belief,
trade union membership,
sexual orientation or
offences or proceedings for an offence
the 3 party recipient understands that the information may only be processed for:
Data sharing Policy V3 FINAL PUBLIC
POL-0023270
POL00026629
POL00026629
the prevention and detection of crime where such processing is in the significant public
interest where such processing must necessarily be carried out without the explicit consent
of the individual;
® meeting obligations placed on the organisations by way of S68 of the Serious Crime Act
2007';
any legal proceedings (including prospective legal proceedings).
* The protection and safety of missing or vulnerable people where the processing is in the vital
interest of the individual (or another person) in the case where consent is not available;
For shared data coming in to Post Office from one of its business partners, the same restrictions will
apply.
Where a recipient of Post Office shared data wish to use the information for other purposes, Post
Office’s prior permission should be sought on a case-by-case basis.
2. Obligation to ensure proportionality
Post Office recognises that it is likely to be reasonable and necessary to share data in its aim to
protect its staff, customers and business. Post Office will ensure that the nature of the data it shares
is proportional to the above aims and will not share identifiable personal information when other
methods that respect individuals' rights to privacy are viable.
3. Obligations on the parties in respect of data quality
Post Office will only share data where it is satisfied that the information is relevant to the purpose of
the sharing and, to the best of our knowledge, accurate.
Where there is a requirement to keep shared data up to date on an on-going basis, the 3 party
recipient must make provisions for updates to the data on a case-by-case basis or agree its update
requirements with Post Office through a bespoke data sharing arrangement
Post Office recognises that there is a requirement for information to be retained only as long as it is
necessary for the purposes outlined in section 1. All recipients of Post Office shared data should
have a documented retention policy outlining its intentions in respect of the archiving and
destruction of this information once it has served its purpose.
4. Rights of the individual
The Data Protection Act gives rights to individuals in respect of the processing of their personal
information and those key to a data sharing initiative are:
¢ Right of access to information;
Right to demand an organisation cease processing personal information about them on the
grounds that it will cause (unwarranted) damage or distress;
* Please note - S68 of the Serious Crime Act makes it an offence to further disclose information covered by this
obligation.
Data sharing Policy V3 FINAL PUBLIC
POL-0023270
POL00026629
POL00026629
Right to object to any fully automated decisions that significantly affect the individual;
e Right to claim compensation for any damage or damage and distress caused through a
breach of the Act.
In accepting personal information from Post Office, the recipient organisations accept that they will
be responsible for handling any requests they receive directly from individuals in compliance with
the requirements of the Data Protection Act 1998 and will adopt suitable procedures to react to
individuals exercising their rights.
5. Security
Post Office takes the security of shared data very seriously. It will ensure that any information it
shares with recipient organisations is transferred in a manner that protects the information, such
protection being appropriate to the nature of the information and any resultant harm that could
come from inappropriate disclosure, loss or destruction to that information.
Recipient organisations must ensure that shared data they receive from Post Office is adequately
protected by:
¢ Adopting an Information Security Policy that recognises the controls required to protect this
information
Taking physical, technical and organisation security measures to protect the information
¢ Providing training to staff that have access to this information on the importance of keeping
the information secure
© Checking the reliability of staff that are granted access to the information through formal
vetting procedures appropriate to the nature of the data the staff member can see.
The recipient organisation agrees to advise Post Office immediately if, as the recipient of
information, your contact information changes, your role changes or the need for sharing Post Office
information stops or changes
6. Overseas Transfers
Post Office’s written permission is required where Post Office shared data, disclosed to a recipient
organisation that is likely to hold or allow access to the data from overseas locations. Such
permission may be refused after considering the nature of the data, purpose of the processing and
Post Office’s obligations under the Data Protection Act 1998
7. Data Sharing using Data Protection Act 1998 exemptions
Where Post Office is approached by a 3 party organisation that is making a request for Post Office’s
Personal Information that may fall within the scope of an exemption within the Data Protection Act
1998, these requests will be considered on a case by case basis.
Post Office will apply the same considerations when using these exemptions to request other
organisations for personal information.
Data sharing Policy V3 FINAL PUBLIC
POL-0023270
POL00026629
POL00026629
8. Status of this Policy
This policy has been approved by the Post Office Executive Committee and is managed and
maintained on their behalf by Post Office’s Data Protection and Privacy Team.
Data sharing Policy V3 FINAL PUBLIC
POL-0023270
Appendix (i): Obligations on Recipient Organisations
In accepting shared data from Post Office, the recipient organisation understands that it must:
POL00026629
POL00026629
a) Comply with its own obligations under the current and future Data Protection and Privacy
legislation in respect of the processing of any personal data being disclosed or shared.
b) Only use the shared data for the purposes established in this Policy and not to use it for any
other purpose without the prior written consent of Post Office.
c) Adopt adequate technical and organisational security measures to protect the shared data
from unauthorised or unlawful processing and accidental loss, destruction or damage.
d) Advise Post Office immediately if, as the recipient of information, the contact infor
mation
changes, recipients role changes or the need for sharing Post Office shared data stops or
changes
e) Ensure the reliability of staff that have access to the shared data and agree that only those
individuals that have a genuine business need to see that data will have access to it.
f) Only retain the shared data while there is a business need to process it and securely destroy
the data in line with a documented retention schedule, as required by this Policy.
g) With regard to shared data that is personal information, respect the rights granted to
individuals under the Data Protection Act 1998, adopting procedures to react to indi
exercising their rights in order to comply with the requirements of the Act.
h) Take appropriate steps to maintain the quality of the shared data.
i) Not transfer shared data outside the European Economic Area without Post Office’
written permission as outlined in section 6 of this Policy.
j) The recipient of shared data understand that Post Office Limited is subject to the Fr
of Information Act 2000 and as such this Policy and information about those organi
that share data may be subject to disclosure under this Act.
Data sharing Policy V3 FINAL
viduals
's prior
eedom
isation
PUBLIC
POL-0023270
POL00026629
POL00026629
Appendix (ii): Recipient Organisations
Post Office will share information with organisations, such as those that fall into the following
categories:
e Law enforcement agencies
¢ Government bodies and agencies
¢ Public authorities
¢ Post Office product providers, for example the Bank of Ireland
¢ Post Office business Associates, for example Transport for London.
© Financial Services institutions, for example High Street Banks
* Sub-Post Masters
© Royal Mail
© Credit reference and fraud prevention agencies
e Financial Conduct Authority
© Legal advisors
Data sharing Policy V3 FINAL PUBLIC
POL-0023270
POL00026629
POL00026629
Name of Organisation:
Nominated Signatory Name:
In accepting personal information from Post Office, the recipient organisation named above understands that
it must:
a)
b)
¢)
d)
e)
8)
h)
Comply with its own obligations under the current and future Data Protection and Privacy legislation
in respect of the processing of any personal data being disclosed or shared.
Only use the shared data for the purposes established in this Policy and not to use it for any other
purpose without the prior written consent of Post Office.
Adopt adequate technical and organisational security measures to protect the shared data from
unauthorised or unlawful processing and accidental loss, destruction or damage.
Advise Post Office immediately if, as the recipient of information, the contact information changes,
recipients role changes or the need for sharing Post Office shared data stops or changes
Ensure the reliability of staff that have access to the shared data and agree that only those individuals
that have a genuine business need to see that data will have access to it.
Only retain the shared data while there is a business need to process it and securely destroy the data
in line with a documented retention schedule, as required by this Policy.
With regard to shared data that is personal information, respect the rights granted to individuals
under the Data Protection Act 1998, adopting procedures to react to individuals exercising their rights
in order to comply with the requirements of the Act.
Take appropriate steps to maintain the quality of the shared data.
Not transfer shared data outside the European Economic Area without Post Office’s prior written
permission as outlined in section 6 of this Policy.
The recipient of shared data understand that Post Office Limited is subject to the Freedom of
Information Act 2000 and as such this Policy and information about those organisation that share
data may be subject to disclosure under this Act
I acknowledge receipt of Post Office’s Data Sharing Policy V1 and agree to process Post Office information
in
accordance with the standards recorded in this Policy.
Signed:
Dated:
Data sharing Policy V3 FINAL PUBLIC
POL-0023270
POL00026629
POL00026629
Strictly Confidential
POST OFFICE LIMITED BOARD
Status Report
No. I REFERENCE ACTION BY WHOM STATUS
ta I October 2013 Consider more radical options post-2015 to drive automation and further reduce Harry Clarke The CTP programme,
POLB 13/100(d) I the property requirement. together with the Crowns
network team, will review the
post-2015 Crowns strategy
once detailed planning for
FY14/15 is finalised, and
report back in Q4. An update
will be provided to the
February Board.
1b January 2014 Further discussion on NT targets to come to the February Board. CFO To February Board
POLB 14/2(d)
2a July 2013 Produce analysis to explain economics of the Crown and agents network Chris Day Crown Complete (October
POLB 13/48(g)_ I models and set up a workshop for those NEDs who would find it helpful. Board).
Agents — date tbd.
2b January 2014 Ensure that there is common understanding of the position and the precise I CFO On-going
POLB 14/5(f) definition of ‘break even’ between the Business and BIS via the final budget
presentation.
2c January 2014 The mitigation for each risk contained in the Budget paper to be included in the I CFO Completed.
POLB 14/5(h) Budget Book.
2d January 2014 Produce and circulate a Budget Book in approximately 4 weeks taking into I CFO Completed, to be circulated
POLB 14/5(i)(ii)_ I account the Board discussions. on 21 February
2e January 2014 A conference call to be offered to Board members who wished to discuss the I CoSec For discussion at the
POLB 14/5(i)(iii) I Board Book further. February Board
3a September Provide a paper for January Board covering the opportunities in the Energy I Martin George March Board
Status Report at 20 February 2014 Alwen Lyons Page 1 of 4
POL-0023270
Strictly Confidential
POL00026629
POL00026629
2013
POLB 13/87(e)
& October 2013
POLB 13/104(e)
market.
3b
January 2014
POLB 14/3(b)
Clarify Business Transformation Objectives, including the impact of public
procurement, for discussion at the next Board meeting.
CFO
February Board
3c
January 2014
POLB 14/4(a)
The Business to analyse its products by contribution and to recommend to the
Board a list of products which would be deprioritised for the next 18 months, so
providing opportunities to reduced costs and focus on the areas of greatest
return.
CFO
In progress. A high-level
distribution analysis has been
completed; further work is
underway to refine
allocations and develop the
prioritisation aspect.
3d
January 2014
POLB 14/7(e)
The digital and multi-channel programme to be considered as part of the
Business Transformation. The CEO suggested that the new Head of Digital
present at a future Board meeting.
Martin George
We have engaged a search
firm (Odgers) and are
currently looking for a Head
of Digital. In the meantime,
we have created a Digital
Board to create a roadmap
and manage its
implementation as well as
moving responsibility for
digital marketing into the
Marketing team. The Digital
team will report directly to the
Commercial Director and be
responsible for defining,
developing and delivering the
digital aspects of an omni-
channel customer
experience.
2014 sees the introduction of
a number of important
projects such as the launch
of a mobile website and
common digital platform, as
well as a wide range of trials.
Status Report at 20 February 2014 Alwen Lyons
Page 2 of 4
POL-0023270
Strictly Confidential
POL00026629
POL00026629
The Board can be briefed on
the status of the digital
delivery agenda at any time.
se January 2014 Agree the agenda for the inaugural Post Office Advisory Council meeting. CEO/Tim Franklin I Draft agenda discussed with
POLB 14/13(a) TF, NM and PV on 14
February
CLL 4.NFSP & Trade Association —_ rrr rr
4a I October 2013 Ensure that the final legal framework agreement with the NFSP includes specific I Kevin To February Board
POLB 13/98(c) I termination rights. Gilliland/Chris
Aujard
4b January 2014 A noting paper offering reassurance that if the legal agreement with the NFSP I Kevin To February Board
POLB 14/7(b) had no specific reference to their support for the ‘cliff’ it did ensure they would I Gilliland/Chris
support any move to this position if it was required. Paper to come to the I Aujard
February Board.
Ce I 5. Project Sparrow & Prosecuting Authority oo oe eee
5a July 2013 Review of Second Sight report to be provided to ARC explaining how we Belinda To March ARC
POLB 13/51(g) I awarded and managed the contract and include an internal ‘lessons learned’ Crow/Alwen Lyons
September review for Project Sparrow.
2013
POLB 13/95(b)
5b I January 2014 February ARC to consider an update on Sparrow including lessons learned I Alasdair To February ARC and Board
POLB 14/7(g) along with the Prosecuting Authority paper. Papers for this ARC to be circulated I Marnoch/CoSec
to the full Board, and an update on Project Sparrow to be presented at the full
Board in February.
5c September Produce a noting paper to clarify whether any claims on the Business from the I CFO/Alasdair Appropriate notification to
2013 Horizon work would be covered by Professional Indemnity or Directors & I Marnoch underwriters has been made.
POLB 13/93(b) I Officers insurance and whether we had alerted our underwriters. Ensure that Work assessing claims is
the appropriate notifications are made. continuing and the insurance
position will be considered in
light of this.
5d January 2014 Clarification on whether the Terms of Reference agreed with 2” Sight precluded I Chris Aujard Included in the B48s
POLB 14/7(f)
them from working with claimants against the Post Office.
circulated to the Board
Status Report at 20 February 2014
Alwen Lyons
Page 3 of 4
POL-0023270
POL00026629
POL00026629
Strictly Confidential
i [erRisk] I
6a __I November 2013 I ARC to review the top 6+4 risks at its February meeting. — I Alasdair Marnoch/ I To March ARC and March
POLB 13/128(f) I Include in Board agenda f for March ee I Alwen Lyons. I Board. I
[
7a I November 2013 I Public Purpose Statement to be submitted to the January Board. — Mark Davies _I To February Board
POLB 13/133(a) I I I 7 a) 0 ;
Status Report at 20 February 2014 Alwen Lyons Page 4 of 4
POL-0023270
POL00026629
POL00026629
Strictly Confidential
Post Office Ltd Board
Data Centre Tower Procurement
1. Purpose
The purpose of this paper is to:
1.1. Update the Board on the status of the procurement of a Data Centre Tower.
2. Background
24 As previously agreed by the Executive Committee and the Board, Post Office is
re-procuring the IT supply chain to meet the demands of our business strategy
and Royal Mail Group separation activities.
2.2 Following previous ExCo approval, OJEU compliant procurements were initiated
(using a competitive dialogue process), for our whole IT supply chain, including a
Services Integrator.
2.3 The market was engaged to provide Data Centre services to meet our strategic
objectives; successful separation from RMG, improving timeliness and agility in
change delivery, introducing more variability into the cost base, lowering the cost
of IT service.
24 The Data Centre Tower services include the facilities, technology infrastructure
and supporting operational service capability on which we run our business
applications such as Horizon, core finance and HR systems.
25 To maximise efficiency providers typically offer services in a number of
configurations, described as Public Cloud, Private Cloud, Hosting and Co-
Location services. The key differences between them relate to the degree of
exclusivity required and who supplies the technology infrastructure (the provider
or the customer)'.
2.6 Post Office requires a mix of all four configurations to support the range of
technology and applications that are used across the business.
ies/Current Situation
3.1 Four bidders (Fujitsu, Capita, CSC and HP) were invited to submit responses to
an Invitation to Submit Proposed Solution (ISPS). Only one bidder, Fujitsu
expressed an interest to bid, the remaining three bidders withdrew, predominantly
due to the high degree of Co-Location services Post Office required.
3.2 The Programme Board reviewed the procurement and authorised continuing with
a sole bidder, Fujitsu. Following completion of dialogue and approval at
Programme Board an Invitation to Submit Final Tender (ISFT) was issued to
Fujitsu in November 2013.
3.3. Fujitsu submitted a bid in December 2013 and a number of clarification requests
were made and meetings held. The bid was evaluated against price and quality
criteria, with scores moderated for consistency. To ensure price/value for money
could be assessed against a sole bid, Gartner was engaged to provide a Market
' Ina Public Cloud configuration there is little or no exclusivity and the infrastructure is delivered by the provider.
Private Cloud and Hosting provide different degrees of exclusivity, whilst, in a Co-Location configuration the provider
delivers exclusive use of a dedicated area (secure space and power) and the customer provides the technology
infrastructure.
Data Centre Tower Lesley Sewell Page 1of4 20 February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
Price Assessment (MPA). The results of this evaluation indicated that the bid in
its current form did not meet Post Office’s objectives for a number of key
reasons:-
e The solution proposed did not reflect the Post Office’s requirement for a
leveraged, outcome based solution as set out in the ISFT.
e The time and quality of the implementation plan does not meet Post Office’s
stated requirements in the ISFT and placed obligations on Post Office that
cannot be met.
¢ It did not meet our value for money criteria based on the Gartner MPA. The
additional costs of the bid over the Gartner MPA were between £16m and
£18m over the term of the contract.
¢ It did not demonstrate a sufficient level of agility; there was no basis for
forecasting implementation costs and timescales for future change.
3.4 A range of options was carefully considered in reviewing the procurement
process and the risks and impacts to our strategic objectives, including
consideration of the impact to our relationship with Fujitsu.
¢ Accept the bid in its current form: The bid was not aligned to our strategy;
accepting it in its current form does not meet our delivery requirements or
achieve the strategic objectives and does not demonstrate value for money.
¢ Continue the process and propose a rebid: Post Office has a low
confidence in a revised bid meeting the required standard and Post Office
objectives; the impact to our Separation timelines was untenable.
« Cancel the procurement process and consider alternatives: This was
the preferred option; the current process was not meeting our strategic
objectives.
3.5 The IT Transformation Programme Board reviewed the procurement process and
considered whether to continue. It determined that the procurement, even if
continued, does not meet our strategic objectives. This decision was endorsed by
ExCo. The bidder was advised of Post Office’s decision in a meeting held on the
31% January. The procurement was formally cancelled on the 7” of February
2014 without award of contract.
Next steps
3.6 A plan is now being considered and taken forward to procure Data Centre
services through alternative methods; -
¢ Short term: Look at exploiting existing contracts to secure continuity of
services, and to enable us to meet our Separation activities.
* Medium term: Secure Data Centre services from a supplier appointed
through the Solutions Delivery Framework or through use of a framework
contract such as G-Cloud.
e Strategic Term: Review our IT supply chain strategy to accelerate provision
of hosting services within our existing Towers rather than through a single
Data Centre Tower.
3.7 An Independent internal review of the procurement including lessons learnt will
be conducted in due course; the report and actions cascaded across our
Transformation Programmes and Commercial Teams and will be shared with
ExCo.
Data Centre Tower Lesley Sewell Page 20f4 20 February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
3.8 A detailed update of the changes to the IT Strategy and the impact of this
decision will be presented to the Executive Committee and Post Office Board in
April.
Options Considered
Covered in Section 3.4
Commercial Impact/Costs
5.1 Sunk costs associated with the Data Centre procurement currently amount to
£1.1m.
5.2 Future costs are expected to be in the region of £6.2m:
¢ In order to support in-flight initiatives, such as Separation, we need to secure
both short and medium-term Data Centre services. The anticipated
additional cost of doing this is £3.4m.
« Longer-term, the Data Centre solution is expected to cost £2.8m to deliver
(not including on-going run costs).
5.3 The existing business case for the Data Centre procurement includes £2.4m to
transition services to the new Data Centre. Taking this into account, the
additional spend to deliver the short, medium and long term solutions is £3.8m.
5.4 In summary, the impact on the existing Strategic Plan assumptions are:
e FY 2013/14: £0.9m under budget
« FY 2014/15: £1.9m additional funds required.
« Subsequent years: £2.8m additional funds required.
5.5 All of these costs are subject to challenge during a detailed planning phase and
will be subject to the usual business sign-off processes,
5.6 Operational Expenditure: For planning purposes we have estimated an upper
limit increase of £850k in FY2015/16 and £500k in FY2016/17 for the revised
Data Centre services. Actual costs will be finalised as part of the detailed
planning phase.
5.7 There is no anticipated change to the timing of the benefits realisation in the IT
Transformation Programme as a result of cancelling the Data Centre
procurement.
Key Risks/Mitigation
6.1 Cancellation of the procurement process carries the risk that Fujitsu may be
motivated to pursue a legal challenge to seek loss of profits and/or bid costs.
Fujitsu’s bid costs are estimated to be circa £1m. An award for damages may be
higher. Risk mitigations include:
« The ISFT documents issued by Post Office specifically allow Post Office to
cancel the procurement process and preclude bidders from reclaiming costs;
however this may not prevent Fujitsu from seeking a route to challenge.
* Post Office engaged legal Counsel throughout the procurement to advise on
the procurement, associated risks and take appropriate mitigating actions.
Data Centre Tower Lesley Sewell Page 30f4 20 February 2014
POL-0023270
10.
POL00026629
POL00026629
Strictly Confidential
6.2 Fujitsu may seek to link our current Intellectual Property Rights (IPR) position
with the decision not to award a Data Centre contract. There is no commercial
link, as this would contravene Public Procurement Regulations.
Long term considerations — horizon scan
74 Fujitsu may use its position to leverage value from Post Office at the termination
or extension of current contracts.
7.2 Fujitsu are competing on other procurements and have responded with
expressions of interest on future procurements. The Data Centre procurement
decision does not impact our expectations or consideration of Fujitsu as a
strategic partner to Post Office.
Communications Impact
8.1 Cancelling the procurement sends a clear message to the Market and to our key
stakeholders that Post Office is a commercial organisation and mindful of the
need to ensure that procurements fully satisfy key strategic and commercial
objectives and extract maximum value for the ‘Public Purse’
8.2 There was a requirement to communicate this decision across the current supply
chain, to bidders involved in current and future procurements and to Royal Mail
Group. Consideration of Post Office’s longstanding relationship with Fujitsu has
been managed in the key messages.
8.3 Post Office Board have been advised.
8.4 Cancelling the Data Centre procurement does not impact customers, colleagues,
branches or unions.
Conclusion
9.1 Post Office has taken a decision to cancel a procurement process that does not
meet its strategic objectives or demonstrate value for money for the ‘public
purse’.
9.2 Plans for an alternative Data Centre solution will be taken forward.
9.3. Associated risks to time and cost are tolerable.
Recommendations
The Board is asked to note that:
10.1 The Data Centre procurement has been cancelled without award.
10.2 There will be an update to the IT Strategy shared with ExCo and the Post Office
Board in April 2014.
10.3. The impacts to the Benefits Case will be presented to the IT Transformation
Programme Board, Post Office Investment Committee, Executive Committee,
and Post Office Board in April 2014.
Lesley Sewell
20 February 2014
Data Centre Tower Lesley Sewell Page 4of4 20 February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
Post Office Ltd Board
Cyber Security and Information Assurance
1. Purpose
The purpose of this paper is to:
44 Update the Board on UK Cyber Security industry initiatives;
1.2 Update the Board on key Information Security and Assurance Group (ISAG)
activities;
1.3 Outline risk reduction activities being implemented at Post Office in Cyber
Security.
2. Industry Initiatives
21 Since the inaugural Cyber Security noting paper dated 15 January 2014, Post
Office has participated in a Government Consultation for a new Standard to
address Cyber Security. The anticipated time to develop the Standard is 18
months. This is led by BIS with backing from all major Government Departments
and aims to develop a Cyber Security Standard for adoption across Public and
Private sectors. The consultation is in line with the intention set out in the
National Cyber Security Strategy’ paper to address the increasing threat to UK
PLC.
2.2 The Consultation is in the early stages, but BIS are aware that Industry, including
Post Office, is appealing for a Standard that will;
. Not be too onerous to implement;
. Be applicable to organisations who have outsourcing arrangements and
have a reliance on supply chains;
. Provide real value in terms of measuring success against on-going and
emerging risks
° Include Mobile technology, which has the potential for severe compromise
if not managed adequately.
2.3 It is proposed, and supported by Post Office representation that the Cyber
Security Standard will be interoperable with current ‘good practice’ standards
such as IS027001°, rather than inventing something new, this will limit the
impact on Post Office. ExCo will be updated on further developments that may
affect Post Office regarding the proposed Standard.
3. Activities/Current Situation
Building on last month’s report on activities:
3.1 There are currently eleven active incidents or breaches that ISAG are aware of; at
this time none are assessed by ISAG as being of significant risk to Post Office.
These will be discussed at the next Information Security Committee.
‘ National Cyber Security Strategy 2011 and 2013 Published by Cabinet Office
? 1$027001: An International Standard covering the specification and management of an organisation's Information
Security Management System.
Cyber Security Julie George / Lesley Sewell Page 1 of 3
February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
3.2 Incident Summary
Following on from January's noting paper; during the period of mid January 2014
to the end of January 2014, there have been three new reported incidents all of
which are limited and contained.
Three of the eleven cases are on the Agenda for the next Information Security
Committee meeting for formal closure.
3.3 Contractual Due Diligence
ISAG are working with the Company Secretariat to ensure that there is adherence
by all parties to the sign-off process by ISAG (among other key teams) before
contracts are signed with suppliers.
Work is continuing with the Sourcing team and a Pre-Qualification Questionnaire
for Information Security has been introduced to tighten up the Information Security
requirements of new product and service acquisitions. All future procurements will
now include input from technical, data protection and compliance colleagues within
ISAG (dependent on the nature of the project).
A formal project gating certificate has now been drafted and will ensure ISAG
requirements are agreed prior to project sign-off.
3.4 Marketing Due Diligence
Regular engagement continues with Marketing due to the high level of reliance on
processing personal information. This is proving to be successful and helps
promote Post Office to our suppliers as an Information Security focussed
company.
3.5 IT Supply Chain Transition to ATOS
Regular meetings continue with the Atos team across many disciplines and
service categories, key areas include but are not limited to:
° Governance and Risk.
. Incident response and management.
. Business Continuity requirements.
. Segregation of responsibilities.
. Requirements and Controls are being assessed around data exports to
non-European locations.
3.6 Risks
Risk and Compliance Tool
A suitable tool has been selected for ISAG, which will help calculate and manage
risks in support of both internal policies and external certifications. This is being
put in place as a result of an audit finding from 2013.
Cyber Security Julie George / Lesley Sewell Page 2 of 3
February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
Reporting Risk
All Information Security and Assurance unmitigated risks continue to be logged
locally and escalated to the Risk and Compliance Committee as appropriate.
Assessing the Cyber Security Threat Landscape
The information Security and Assurance Group actively participates in industry
events, providing valuable peer interaction and demonstrating Post Offices
commitment to protecting its organisation.
ISAG also maintains contact with a number of external authorities to gain
knowledge of known and emerging threats. These include but are not limited to:
. CPNI — Centre for the Protection of the National Infrastructure — access to
their Secure Restricted Extranet for Cyber Security and guidance
updates.
. CESG — Communications and Electronic Security Group — regular
updates that are communicated to ISAG team members and other
colleagues as appropriate.
. British Computer Society Forensic Forum for Cyber Security — regular
updates are provided to ISAG team members.
. National Archives — Quarterly meetings for Senior Information Risk Owner
(SIRO), regular information updates are received and communicated to
appropriate colleagues.
3.7 Policies
All Information Security policies are now signed off, and have been communicated
to all colleagues, save for the Acceptable Use Policy which is subject to additional
supporting activity and is a paper for ExCo information and noting.
3.8 Training and Awareness
Key training and communication activities remain on schedule for April and July
2014 — rollouts to central and branch colleagues respectively.
ISAG are currently engaged with HR representatives to ensure ISAG Policies are
reflected in colleague communications and HR policies.
Request
44 The Board is asked to note the update and actions set out above.
Julie George/Lesley Sewell
18 February 2014
Cyber Security Julie George / Lesley Sewell Page 3 of 3
February 2014
POL-0023270
POL00026629
POL00026629
Strictly Confidential
FEBRUARY 2014
POST OFFICE LIMITED MATTERS — DISPUTE RESOLUTION
PRIVILEGED AND CONFIDENTIAL — CLAIMS OVER £500K OR THOSE OF A SENSITIVE NATURE
F a & TON
Horizon claims I POL/HF/R Belinda Crowe /I The Mediation Scheme, Business I Following the Second Sight Report, on I Bond
Ww Angela van den I Improvement Programme and approach to I 27.08.13 POL launched a Mediation I Dickinson
Bogerd
prosecutions referred to in this update are
the subject of separate reports to the Board
this month.
POL has received various claims from
subpostmasters (SPMs) alleging defects in
the Horizon system and POL's internal
processes.
These allegations were initially made in 5
claims brought through solicitors
Shoosmiths. Similar allegations have been
made through:
- SPMs’ MPs;
- the “Justice for
Alliance” (JFSA);
- defences to court proceedings
brought by POL to recover debts
from SPMs; and
- direct contact with POL.
Subpostmasters
Following discussions with James Arbuthnot
MP and JFSA, in July 2012 independent
investigator Second Sight Support Services
Ltd (Second Sight) was appointed to carry
out a review into these allegations.
On_ 08.07.13, Second Sight published a
Scheme aimed at resolving individual
complaints made about Horizon. POL
has also been developing and
implementing a Business Improvement
Program to improve the way POL
supports SPMs run their branches.
The Scheme received 147 applications
before applications closed on 18.11.13.
The applications are now _ being
progressed through the Scheme under
the direction of a Working Group chaired
by retired Court of Appeal Judge Sir
Anthony Hooper, and = comprising
representatives from POL, Second Sight,
and JFSA.
To ensure POL continues to comply with
the evidential, public interest, and
disclosure standards required __ for
prosecutions, POL has also completed a
review of criminal prosecutions brought
against SPMs which used Horizon data.
POL has also reviewed its approach to
prosecutions generally.
To date, no claim has been made against
POL in the civil courts, and no appeal has
Significant Litigation Report
19 February 2014
Page 1 of 3
POL-0023270
Strictly Confidential
POL00026629
POL00026629
Significant Litigation Report
Report finding shortcomings in POL's
internal training and support to SPMs on the
Horizon system, but no systemic problems
with Horizon itself.
19 February 2014
been made against any conviction in the
criminal courts, following Second Sight's
Report.
POL is not currently issuing any new
criminal summons, although it did
continue those cases already underway
before Second Sights Report was
published. There are currently only 5 live
criminal cases before the courts (of which
3 concern post-conviction _ financial
recovery only)
Page 2 of 3
POL-0023270
POL00026629
POL00026629
Strictly Confidential
PART (B) — PRINCIPAL CRIMINAL CASES BROUGHT BY POST OFFICE LIMITED
ESenl a
Defendant pleaded guilty on 05/02/13 and was sentenced to 2 years’
imprisonment.
On 12/07/13 a Confiscation Order was made in the sum of £59,500. The
Sub postmaster accused of theft of £78,660.63. Defendant had 6 months to pay that sum or receive a further 19 months’
imprisonment. Payment was not made within that time, and the matter is now
with the Court's Confiscation Unit to progress.
On 11/10/13 the Defendant was convicted of theft of c.£175k and sentenced to
Subpostmaster accused of two offences of theft of £175,260 and 2 years’ imprisonment. As a consequence of this conviction, no evidence was.
£9,999.43, and two offences of false accounting regarding the same offered with respect to the theft or false accounting of the c.£10k.
sums.
Confiscation proceedings have been initiated by POL and are proceeding to a
timetable set by the Crown Court. The next hearing of this matter will be on
04/04/2014.
Defendant pleaded guilty and on 03/05/13 was sentenced to 16 months’
imprisonment.
Subpostmaster accused of fraud of £115,172.11.
POL has recovered £61,000 to date, and is looking to deal with the outstanding
sum under a Consent Order. POL may withdraw its Confiscation proceedings if
a Consent Order can be agreed.
Significant Litigation Report Page 3 of 3
19 February 2014
POL-0023270
POL00026629
POL00026629
Confidential
POST OFFICE LTD BOARD
Health & Safety Report
1. Purpose
The purpose of this paper is to:
1 Provide an update on safety performance.
1.2 Outline risk reduction activities.
2. Current Situation
2.1 Injury accidents, up to period 9, are showing a favourable trend against last year,
and against the target reduction of 5%. Accidents involving absence have
decreased from 35 to 20 compared to the same period last year. The “per 1000 staff
in post” comparison indicator, which takes account of head count fluctuation year on
year, is showing a favourable trend for both ‘all accidents’ and ‘absence’
accidents. (Table 1)
Table 1 All Injury accidents and those resulting in absence (Cumulative)
350
300
250
o + 2012/13 All
§ 200 2013/14 All
3 150 2012/13 Absence
2 2013/14 Absence
100
50
0
P1 P2 P3 P4 P&S P6 P7 P8& PO P10 P11 P12
Period
2.2 The number of days lost due to accidents is showing a significant reduction
compared to the same period last year and against a target reduction of 5%.
This reduction is predominantly due to the absence of major injuries and
indicates that not only is there a favourable trend in the frequency of accidents
there is also a favourable trend in a reduction of the severity of those accidents.
(Table 2 below refers)
2.3 Claims for personal injury as a result of an accident at work are showing an
improving trend on past years in terms of both volume and value.
Health and Safety Neil Hayward Page 1 of 5
February 2014
POL-0023270
POL00026629
POL00026629
Confidential
Table 2 Days lost resulting from injury accidents (Cumulative)
2012/13
~~ 2013/14
P1 P2 P3 P4 PS PE P7 P& PO PIO P11 P12
Period
24 The total number of road traffic collisions (RTCs) up to and including period 9 is
up 4.5% on last year. The number of incidents where the Post Office driver is
‘at fault’ is 2.3% down against the same year to date period as last year. (Table
3) Road risk reduction opportunities continue to be the subject of analysis at the
Road Risk Forum with a view to identifying improvement activities in addition to
those already in place. (3.1 below) Reversing incidents are currently becoming
a cause for concern and will be the subject of additional attention. Injuries as a
result of road traffic collisions are infrequent. Road traffic collisions account for
less than 3% of the overall number of injury accidents, however they have the
potential for high impact in terms of injury and loss.
Table 3 Road Traffic Collisions (cumulative)
250
200
3
/
S450 2012/13 All
5 te 2013/14 All
5 2012/13 ‘at fault’
2 100
= 2013/14 ‘at fault’
Zz
50
o buco ee 2
P1 P2 P3 P4 PS P6 P7 PB PS P10 P11 P12
Period
Health and Safety Neil Hayward Page 2 of 5
February 2014
POL-0023270
POL00026629
POL00026629
Confidential
25 The majority of accidents currently fall into three main categories: lifting and
handling, stepping and striking and outdoor falls. These are high frequency
events with, in the majority, relatively low severity. The lower frequency types of
incident can carry the potential for very high impact, for example, assaults and
road traffic collisions. .
26 Robberies on Post Office Cash and Valuables in Transit (CViT) crews are down
from 42 to 32 cumulative for the past 9 months. Physical injuries during
robberies, of which there have been 8, a reduction of 5 on last year, remain
relatively minor in severity. Five of the 32 robberies were enabled by the
presence and/or threat of use of fire arms however on no occasions were the
firearms discharged. Risk reduction activities are identified at 3.2. (Appendix 1 —
Significant Incidents refers)
27 Robberies and attempted robberies on the Post Office network, cumulative to
period 9, are lower than last year — 78 compared to 83 — 39 of the 78 were
successful. Injuries sustained during robberies are down from 21 to 15.
Robberies take place predominantly at sub post offices. Supporting activities
have been introduced to continue to mitigate this risk and are identified at 3.2.
(Appendix 1 — Significant Incidents refers).
28 Burglaries and attempted burglaries (which do not involve personal attack) have
decreased slightly from 66 to 65 compared to the same 9 month period last
year — 15 of the 65 incidents were successful...
3. Act
ies
3.1 Road Risk
Current activities to mitigate road risk are:
e Road risk forum in place to scope and develop road risk reduction initiatives
and activities
« Analysis of effectiveness of face to face training given to top 50 high risk drivers
has indicated that accidents amongst this community have reduced significantly
following the refresher training
Analysis of and interventions for reversing incidents
Eye sight checks for operational drivers are in place
Technical accident reduction interventions on new vehicles e.g. Reversing aids
Analysis and evaluation of data (e.g. risk profiles) to determine further accident
reduction interventions
Introduction of coloured ‘high visibility’ seat belts on new vehicles
Safety team input and concurrence for vehicle specification and changes
Safe driver of the year award
Weekly case conferences to ensure consistent approach to accident
investigation, follow up activity and sharing of best practice
oeee
3.2 Robbery/Burglary Risk
Current activities to mitigate robbery and burglary risk are:
¢ Active liaison activities with the police and increased police support activity
Liaison with Met. Police on the increase in gun enabled robberies
Introduction of new deterrent technologies e.g. Smartwater — a solution that
contains a unique identifier that is released automatically in the event of a
Health and Safety Neil Hayward Page 3 of 5
February 2014
POL-0023270
POL00026629
POL00026629
Confidential
robbery, spraying those involved and enabling identification of the individuals
involved in the robberies
e Significant reduction in opportunities for duress type robberies linked to the
introduction of single person vehicles
Increased security support visits to Post Offices in ‘hotspot’ areas
‘Darker nights’ security awareness campaign
Increased use of crime alert communication techniques to Post Offices
Trialling new point of transfer arrangements to reduce exposure
Increased use of surveillance vehicles
A three month ‘Crime stopper’ campaign in the West Midlands has
commenced, aimed at reducing cash in transit robberies
eooeeee
3.3 Health and Wellbeing
Current activities to enhance wellbeing
* Programme of visits to all Post Office sites to offer and encourage the use of
health check equipment that provides a wide range of indicators on physical
wellbeing
e Plans in place to re-visit all Post Office Crown Branches and Supply Chain sites
within 18 months
Health and wellbeing ‘Team Talk’ modules
Health and wellbeing poster themed campaigns
Online wellbeing monitoring tool to support health check initiative
Roll out of mental health awareness programme
3.4 Safety
The Post Office occupational health and safety management system (OHSMS)
is certified by external auditors to the standards required by British Standard
OHSAS 18001.
4. Residual Risks
4.4 Driving activities have the potential for high impact/loss and therefore remain as
a significant residual risk. However, the actions identified above are aimed at
mitigating that risk and improving performance.
5. Recommendation
The Post Office Ltd Board is asked to:
5.1 Note the overall safety performance
5.2 Note the risk reduction activities.
Neil Hayward
February 2014
Health and Safety Neil Hayward Page 4 of 5
February 2014
POL-0023270
Confidential
POL00026629
POL00026629
Appendix 4
I Significant Incidents (Period 9)
Crowns and Network
floor with a shotgun against his head. SPMR was
forced to open up the secure area and hand over
cash. Assailants left via the back door.
Location Loss Circumstances Physical Injuries Any further details
Norris Green SPSO_ I £66k Sat 18/01 13:00 The Post Office was closed and the I Nil
Liverpool SPMR was refilling the ATM, two males rushed into
L111BQ the Branch and grabbed a staff member putting a
knife to his throat, the ATM money was taken.
Higham Lane £7k Thurs 23/01 23:15. Three masked males were Nil
Coventry waiting outside armed with crowbars when the shop
CV11 6AS was closing. The assailants forced the front door and
threatened the two staff members, forcing them in to
the secure area of the PO. One male threatened to
shoot them, although no gun was seen. The Bidi safe
was opened and the PO money and shop money
was taken, along with the main safe keys, and PO
drawer and Bidi safe keys. The males fled out of the
back door.
Hornsea SPSO £27.5k Mon 27/01 18:46. The shop assistant was on his own I Nil
Hull in the shop when two masked males entered. The
HU18 1LN SPMR returned to find shop assistant tied up on the
Nil
Supply Chain (Cash, delivery and collection)
I
Health and Safety
Neil Hayward
February 2014
5 of 5
POL-0023270
POL00026629
POL00026629
POST OFFICE LIMITED BOARD
Sealings 15 January 2014 — 18 February 2014 inclusive
Register of Sealings
The Directors are invited to consider the seal register and approve the affixing of the Common Seal of the Company to the documents set out against
items numbered 1118 to 1128 inclusive in the seal register.
“The Directors resolve that the affixing of the Common Seal of the Company to the documents set out against items numbered 1118 to 1128 inclusive in
the seal register is hereby confirmed.”
Alwen Lyons
Company Secretary
18 February 2014
Register of Sealings Alwen Lyons Page 1 of 3
18 February 2014
POL-0023270
Date
18/02/2014
POST OFFICE LIMITED
Register of Sealings
POL00026629
POL00026629
Company Number
2154540
Seal Number
/ File Ref.
Date of
Sealing
Date of
Authority
Description of Document
Persons Attesting
To Document
Destination of
Document
1118
1119
1120
1121
1122
1123
1124
1125
17/02/2014
17/01/2014
22/01/2014
27/01/2014
30/01/2014
30/01/2014
30/01/2014
11/02/2014
16/01/2014
17/01/2014
20/01/2014
16/01/2014
30/01/2014
30/01/2014
30/01/2014
11/02/2014
Licence to underlet and change use relating to 22 Market
Square, Poplar, London, E14 6AB between Poplar Housing
and Regeneration Community Association Limited, POL
__and Iridium Assets Limited
Agreement in respect of the management of required
changes to the CRC Energy Efficiency Scheme Participant
Group following the listing of Royal Mail pic on 15 October
2013 between Royal Mail Group Limited and POL
Licence for alterations relating to 1-7 South Mall,
Edmonton Green Shopping Centre, London, E9 between
St Modwen Developments (Edmonton) Limited and POL
Lease Unit G11 Kings Walk Shopping Mall, 122 Kings
Road, Chelsea, London, SW3 4TR between O & H
(Chelsea) Nominee Limited and O & H (Chelsea) (No.2)
_ Nominee Limited.
Licence to underlet and change use relating to 22 Market
Square, Poplar, London, E14 6AB between Poplar Housing
and Regeneration Community Association Limited, POL
and Iridium Assets Limited
Lease for alterations relating to Ground Floor, Stanway
House, Almondsbury Business Centre, Bristol, BS32 4QH
_ between Fairfax Shelf 1 LLP and POL
Licence to carry out works relating to Ground Floor,
Stanway House, Almondsbury Business Centre, Bristol,
BS32 4QH between Fairfax Shelf 1 LLP and POL.
Licence to Assign premises at The Post Office forming part
of the premises known as 1 Heathfield Terrace, Chiswick,
London W4 4JF between Post Office Limited and Yasmin
Zorha Syed and Siya Limited.
Piero D'Agostino
Piero D'Agostino
' Piero D'Agostino
Gill Catcheside
Alwen Lyons
Alwen Lyons
Alwen Lyons
Gill Catcheside
Jean Reynolds
"Jean Reynolds
"Jean Reynolds
"Jean Reynolds
I Jean Reynolds
Jean Reynolds
’ Jean Reynolds
To Jean Reynolds
1126
11/02/2014
11/02/2014
Rent Deposit Deed relating to premises at The Post Office
forming part of the premises known as 1 Heathfield
Gill Catcheside
To Jean Reynolds
Register of Sealings
Alwen Lyons
18 February 2014
Page 2 of 3
POL-0023270
POST OFFICE LIMITED
POL00026629
POL00026629
Date 5 . Company Number
18/02/2014 Register of Sealings 2154540
Seal Number Date of Date of Persons Attesting Destination of
/ File Ref. Sealing Authority _I Description of Document To Document Document
Terrace, Chiswick, London W4 4JF between Post Office
Limited and Siya Limited and Yasmin Zorha Syed . I
1127 13/02/2014 13/02/2014 I Agreement for lease of 160/161 Upper Street, Islington Alwen Lyons Jean Reynolds
between Christopher Theodore Eliades, Vincent Daniel
_ Goldstein and POL
1128 17/02/2014 17/02/2014 I Agreement for lease of premises at Unit 19, Kingsway Alwen Lyons Jean Reynolds
Shopping Centre, Newport, Gwent between UBS Global
Asset Management (UK) Limited and POL
Register of Sealings Alwen Lyons Page 3 of 3
18 February 2014
POL-0023270