Post Office Board Agenda
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®
Present
In Attendance
Apologies
25th July 2016 + Tim Parker ( Chairman) + Alwen Lyons None
; — 5 * Richard Callard
Sate Ul Gis aatime * Tim Franklin Other attendees:
09.30hrs 12.15hrs + Virginia Holmes + Rob Houghton (Item 4)
+ Ken McCall + Nick Kennett (Item 5)
Room 1.19 Wakefield * Paula Vennells
* Alisdair Cameron
1. Minutes of previous Board and Decision Minutes formally agreed. Alwen Lyons 09.30 - 09.35
Committee meetings including
Status Report
Zz CEO Report CEO report noted CEO to update the Board on the report. CEO 09.35 — 09.55
Including IR update
3. Financial Report CFO report noted CFO to update the Board on P3 results. CFO 09.55 — 10.10
4. Technology Strategy Agreement To understand the status and strategic direction of the IT Rob Houghton 10.10 - 11.10
function.
BREAK 11.10 - 11.20
5. Banking Framework Decision Agree contracts / delegate authority to sign. Nick Kennett / 11.20 - 11.35
Martin Kearsley
6. Update from Board Committees Board updated Committee Chairman to update the Board on Committee Committee 11.35 — 12.00
(verbal) meetings held since the last Board meeting. Chairman
We Any Other Business 12.00 - 12.15
7.1 Health & Safety Noting To update Board.
7.2 Sealings Noting Board aware of the affixing of the seal. Alwen
7.3 Confirmation of 2017 Board & Noting To remind the Board of the Board and committee dates for I Alwen
Committee dates 2017.
CLOSE 12.15
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POLB 16(4'")
POLB 16/26 — 16/36
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held at 9.00am on 24 May 2016
at 20 Finsbury Street, London EC2Y 9AQ.
Present:
Tim Parker Chairman
Richard Callard Non-Executive Director
Alisdair Cameron Chief Financial Officer (excluding minute POLB 16/30)
Tim Franklin Non-Executive Director
Virginia Holmes. Non-Executive Director
Carla Stent Non-Executive Director
Paula Vennells Chief Executive (excluding Minute POLB 16/30)
In Attendance:
Alwen Lyons Company Secretary
Mark Davies Communications Director (Minute POLB 16/29 & POLB 16/32)
Jane MacLeod General Counsel (Minute POLB 16/31)
Andrew Moys Post Office Advisory Council (Minute POLB 16/32)
Nick Kennett Financial Services Director (Minute POLB 16/33 to POLB 16/34)
Steve Ashton Chairman Post Office Management Services (Minute POLB
16/33 to POLB 16/34)
Kevin Gilliland Network and Sales Director (Minute POLB 16/35)
Kevin Seller General Manager Network Transformation and Development
(Minute POLB 16/35)
Apologies:
Ken McCall Senior Independent Director
POLB 16/26 INTRODUCTION
(a) The Chairman noted that a quorum was present and opened the
meeting.
(b) Each Director confirmed that they had no conflicts of interest in
relation to the business to be considered at the meeting.
POLB 16/27 MINUTES OF THE PREVIOUS BOARD AND COMMITTEE MEETINGS
INCLUDING STATUS REPORT
Minutes
(a) The minutes of the meeting of the Board held on 9" February 2016
were approved as accurate records and the Chairman was
authorised to sign them.
(b) The minutes of the meeting of the Board held on 21% March 2016
were approved as accurate records and the Chairman was
authorised to sign them.
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(c) The minutes of the Audit, Risk and Compliance Committee meeting
held on 22" January 2016 were noted.
Status Report
(d) POLB 16/02 (g) — The Board noted NFSP Grant Agreement
update. The CEO reported that to date no grant project funding had
been utilised and that any funding would have to be supported by a
business case.
(e) The Board noted the Status Report dated 16" May 2016.
POLB 16/28 CEO REPORT
CEO Report
(a) The CEO introduced the CEO Report, focusing on the following key
points:
(b) Period 1 results. Good trading results for the start of the year and
reducing costs have delivered above target results for period 1.
(c) IRIS. The IRIS announcement to withdraw from the supply chain
external market had been well managed by the CFO, Mark Ellis,
Supply Chain Director, and a team of ‘super- briefers’. After the initial
leaking of information by the CWU the external communications had
been effectively managed and the CEO thanked all those involved
All the units would now have a session with a member of the Group
Executive (GE) or the Lead Team, to build on the messages and
listen to concerns.
(d) I The 90 day consultation period was underway and despite the
excellent work the CEO still expected the CWU to ballot for industrial
action. The CEO explained that in the event of industrial action
support would be prioritised in the following order; supply chain;
NBSC (helpline); then directly managed branches.
(e) NFSP Conference. The CEO thanked the Chairman for attending
the NFSP Conference. The debate and questions had been
challenging but an opportunity to engage with the NFSP delegates.
(f) Horizon outage. Tim Franklin reported that the ARC had received
an update on the Horizon outage and that a full report, including root
cause analysis, was being presented at the September ARC.
(g) The Board noted the CEO report.
Transformation Update
(h) The Board noted the Transformation Update.
POLB 16/29 ANNUAL REPORT AND ACCOUNTS (ARA)
(a) I The Chairman welcomed Mark Davies, Communications Director, to
the meeting.
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(b) The CFO introduced the ARA focussing on the following key points:
(c) The Accounts. The numbers in the accounts are almost finalised
with a few revenue procedures to complete. The CFO explained the
approach to capital expenditure impairment which had been
discussed at the ARC and the different treatment for POMS.
(d) Disclosures. As the Company was no longer reporting compliance
with the ‘spirit’ of the UK Code of Corporate Governance, there was
an opportunity for more flexible approach to disclosures in the ARA.
(e) The CFO reported the debate at the ARC and the recommendation
from EY to disclose the Sparrow claim. The Board agreed that the
note on Sparrow, as detailed in the Board paper, should be included
in the ‘contingent liabilities’.
(fy) The Board discussed the Directors’ Remuneration Report and the
level of detail to include in the ARA. It was agreed that the report
would include more than the minimum detail required and although
it was unusual to provide the maximum stretch target for bonus
payments, this would be included as it was included in the past.
(g) Timetable. The ARC would be convened at the end of June for final
sign off of the ARA, which would be published in early July.
(h) Taking into account the discussion topics, the Board:
e¢ Noted the Briefing Book.
« Noted the Post Office Annual Report and Financial
Statements.
¢ Noted the Audit Results Report provided by EY.
« Delegated authority to the Post Office Audit, Risk and
Compliance Committee (ARC) to approve the Annual Report
and Financial Statements
« Delegated authority to the Chairman, the Chief Executive
and the Chief Financial Officer to sign the Annual Report and
the Financial Statements following approval by the ARC.
(i) Mark Davies left the meeting.
POLB 16/30 APPROVAL OF 2016/17 ANNUAL BONUS (STIP) DESIGN
(a) The CEO and CFO left the Meeting.
(b) A paper highlighting the 2016/17 Annual Bonus (STIP) Design was
circulated to the Board, outlining a proposal which had been
discussed at the Remuneration Committee on the 23" May and
recommended to the Board. The Chairman explained the proposal
included a gateway of 900 branch conversions, and an ‘entry point’
target.
(c) The Board approved the annual design and metrics for
recommendation to UKGI.
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ACTION: (d) 2016/17 Annual Bonus design and metrics to be recommended
Neil Hayward to UKGI.
(e) The Board noted the governance agreed by the Remuneration
Committee.
POLB 16/31 ITEMS FOR NOTING
(a) The CEO and CFO re-joined the meeting. The Chairman welcomed
Jane MacLeod, General Counsel (GC), to the Meeting.
Sparrow.
(b) The GC introduced the report on Postmaster Litigation and gave a
verbal update on the High Court Claim described in the Noting
paper.
(c) The GC noted that the claim although filed in the High Court, had
not been formally served on the Company and that service must be
effected by 11 August in order to be effective.
(d) The GC noted that a 53 page letter had been received
from Freeths (the solicitors acting for the claimants) and that a
response would be sent during July. Initial review of the letter
suggested that there were no new areas of concern that had not
previously been raised through the Complaint & Mediation Scheme.
(e) I The GC advised that it was proposed to continue to instruct Bond
Dickinson, who had detailed knowledge and experience of the
claims and that Tony Robinson QC had been interviewed and
instructed to act also.
(f) The Board noted the pro forma litigation timetable set out in the
paper.
(g) The Board noted the report.
Modern Slavery
(h)
(i) The Board discussed the requirements of the Act and the proposed
statement which would be published on the Company website. The
publication of the statement by September 2016 would ensure
compliance with the Act.
0) The Board asked if the Company needed to ensure all its suppliers
including those based overseas, complied with the Act.
(k)
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(j) Taking all the discussion points into consideration, the Board
approved the Modern Slavery Transparency Statement 2015-2016.
(k) The GC left the meeting.
Sealings
()) The Directors resolved that the affixing of the Common Seal of the
Company to the documents numbered 1400 to 1421 inclusive in the
seal register was confirmed.
Project Paddington
(m) The Board ratified the decision to delegate authority to the CEO to
sign a variation to the existing Collaboration Agreement, a Master
Franchise Agreement and a Framework Concession Agreement
with WHSmith (WHS) in connection with Project Paddington.
POLB 16/32 POST OFFICE ADVISORY COUNCIL (POAC)
(a) The Chairman welcomed Mark Davies, Communications Director
and Andrew Moys, a member of POAC, to the meeting.
(b) Mark Davies explained the history of the POAC, the backgrounds of
the members involved, and the range of issues which had been
debated at the meetings.
(c) Tim Franklin thanked the CEO for her support and recognised that
some of the debates at the POAC had been challenging for the
Executive team members presenting items. The CEO reinforced her
backing for the POAC and welcomed the diversity of the group and
the rigour of the challenge.
(d) Andrew Moys thanked the Board for inviting him and described his
role as a POAC member. He explained that the POAC brought
together a wide range of experience and had worked most
effectively when asked for input early enough to influence Company
thinking.
(e) Tim Franklin thanked the Board for their support and invited them to
attend a future POAC meeting.
(f) The Board noted the report.
(g) Mark Davies and Andrew Moys left the meeting.
POLB 16/33 PROJECT PEREGRINE PHASE 1
(a) The Chairman welcomed Steve Ashton, Chairman of POMS, and
Nick Kennett, Financial Services Director and CEO of POMS, to the
meeting.
(b) Nick Kennett gave a verbal update to the Board on Project
Peregrine, the renegotiation of the Bank of Ireland (Bol) contract.
After a tender process Macquarie, investment banking group, had
been chosen to support the Peregrine process.
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(c) Nick Kennett explained that the work was in three phases:
e To understand the value of the Bol contract, as it was
currently suboptimal for both parties;
* To agree a negotiation strategy, a mandate for which would
be brought to the June Board away day; and
* To prepare for the negotiation.
(d) Nick Kennett clarified that it had yet to be decided if Macquarie would
be involved in the negotiation as a different set of skills may be
required.
(e) The Board noted the paper.
(f) Nick Kennett updated the Board on the good progress being made
on the Banking Framework. He also explained that the Payments
Strategy, covering bill payments and the digital wallet would be
presented at the June away day.
ACTION: ALL (9) Nick Kennett offered 121 sessions to Board members before
the June away day.
POLB 16/34 POMS UPDATE TO POST OFFICE BOARD
(a) Nick Kennett introduced the POMS update paper to the Board
reporting the progress made over the last year. Two areas of risk
were identified:
«Branch trading for travel insurance; and
e Ensuring that branch sales conversations are compliant.
(b) The Board asked how POMS was trading compared with the market.
(c) Steve Ashton explained that the market had shifted online and to
aggregator sales and that POMS needed to respond. Competitors
were very good at acquiring customer life time value through
analytics and that this was where the Post Office should focus.
(d) Nick Kennett reported that work was underway on customer
segmentation and product analytics which, along with improvements
in the customer journey, should enable POMS to develop a better
customer relationship and higher customer value.
(e) Steve Ashton recognised that POMS could use the Travel Insurance
product, linked to the travel money product as an anchor to create
awareness and customer momentum. This anchor could then
enable product bundling and the development of a customer
relationship.
(f) The Board asked if Network Transformation was hindering the
growth of Financial Services. Nick Kennett explained that the most
vulnerable area was in travel where the product is currently sold in
c9000 branches.
(g) The Board discussed the sales model of Financial Services products
and the CEO explained that a new proposed Target Operating
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Model would be discussed at the June Away day which would
recognise the difference between transactional and relationship
sales.
(h) The Board asked about the risks identified by POMS. Steve Ashton
stressed that 6 to 9 months ago the POMS Board had been very
concerned by the regulatory relationship with Post Office and the
lack of engagement to mitigate the conduct risks. However he was
pleased to report that the POMS ARC had received a report and
presentation from Kevin Gilliland, Network & Sales Director, and
Jonathan Hill, Head of Financial Services Risk, on the oversight of
Post Office as the appointed representative of POMS. This had
given POMS ARC comfort that Post Office is taking steps to address
the various issues and concerns. Post Office is due to present an
update to the POMS ARC in July.
(i) The Board noted the progress made and confirmed support to the
strategic direction and business intent.
) Nick Kennett and Steve Ashton left the meeting.
POLB 16/35 DIRECTLY MANAGED NETWORK STRATEGY UPDATE
(a) The Chairman welcomed Kevin Gilliland, Network and Sales
Director, and Kevin Seller, General Manager Network
Transformation and Development, to the meeting.
(b) Kevin Gilliland introduced the Directly Managed (DM) Network
Strategy Update, and explained that although the transformation of
the DM branches had produced a £50m turnaround from a loss of
£46m per annum to a profit of £2.7m per annum, and that
Paddington would deliver a 3yr £18m EBITDAS improvement, the
strategy needed to develop further if the network was to become
cash generative.
(c) Kevin Gilliland explained that the Business case was predicated on
simplifying the operating model and taking out significant central
costs.
(d) The Board discussed the options for the DM branches and the
investment which would be required to deliver the change.
(e) The CFO recognised that there would be a finite investment pot to
right size the Business and that the directly managed transformation
should be considered alongside other initiatives. Richard Callard
reminded the Board that the Government were not expecting to fund
a further big investment. The CFO noted that the earlier plans
assumed a much higher level of profitable Government revenue.
(f) The Board recognised that significant reduction in the DM network
would cause serious industrial relations issues but the CEO believed
that if this was the agreed strategy it could be delivered.
(g) Kevin Seller acknowledged that there would be areas of the country
where an alternative approach would be required. Large city mails
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branches may require dividing and replacing with automation or
smaller cheaper sites. Urban deprived areas, where there are no
other solutions, may need to be considered as community branches
and require ongoing support.
(h) The Board noted the update, confirmed its appetite for a
transformation programme to further reduce the Directly Managed
network and welcomed a fuller debate at the June away day with a
business case to returning to the Board in September.
(i) Kevin Gilliland and Kevin Seller left the meeting.
POLB 16/36 CLOSE
(a) There being no further business, the Chairman declared the meeting
close.
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POLB 16/37 - 16/39
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held at 12.00 noon on 29" June 2016
at Warren House, Warren Road, Kingston Upon Thames, Surrey, KT2 7HY.
Present:
Tim Parker
Richard Callard
Alisdair Cameron
Tim Franklin
Virginia Holmes
Ken McCall
Carla Stent
Paula Vennells
In Attendance:
Alwen Lyons
Neil Hayward
Natasha Wilson
William Weir
POLB 16/37
POLB 16/38
Chairman
Non-Executive Director
Chief Financial Officer
Non-Executive Director (part item 38 & item 39)
Non-Executive Director
Senior Independent Director
Non-Executive Director
Chief Executive
Company Secretary
Group People Director
Director, Reward & Pensions
Willis Towers Watson
INTRODUCTION
(a)
(b)
The Chairman opened the meeting, and welcomed Neil Hayward,
Group People Director, Natasha Wilson, Head of Reward and
Pensions, and William Weir, Actuary Willis Towers Watson.
The directors declared that they had no conflicts of interest in the
matters to be considered at the meeting in accordance with the
requirements of section 177 of the Companies Act 2006 and the
Company's articles of association
PATHFINDER
(a)
(b)
Neil Hayward introduced the paper explaining the conclusion of the
consultation process and the recommendation to the Board. He
clarified the changes made to the pensions proposal following the
member consultation to:
¢ Close the DB Plan to future accrual at the end of the current
financial year, March 2017;
e Change the benefits accrued pre-2012, to revalue in line with
RPI instead of CPI (subject to final confirmation from the
Cabinet Office).
Neil Hayward explained that the Board were being asked to
approve the submission of a recommendation to the Plan
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Trustee on the 5" July for consideration at the Trustee meeting
on the 15" July.
(c) The Board recognised the implications of the pension proposal on
individuals and discussed the proposed changes.
(d) Tim Franklin Joined the meeting
(e) William Weir explained the assumptions made in his advice to the
Company, and that the self-sufficiency approach proposed would
protect the members’ accrued benefits and de-risk the plan.
(f) Itwas recognised that the Trustee and the Plan Executive would not
have much time before their July meeting to consider the proposal
and that it might need to be discussed again at the September
Trustee Board.
(g) Virginia Holmes acknowledged the legal and actuarial advice
received by the Company and affirmed her support for the proposal.
(h) Having considered all the points raised in the Board paper,
predicated on legal and actuarial advice, the Board approved a
submission to the Plan Trustee recommending:
1. To close the DB Plan to future accrual at the end of the
current Financial Year (March 2017)
2. Benefits accrued pre-2012 (whether final salary or CSDB) will
revalue in line with RPI (subject to final confirmation from
Cabinet Office).
3. Benefits built up from 1 April 2012 to increase in line with CPI.
4. DB Plan members will join the Post Office Pension Plan (‘the
DC Plan’) from 1 April 2017.
5. The Dc IPlan will be improved with an enhanced employer
contribution rate of 1% as per the initial proposal.
6. Death in Service lump sum benefits will increase to a rate of
4x salary (=2x if members have financial dependents) from 1
April 2017
7. Ill health benefits will be provided (subject to medical
consent) at a rate of half pay until the individual reaches age
65 or returns to work.
(i) I The Board delegated authority to the Group Executive to action post
closure options at the appropriate time.
POLB 16/39 DATE OF THE NEXT MEETING
(a) It was noted that the next meeting of the Board would be on 25 July
2016.
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POLB 16(6")
POLB 16/40 - 16/42
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held at 8am on 11 July 2016
by telephone conference call
Present:
Tim Parker Chairman
Ken McCall Senior Independent Director
Carla Stent Non-Executive Director
Richard Callard Non-Executive Director
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Paula Vennells Chief Executive
Alisdair Cameron Chief Financial Officer
In Attendance:
Alwen Lyons Company Secretary
Martin George Commercial Director
Chris Doutney Head of Government Services
Christian Muir Client Director
POLB 16/40 INTRODUCTION
(a) A quorum being present, the Chairman opened the meeting.
(b) The directors declared that they had no conflicts of interest in the
matters to be considered at the meeting in accordance with the
requirements of section 177 of the Companies Act 2006 and the
Company's articles of association
POLB 16/41 POST OFFICE CARD ACCOUNT (POca) PROCUREMENT DECISION
(a) Martin George (MG) thanked the Board for their time explaining
why the POca procurement decision had fallen outside the regular
Board meeting timetable.
(b) Chris Doutney (CD) explained the history of the POca and the
background to the procurement. The preferred, and only remaining
bidder, Hewlett Packard Enterprises and TSB (HPE/TSB) had
offered an improvement in the commercial terms and the capability
of providing innovation for future POca developments.
(c) CD reported that the proposed HPE/TSB bid would improve the
POca direct product contribution by c.£25m over the five years of
the contract compared with the existing terms.
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(d) HPE propose to work with Post Office to develop a digital wallet/bill
pay service (POcaPlus) to provide customers with a ‘jam jarring’
facility, to help with bill payment, which could generate a
commission to HPE and Post Office from the customers’ service
providers.
(e) The Board asked for more detail about Sabadell the Spanish
banking group who have bought TSB from Lloyds Bank.
The CEO suggested that CD provide a note on Sabadell for the
ACTION: CD Board
(f) The Board discussed the IT systems used for the banking
transactions and CD assured the Board that HPE would acquire the
current banking engine IT system from the current bank, JPM, so
they would be working with proven technology that had worked
effectively for a number of years. This would in effect de-risk the
technology aspects of the transition.
(g) The Board asked for reassurance that the single remaining bidders
would agree to the required service level agreements (SLAs). CD
explained that the majority of the MSA SLAs had been finalised
with further caveats in the preferred bidder letter to build in
additional protections. Christian Muir reported that the SLAs had
been agreed and were, as good as, if not better than those in the
existing contract.
The Board asked CD to ensure that all legal risks were closed
down before the contract was signed, and that HPE did not try
ACTION: CD to dilute the terms once they received the preferred bidder
letter.
(h) The Board asked for assurance that the work on digital wallet
would be accelerated and aligned with the wider digital strategy.
MG assured the Board that the work would be accelerated and
ACTION: MG promised to keep the Board updated.
(i) I The Board discussed CYSC8 banking requirements and asked the
ACTION: ARC to pick up the risks concerned with the transfer of POca
Carla Stent accounts (Court Order part 7) and CYSC8.
(j) I The Board approved the selection on HPE/TSB as the preferred
bidder for the POca.
The Board approved the delegation of authority to the CEO and
CFO for final approval and signature of the contract.
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POLB 16/42 CLOSE
(a) There being no further business, the Chairman declared the meeting
close.
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POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a meeting of the AUDIT, RISK AND COMPLIANCE COMMITTEE
Present:
Carla Stent
Tim Franklin
Ken McCall
Richard Callard
In Attendance:
Paula Vennells
Alisdair Cameron
Jane MacLeod
Nick Kennett
Alwen Lyons
Mike Morley-Fletcher
Garry Hooton
Peter Mclver
Mounia Mukina
Elena Belyaeva
Natasha Wilson
Tim Giles
Amanda Bowe
POLARC 16/10
POLARC 16/11
POL ARG, 17" March 2016
held at 2.00pm on 17" March 2016
at 20 Finsbury Street, London EC2Y 9AQ
Chairman (Chair)
Non-Executive Director (TF)
Non-Executive Director (KM)
Non-Executive Director (RC)
Chief Executive, (CEO)
Chief Financial Officer (CFO)
General Counsel (GC)
Financial Services Director, & CEO POMS (NK)
Company Secretary (CoSec)
Head of Risk and Assurance, Corporate Services, (MMF)
Audit Manager (GH)
Ernst & Young (EY) (PM) by conference call
EY (MM)
EY (EB)
Director, Reward & Pensions (NW) (Minute 16/18 only)
Aon Hewitt (TG) (Minute 16/18 only)
Post Office Management Services Limited (POMS) Non-
Executive Director and Chair of ARC (AB) (Minute 16/11 only) by
conference call
INTRODUCTION
(a)
(b)
A quorum being present, the Chairman opened the meeting.
Each Director confirmed that they had no conflict of interest in
relation to the business to be considered at the meeting.
REPORT FROM POMS ARC
(a)
(b)
(c)
The Chair welcomed AB to the meeting.
AB gave a verbal report from the meeting of the POMS ARC which
had taken place on 15 March 2016, immediately preceding the
POMS Board.
The POMS ARC’s main focus of discussion had been: oversight by
Post Office; consideration of the Policy Framework; and updates on
risk and compliance.
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(d) The POMS ARC had approved: the Compliance Monitoring Plan; the
Internal Audit Plan for 2016/07; and the noted the External Audit
Plan and fee for the period ending 27 March 2016.
(e) The POMS ARC in May would receive a comprehensive action plan
covering the oversight of POL performance under the MSA; the
management of risk associated with POL commercial activities —
especially regarding marketing & sales activity; and oversight of POL
regulatory activities.
(ff) NK explained that the need for clarity in the relationships of the
Principal and Appointed Representative had been raised by PwC in
the readiness assurance provided for POL before the establishment
of POMS. He reported that POL CEO would be attending a POMS.
ARC and Board in due course.
(g) NK explained that the immediate issue of managing compliance in
the branch network including AML is covered in work being
undertaken by the GC.
The Committee asked for a paper for the May meeting
explaining how POL had oversight of regulatory activity in
ACTION: GC branch and how issues are escalated.
(h) The Committee asked how POL and POMS were kept abreast of
regulatory changes. NK assured the Committee that responsibility
for horizon scanning for regulatory changes was the accountability
of a member of his POMS team.
(i) The Committee noted the report.
0) AB left the meeting.
POLARC 16/12 MINUTES OF THE MEETING HELD ON 22 JANUARY 2016, STATUS
REPORT AND MATTERS ARISING
(a) The minutes of the meeting held on 22 January 2016 were
approved as presented and the Chair of the Committee was
authorised to sign them as a true record.
(b) POLARC 15/30 (e) — The Committee noted the developments to
the Contract Management processes and noted the further work
that would be required across each function commencing in Q1
2016/17.
(c) POLARC 16/02 (e) — The Committee noted the Cyber Security and
Information Assurance Update paper.
(d) I The Committee asked for more clarity on how actions had been
discharged before reporting them as closed.
CoSec was asked to highlight where actions are absorbed into
ACTION: CoSec activity which the Committee are tracking.
(e) I The Committee noted the action list dated 11 March 2016.
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POLARC 16/13 RISK & CONTROLS UPDATE
(a)
(b)
(c)
ACTION: MMF
(d)
ACTION: MMF
(e)
ACTION: MMF
()
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MMF introduced the Risk Update and explained the progress to
date.
The Committee discussed the Group Risk Profile and Incident
Reporting and asked whether Trinity should have been highlighted
as an incident. MMF explained that Trinity was being treated as a
tisk mitigation for risk 7, which had consequently be renamed from
‘Transformation Complexity’ to ‘Transformation IT delivery’. A
reduction in the net risk evaluation was expected in the near future
as the impact of Trinity was taken into account.
The Committee asked for more granular detail on the ‘top risks’ to
enable them to understand the contribution of specific issues such
as IRIS or Trinity. Using ‘Industrial Relations’ as an example, the
CEO explained that the risk rating was a conflation of the Industrial
Relations risk of a number of transformational projects.
Description of top risks to be amended where relevant to
identify the contribution to the top risks of issues such as IRIS
or Trinity.
The Committee discussed the IT incident reporting. The CFO
explained that a survey of incidents was in place and reviewed by
the Group Executive (GE).
Consider how to make failure of any of the critical suppliers
(eg ATOS, Fujitsu, BOI, RMG) more apparent on the Risk
Profile, with an explanation of how Management are managing
the risk.
The Committee discussed whether the ‘top risks’ covered the
current areas and issues which were of most concern to the CEO.
Consider how to update the ARC/Board on the current risks
facing the business at a point in time and relating these back
to the ‘top risks’, giving greater clarity on the ‘risks of the
moment’.
MMF reported the progress made in developing the General
Control Framework. The GE accountabilities had been agreed
and would be included in objectives for 2016/17. An attestation
process to enable GE self—assurance had been developed which
would be trialled during the Interim Accounts process and in place
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ACTION: MMF
ACTION: GC
ACTION: CoSec
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(i)
@
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for the 2016/17 year end Board Annual Assessment and disclosure
in the Annual Report & Accounts.
The Committee asked for assurance that the timescales for
developing the Policy Framework were realistic and were assured
by MMF that the work was progressing to plan. The GC explained
that some policies had been brought forward to meet the timetable
of the Banking Services Framework assurance and that these were
on track.
Include in the Policy Framework update for the May ARC an
explanation of the governance for policies, and which will be
presented to which Committee for oversight.
The Committee discussed the Business Continuity Plan (BCP)
and challenged the timescale to complete phase 3 of the process.
MMF explained that the October date included in the paper was
when BCP would become business as usual, it was not meant to
suggest that nothing would be in place before that date.
The CEO stressed that the work underway was to document best
practice but that processes were in place for BCP and the Business
had the ability to react to an incident.
The Committee asked what part the Board played in the Crisis
Management Construct and how the Board would be informed if an
incident occurred. The CEO explained that she was personally
responsible for keeping the Chairman and the Board informed.
The Committee requested that the Crisis Management plan
included details of the role of the Board making clear when
and how they would be contacted. It would be finalised and
circulated to the Board as soon as possible.
The Committee approved the draft proposal for the Post Office
revised corporate governance compliance statement for inclusion in
the governance section of the 2015/16 Report and Accounts.
Include the statement ‘PO maintains standards of corporate
governance appropriate for our ownership structure, our
commitment to social purpose and our strategy to commercial
sustainability’ in the Annual Report & Accounts.
After providing feedback on its elements, the Committee noted the
Risk Update.
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POLARC 16/14 INTERNAL AUDIT UPDATE
(a) GH introduced the Internal Audit (IA) Update. The Committee were
disappointed by the lack of progress on IA actions and challenged
management as to whether enough focus was being given to the [A
findings.
(b) I The CEO explained the time pressure that Trinity had put on the
Business over the last two months but accepted that the actions had
not be progressed quickly enough. The CEO promised that audit
actions would be addressed before the May ARC and that in future
GE members would be invited to the Committee if red audit actions
had not been addressed.
Late red audit actions to be addressed before the May ARC and
where this has not happened the GE responsible would be
ACTION: GH invited to the Committee to explain why actions had not been
cleared.
The Committee asked that the GE responsible for the Financial
ACTION:GC Crime audit be invited to the May ARC.
(c) The Committee were concerned by the report on Property
Compliance Governance, especially in relationship to Health &
Safety. The GC expected to have property compliance in place by
the end of March, and that all the property IA actions would be
completed before the next ARC.
Provide an update on property compliance governance for the
ACTION: Kevin Committee, with more detail on the areas of concern highlighted
Seller in the report.
(d) I The CFO gave an update on Trinity and a FO! request received from
a law firm. The GC explained the nature of the request and stressed
that the information supplied would be redacted to ensure no
commercially sensitive information was provided.
(e) Having taken all the discussion points into consideration, the
Committee noted the update.
POLARC 16/15 INTERNAL AUDIT PLAN 2016/17
(a) GH introduced the proposed Internal Audit Plan for 2016/17.
(b) I The Committee asked that cyber security to be included as part of
the proposed reviews and not as part of the watch list.
ACTION: GH Cyber security to be included as a review in the Internal Audit
plan 2016/17.
(c) GH confirmed that he had the required resource to complete the
proposed Audit Plan.
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(d) Having taken all the discussion points into consideration, the
Committee approved the Internal Audit Plan for 2016/17.
POLARC 16/16 AML CTF FRAMEWORK
(a) GC introduced the Anti-Money Laundering (AML) and Counter
Terrorist Financing (CTF) Framework. During 2015 responsibility for
AML had moved to the Head of Security who had commissioned a
review by Promontory. The recommendations from this review were
summarised in the Committee paper.
(b) GC reported that the business has also been notified by HMRC that
they are to carry out an AML/CFT compliance audit on the Post
Office in 2016 in advance of a possible Financial Action Taskforce
Review in 2017.
(c) The Committee were concerned by the issues raised in the
Promontory report and asked for the following updates:
ACTION: GC A monthly progress report on the actions highlighted in the
Promontory report to be circulated to the Committee
ACTION: GC A report on AML at every ARC meeting including a stakeholder
plan
(d) The Committee asked GC if the Audit team could assist in the
process and the Chair offered her experience in AML risks and
frameworks.
(e) Following discussions the Committee noted the paper.
POLARC 16/17 FINANCE
Lessons learnt on Postmaster Compensation provision
(a) CFO introduced the Lessons Learnt paper on Postmasters’
Compensation.
(b) The Committee recognised the work undertaken to improve the
controls and noted the changes that had been implemented.
Update on Financial Reporting and Controls
(c) CFO introduced the update on Financial Reporting and Controls.
His paper set out the areas where work is underway to give
assurance for the signing of the 2015/16 year end accounts, but also
to build effective controls for the future.
(d) CFO told the Committee that during the work no further areas of
discrepancy had been identified. CFO noted the criticality of the
income reconciliation from source data through to client settlement.
Scrutiny of the items on the Balance Sheet, was also underway and
would include post balance sheet event testing.
(e) CFO took some comfort that the external audit plan approach had
been changed to include more testing of the balances.
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(f) Having commented on the progress and the plans, the Committee
noted the paper.
EY External Audit Update
(g) PM introduced the External Audit Update and the audit approach
which included:
1. Additional work planned to further test the Postmaster
Compensation Provision which was highlighted in Appendix
A of the EY report, including post balance sheet payments to
subpostmasters.
2. Revenue reconciliation across a range of diverse products
and systems, similar approach to last year.
3. Classification of and completeness of the exceptional items
and the utilisation of the Government Funding, similar
approach to last year
4. Other areas would include Pension valuation & accounting;
VAT accounting; and IT and SAP Core Finance System
checks, similar approach to last year
Performance materiality levels had been reduced from 75% to 50%
so any errors over £540k would be deemed material and included in
the audit report.
(h) The Committee challenged PM on the appropriateness of using a
similar audit approach to last year which had not identified the
Postmaster Compensation Provision issue. The Committee asked
what EY had learnt from the previous audit and what additional
checks would be put in place this year. PM acknowledged the fact
that the EY audit had not identified the issue in last year’s accounts.
and that a new team was in place to give a fresh set of eyes and to
challenge the risks.
(i) I PM gave assurance that the approach this year would include more
substantive testing and lower level of materiality.
(@) IThe Committee asked if the audit approach for 2015/16 had been in
place would it have highlighted the Postmaster Compensation
Provision error in 2014/15.
PM was asked for written response, before the next ARC, to
explain what EY had learnt from last year’s audit and if the audit
ACTION:PM approach for 2015/16 had been in place in 2014/15 would EY
have highlighted the Postmaster Compensation Provision
error.’
(k) I The Committee noted the report.
Report and Accounts
() The CFO introduced the production approach for the Report and
Accounts 2015/16.
(m) The Committee endorsed the approach, process and timescales
outlined and noted the paper.
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POLARC 16/18 PENSIONS INVESTMENT REPORT
(a) I The Committee discussed the Pensions papers presented which
were not clear about what the Committee were being asked to
decide.
(b) I The CFO gave an introduction to the agenda item and explained that
the Business was in the mid-point of a consultation to close the
Defined Benefits Pension Scheme to further accrual. Because of this
the Pension Trustee had delayed the triannual evaluation which
meant that the scheme surplus position reported in the papers
appeared optimistic. The Trustee recognise the weakening employer
covenant and therefore proposed to de-risk the scheme. Part of this
decision required the Trustee to consult with the Business and was
the reason for the paper coming to the ARC.
(c) The Chair welcome NW and TG to the meeting.
(d) TG gave a high level summary of the report.
(e) I The Committee recognised that Virginia Holmes, the Non-Executive
on the Board with pensions expertise, would have been a helpful
contributor to the debate and the Chair suggested she be invited to
join the ARC for any future pension slots.
The Chair to ask Virginia Holmes if she would be able to join
ACTION: Chair ARC for any pension debates
(f) CFO emphasised that it was the responsibility of the Trustees to take
any decision to de-risk the Scheme and that the Committee was
being asked to note that decision. The Committee asked NW to
contact Virginia Holmes before responding to the Trustee to
understand her view on the decision being made.
(g) The Committee understood the Trustee desire to de-risk the pension
scheme to protect the members from a weakened covenant and
noted this decision.
(h) NW and TG left the meeting.
POLARC 16/19 REVIEW OF THE ARC TERMS OF REFERENCE AND INTERNAL
AUDIT CHARTER
(a) GC introduced the ARC Terms of Reference review.
(b) The Chair asked if during the year the ARC had met with EY without
Management attending. The Company Secretary confirmed that this
had taken place as part of the May ARC meeting.
(c) I The Committee asked that AML be added to the proposed topics for
all forward agendas.
ACTION: CoSec Include AML on every ARC agenda going forward, until further
notice.
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(d) IThe Committee members confirmed that they had fulfilled the
requirements of the ARC Terms of Reference as specified by the
Board.
(e) IThe Committee noted the Annual Self-Assessment of the Internal
Audit Charter.
POLARC 16/20 ITEMS FOR NOTING
Horizon Spotting
(a) The Committee discussed the Horizon Spotting paper and
suggested that Management add the current Trade Union Bill and
Ofcom Review.
Include the Trade Union Bill and Ofcom Review in the Horizon
ACTION: GC Spotting exercise.
(b) GC explained that the implications of the Modern Slavery Act 2015
were being tested in relationship to subpostmasters and their
employees, and that this might require a change to the
subpostmaster contract. The Committee discussed the requirement
on the Business to ensure its key suppliers were also adhering to the
Modern Slavery Act.
Provide a paper for the May ARC/Board to explain the approach
ACTION:GC to Modern Slavery, including subpostmasters and their
employees and Post Office key suppliers.
(c) The Committee noted the paper.
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POST OFFICE ADVISORY COUNCIL MINUTES
Finsbury Dials, 20 Finsbury Street, London, EC2Y 9AQ
Thursday 6" July 2016
Attending: Tim Franklin, Chair POAC
Paula Vennells, Chief Executive
Council Members: Rebecca Glenapp
David Foley
Nick Stuart
Liz Armstrong
Lyn Simpson
Andrew Moys
Nilesh Joshi
Pardeep Duggall
Donna Underhill
Apologies Ismail Loonat
Farida Iqbal
Tim Coomer
Marc Kidson
Ben Lucas
Andy Burrows
Chris Feliciello
Kevin Twynholm
Brian Scott
Marcus Buck
Theo Bertram
Post Office Limited: Alwen Lyons, Company Secretary
Jane Hill, Head of Public Affairs
Martine Munby, Public Affairs
Glyn Williams, Head of Digital
Nick Beal, Head of Agents Development and Remuneration
Rina Patel, Communications
Kathryn Hollingsworth, Communications
Welcome Tim Franklin
The Chair welcomed the members of the Council and thanked them for attending the meeting,
passing on apologies for those who were absent. He recognised the reduced number and promised
to avoid a meeting in July and August next year. The membership of the Council was under review
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and the Chair proposed that additional subpostmaster members and a WHSmith representative
would be good additions.
The Chair informed the members that, if possible, the Post Office Chairman would be attending the
next meeting.
The Chair explained the changes that the Post Office Board now had three new Non-Executive
members and because of the he and Andrew Moys had led a session at the Board meeting in May to
give the new Directors an understanding of the rationale for POAC and an update on what had been
achieved to date. The Board were all very supportive of the Council and recognised the value added
by the debate and challenge.
Andrew reiterated the support received from the Board, and that the Post Office Chairman thought
the structure and output from the Council was better than he had seen anywhere else. The Chair
thanked Andrew for joining him to present to the Board.
Business Update: Paula Vennells, Chief Executive (CEO
The CEO thanked the Council for their continued support and input, and gave an update on the
highlights since the last POAC meeting:
One of the highlights of the last few months was on Saturday 4" June — the Network Sales Awards —
where the contribution that colleagues, agents and their staff have made to communities across the
UK was recognised and celebrated. 181 Post Offices were represented at the event, and 30 awards
were presented to businesses that were flourishing because of the appeal and quality of the service
they offer. The CEO said that presenting these awards and celebrating these successful branches is
one of the best parts of the job.
Business performance
The CEO shared an update on annual results. When published the Annual Report and Accounts will
be shared with POAC, as usual.
Changes we’re making
To get to this point, we have had to deliver a significant reduction in costs across the business, and
we need to carry on in this vein if we are to continue our journey towards profitability.
Some of these changes are very current:
e In February we launched a consultation on closing our defined benefit pension scheme to
future accrual.
e In May we announced our intention to reduce the cost of providing cash to Post Offices.
This will see up to 600 colleagues in our supply chain operation leave the business.
* Last week we told colleagues working on the network transformation program that this will
begin winding down from the autumn of this year. Around 500 individuals will be affected.
e — And only yesterday we told colleagues in a further 20 Crown Post Offices that we will be
advertising to try to find a business to take on their branch. This is in addition to the 39
branches we announced our intention to franchise in January, and a further 30 that will be
hosted by WHSmith.
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So we are looking at significant, structural change - and we never forget that each job lost is an
individual having to face difficult choices about their future. We will always remain sensitive to
individuals but we have to put the business in a stronger sustainable position.
These changes are putting our relationship with our unions under significant pressure. Yesterday
the CWU announced that it was launching a strike ballot in response to these changes.
Looking Ahead
We have to remain focussed on our goal of becoming profitable, because this is the only way to
create the potential to re-invest to secure the future of our unique network.
Our central and support services need to become simpler - and cheaper - to run. We need create the
conditions for postmasters to serve their customers in the best way possible.
There is no change in the strategy and there are 3 clear goals:
To maintain a minimum of 11500 post offices ( 20 new branches opened in the last month)
To maintain our position as number 1 in the parcels and letter market.
To grow and accelerate our FS business.
Digital is key and we will be asking you to give us your input later in the meeting.
Impact of Brexit
The referendum result clearly marks a shift in the environment we are all working in, but it has been
my priority to reassure Post Office colleagues that things are very much business as usual.
Our products and services remain available to all customers, with all their current features and
protections. We have updated branches to advise them of this and followed up with further updates
to reassure that all the existing protections for financial products are maintained.
Our travel money business had had a roller coaster couple of weeks. Saw highest demand in its
history the week before Brexit, declined immediately after, but has rallied slightly as the value of the
pound stabilised.
Our Directly Managed branches in Northern Ireland have seen a huge demand for Irish Passport
applications.
The Group Executive and Board will continue to monitor developments to ensure we act in the best
interests of our customers, staff, partner and shareholder.
The Chair thanked the CEO for her openness and took questions from the Council.
Questions from the Council for Paula Vennells, Chief Executive (CEO)
1. What further changes could the CEO imagine for the Post Office?
Doing things digitally, both digitising the Business to take cost out and simplifying processes,
and enabling customers to interact with us through digital technology. Use of mobile
technology to make customer journeys simpler and more convenient.
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There may be better ways to structure the Business. At the moment we treat every
customer in the same way, whether they are coming to branch for a transaction (where the
relationship is with the subpostmaster) or buying a regulated FS product. We need to look at
our structure and operating model to ensure it supports these two very different type of
customer.
2. You have taken a lot of cost out of the Business and delivered NT. What are you most proud
of?
Most proud of building an extraordinary Group Executive, with different skills and
experiences and then managing them to deliver. Being honest with recognition and
challenge.
3. What is the biggest challenge with such a large network?
Communication is always a challenge as face to face with 11500 branches is difficult. But
maintaining honesty especially with difficult news is key.
The Chair thanked the CEO for her report and for taking questions from the Council and introduced
Glyn Williams the new Head of Digital.
Glyn Williams: To explore opportunities in digital.
Glyn Williams explained his background with Aviva, and most recently Asda where he had worked on
connecting digital and branch customers to drive footfall.
Glyn explained that he would like the Council’s input at this early stage in his Post Office career as he
formulates his thinking on the digital strategy for the Business.
The Council were asked to consider:
In what way can digital support agents, customers & communities?
. Web
. Social
. Mobile / devices
° Data
° Wi-fi
° Blogs / Content
(Group flip charts shown as Appendix A to these notes)
Key Themes
Use digital technology to:
Share ideas, get SPMr and customer feedback on products
Listen to SPMr and Staff
Recruit new people
Free wifi for customers forming a PO digital hub
Promote the SPMr as a personal representative for PO, branch database, hub of the community
(what new skills would the SPMr need?)
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Capture data for a loyalty scheme
Link the customer journey to branch to SPMr
Barcode on mobile to send a parcel
Use social media to connect with customers and communities
Give SPMr a website, a digital package to use
Incentivise SPMr to drive customers on line, make it worth their while
Colleague offers to have an effect on advocacy
Use customer data in a more effective way, to drive additional sales
Share tips and best practice into the network
Use digital to inform the community what is available at the PO and on line
How do you link the customer to the branch, give the customer live data on the branch, queue
times, services available etc
Drive click and collect customers into branch as now have longer opening hours, but customers do
not realise.
Branch Finder: What services should it provide? What should it look like? How should it be
managed?
(Group flip charts shown as Appendix B to these notes)
Key Themes
Build the site around the local branch and SPMr
Show opening hours, retail offers, and community information, queue times, store rating? Deals
available - real time info.
Use as a shop window to the Branch — route in via the SPMr — give the SPMr ownership
Some areas controlled centrally but trust SPMr to amend things like opening hours, need flexibility
to change eg for Christmas opening.
Front end click a location customer decides which branch, then click through to local SPMr website,
but same standard across the country so will need to help some SPMr
My branch, my promotions, my community, link through to other websites. The community could be
a group of local branches.
Could access through branch finder, or a product search.
Automated GEO location.
Phone numbers currently go through to a central helpline, it would be more personal if it was the
SPM but recognise this is difficult to manage
Glyn thanked the Council for their input which would be fed into the Branch Finder project. He
offered to return to a future meeting to update on progress. The Chair thanked Glyn and welcomed
the offer to return.
Summary and Conclusions: Tim Franklin
The Chairman thanked the POAC members for their contributions. He stressed that the business
recognised the need to embrace digital and overcome the perception that the Post Office is a bricks
and mortar business.
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The date of the next meeting was confirmed as pm on Thursday 3"! November, at Finsbury Dials.
That evening the POAC members are invited to attend the Charity Ball, at Grosvenor Park Hotel as
guests of the Business, as recognition and thanks for the time they give to the POAC. (details to
follow).
The Chairman closed the meeting, thanking the Council for their input and asking for any feedback
to be sent to Martine Munby.
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Appendix A — Flip Chart Feedback
Sydicate 1
.
°
No incentive for agents to push people on line
More support for agents on professional website design
Live information on branches — eg status of AEI, queues etc
Ability to rate and feedback on POs
Free Wi-Fi in branch
Capturing customer data electronically
Click and collect drives people in branch — promote this and look for other opportunities
Clarify ID verification services
Consistent and clear branch information
On line community based around Postmasters
Better management of branch finder
Central v local information
Syndicate 2
.
°
Postmasters share best practice/tips
Attribution
Collect discount
Data/customer
Classified
Remuneration
Footfall drivers — click and collect
NB Syndicate 3 gave verbal feedback
Syndicate 4
Agents:
Database for agents to see when policy renewal dates come up
Shared database of customer info
Mobile enabled/simple/apps
Wi-Fi hub
Customers:
Simple
Profile of customer data
Scheme of data capture
Loyalty scheme with incentives
Provide info on products and services
Post Office advertising notice boards
Feed from feedback
Bank with Post Office — get free advertising on our website
Web page per area
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Communities
© Link journey on line to branch
End to end, drop product off on line
«Parcel check service
© Digital barcode created on app and then take parcel to the Post Office
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Annex B
Syndicate 1
Branch Finder design:
Design Access:
Opening hours
¢ Content
¢ Services
e Education/digital/apps
Social:
e Recruitment — Postmaster, Apprentices
¢ Connecting — Postmasters (social and collaborative)
¢ Small ideas and lessons
e Events
e Blogs
Training
©) WiFi
¢ Module based
Show and tell
Innovation
e = Insight
e Self Drive
e Engagement
Marketing
e Promotions
¢ Footfall
¢ Big opportunity
e Engage
© Community
¢ Brand
Progressive
Postmaster at the heart of digital:
°
°
.
°
°
°
°
Digital
°
°
Listen
Engagement and feedback with Postmasters
Impact of solutions
Automation — SSKs
Education
Incentive
Horizon — process
Engagement/communications
Transact — device — customer experience and access
Internal digitisation
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* Technologs
Syndicate 2
Branch Finder:
¢ Geo location based map
Opening times based in time/day “open now until 6pm”
¢ Individual Postmaster data
Branch search:
¢ Search term and Post Office
¢ Location
@ Opening hours
e Branch phone number
* Google reviews
¢ Business ownership
Syndicate 3
Branch Finder:
© Centrally managed
© Use existing resource (eg IMAPs)
e Link through to local branch website
Map based and interactive
Hover button to reveal products and services and opening times
Main site
Products
© Opening hours
* Contact details
== Click through:
Customer/feedback
© Option to buy service
* Online (postmaster incentive)
Cluster products and cross sell
Two Way traffic
e le collect travel money in branch
Customer contacted via branch finder
Syndicate 4
Branch Finder
e Identify nearby Post Offices via individual’s location
¢ Information on local branches:
e Hours
e Address
¢ Postmaster
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Phone no
Accessibility/parking
Busy times
Click through to community info hub
Products and services (drop down list with other branches)
Products (drop down)
Click through to the main Post Office site, banking site and Postal app
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Post Office Ltd - Confidential
Post Office Board Strategy Away Day Reference: POLB 29/06/2016
Date: 29/06/2016 I Venue: Warren House, Kingston upon Thames. Time: 13:00
Present: In Attendance Apologies
Tim Parker (TP) Alwen Lyons (AL)
Ken McCall (KM) Neil Hayward (NH)
Carla Stent (cs) Martin Edwards (ME)
Virginia Holmes (VH) Martin George (item 1.2) (MG)
Tim Franklin (Tk) Mark Siviter (item 1.2) (MS)
Richard Callard (RC) Nick Kennett (item 1.3) (NK)
Paula Vennells (Pv) Jonathan Hill (item 1.3) (JH)
Alisdair Cameron (AC) Chrysanthy Pisinis (item 1.3) (CP)
Jonny Allison Macquarie (item
1.3) (JM)
Alan Smith (item 1.4) (AL)
Kevin Gilliland (item 2.1) (KG)
Kevin Seller (item 2.1) (KS)
Day 1 - Agenda Item 1.1
Strategy Overview & Brexit
To discuss and agree the overview of the strategy, introducing key decisions and choices to be covered at the
meeting. A discussion on the possible implications of BREXIT.
« What has changed since the last plan in 2013? NT almost complete; sharper focus on3 groups, customers,
subpostmasters (retailers) and clients ,More focus on FS integrator model and emphasis on digital.
We should be focussing on how a simpler business can be more profitable, rather than adding activities to attempt to
generate growth — that can/will come later. There is a good business model within our grasp.
« Need to be focussed on innovation and digital to drive easier customer journeys and draw people into post offices.
e Board supportive of greater digital focus, but keen to see detail.
e Brexit - could be an opportunity for the Post Office brand. Potentially less UK providers, but there is uncertainty about
the commercial impact, we need to be ready to seize any opportunities.
e Brexit - however there will be a period of uncertainty and there may be political challenges especially around any
funding requirement.
The Board supported the overall shape and direction of the business as outlined in the
overview paper
ACTIONS:
1. Assess SME opportunities in financial services sooner rather than later, look at the
opportunities to market FS products direct to SMEs. (NK & ME to discuss way forwards)
2. Share further detail with the Board on digital strategy (alongside the IT strategy) with
further work to be presented at the October Board
Agenda Item 1.2
Mail Strategy
NK Oct
ME/MG Oct
Agree the strategy and action plan for securing POL position in the mail market, centred around a strong
relationship with RMG.
e Board keen for a arrangement that locks RMG in on a more permanent basis, for example through equity partnership.
« Do not allow discussions to meander on towards 2019/2020 — need to force RMG's hand by offering them attractive
partnership opportunity with the message that if they don’t engage we will switch to our plan B options.
e We should be exploring a broader range of strategic partnerships to create a ‘knock-out’ proposition if it is required. Build
Amazon and eBay relationships.
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e Our competitive advantage is in optimising last mile economics for the carriers, this is where carriers face their biggest
challenge.
e We should take seriously the threat that RMG may put the contract out to tender and/or continue to develop their direct
channels (within MDA) — digital technology has reduced the costs/barriers to entry.
e Need to be clear in any partnership; who owns the customer; how POL neutralises the threat of competitors; and what
would any deal mean to the subpostmaster.
There is a risk that in future RMG may consider contracting direct with subpostmasters.
The Board endorsed the overall approach to engage early with RMG with the aim of re-
establishing the relationship on a more durable and mutually beneficial basis (not just an
extension of the current arrangement).
To ensure this approach has traction - and to counter the risk of RMG pursuing alternative
options the Business needs to:
a) present a compelling story of the value we can drive for RMG, especially in the final
mile;
b) develop a ‘plan B’ option into a genuinely credible alternative; and
c) develop cost reduction opportunities across the whole business to give some
flexibility to negotiate on fees.
This will ensure the Business is credible in both its offer and its threat.
ACTIONS:
1. Proceed with RMG dialogue including possible ownership models, and develop no regrets
options as well as plan B as fast as we can, updating the Board at earliest opportunity, MG/MS/ME
probably before January
2. Start to engage with relevant partners/stakeholder to improve understanding of plan B MG/MS
option (other carriers; Amazon/eBay & other retailers; Ofcom/BIS on USO options)
3. Develop thinking around PR/political leverage on RMG MG/MS/ME
4. Provide more detail in at the next Board Mails discussion on the plan for improving
customer journey and ownership (innovation and digital MG/MS
Agenda Item 1.3
Post Office Money Strategy
Agree the strategy for growth in financial services through a refreshed customer proposition and greater value
chain control (the ‘stronger integrator’ model). In this context, agree Bol negotiating strategy and high level
delivery roadmap.
Offering continued exclusivity to Bol even within mortgages and savings needs to be carefully considered
We need an arrangement with Bol which is agnostic on which side of the balance sheet is growing
Customer strategy broadly endorsed, but the business will need to demonstrate that anynew product areas within FS
represent a genuine opportunity and not a distraction
Eager for POL to own FRES, but recognition that this will be difficult to negotiate.
Need to consider who delivers the tougher messages to Bol (e.g. chair to chair) vs who manages the more collaborative
BAU dialogue.
The Board endorsed the negotiating approach as outlined in the slides, with 2023
recognised as the main source of leverage (as both a reassurance and a threat). The Board
were prepared to risk the downside impacts to EBITDAS (as outlined in additional
document) to pursue the desired outcomes:
a) fairer share of value from FRES (including potentially a buyout);
b) more sustainable share of the value from Bol balance sheet; and
c) flexibility to work with other providers outside of mortgages & savings.
Customer proposition broadly endorsed, subject to the detailed plan.
ACTIONS:
1. Develop negotiating strategy into full term sheet and plan. NK/JH
2. Present full implementation plan for customer, channel and product strategy in
Sept/Oct NK/JH/CP
3. Chairman and CEO to have the initial conversation with Bol TP/PV
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Agenda Item 1.4
Payments Strategy
Outline the strategy for strengthening the position in the bill payments market and establish a role in the
emerging digital payments market.
Need to make sure we've thought through and documented how competitors may react and take pre-emptive actions
to mitigate the risks
e Linked to this, we should aim to secure the other resellers as rapidly as possible after Moped.
« Considerable merit in getting together with AllPay given their existing client relationships and technology capabilities.
e Worth looking at put and call options fora JV,
« POL have to find a better technical solution.
The Board endorsed the Moped proposal.
ACTIONS:
1. Proceed with Moped, updating the Board on progress in the autumn. NK/AS
2. Rename the project!! NK
Day 2 - Agenda Item 2.1
Network Strategy
Agree what changes should be made to the network strategy in order to reduce costs, strengthen the retailer
proposition and support the delivery of POL commercial objectives
« Don't create major dependencies on IT change to deliver the network savings
e Default assumption should be that ‘solus’ post offices (i.e. as opposed to those hosted in retailer) are never the best
option
e Be aware of the risks of streamlining training provision, in particular increased dependency on avaibbility of specialist
staff
e Be ready to explain why converting Mains (and Crowns) doesn't imply a waste of the money spent under NTP/CTP.
e Do not chase the last offices if it costs too much resource, leave the long tail.
e Could be a case for compensating traditional postmasters to leave the network (without like for lke replacement),
although it would need to be well articulated.
« What are the important products for footfall and income? And how would the plan work in a location?
e Be careful about making network decisions predicated on the PFS business.
e The Board gave a clear steer that having a Directly Managed network drives the culture and costs of the
organisatiot
The Board endorsed the approach to network strategy as set out in the paper, and were
keen for the Business to pursue this as quickly as possible.
ACTIONS:
1. Proceed with detailed planning around network strategy, including plans for breaking
dependency on large branches (high mails volumes in city centres) KG/KS
2. Provide a teach-in for NEDs on: a) network, product & customer strategy (and how this
relates to the product & customer strategy for the relationship side of the business); b) NK/MG/AC
network economics from both POL and agent perspective. As part of this should
incorporate comparison vs Paypoint as this was a significant area of debate; c) the move KG/KS
from standalone POs to a category with a store.
3. Board keen to see area planning approach — provide a few case studies when we present KG/KS
proposals in Sept/Oct
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Cost reduction plan
Outline a high level view of the end state cost base, and the key decisions and investments required to get there
Move on the big things quickly
Take some risks and accelerating savings wherever possible, both to release headroom but also to achieve sfbility for
the business and its people sooner
e Tim Franklin offered to engage/support on FS sales model (e.g. agency hosting of specialist sales)
The Board endorsed the overall approach.
ACTIONS:
1. Present detailed plan to the Board in Sept/Oct. AC/ME
Funding outlook and choices
Outline the expected funding requirements up to 2020/21, in the context of our emerging financial projections for
the period.
The Board believed that the business would have no problem funding these initiatives in the external marketas they
are all linked to tangible, low risk returns.
RC articulated some concem that there is “no sanction if we fail”.
The Govt. may be uncomfortable with the idea of funding FRES acquisition.
The options should be presented as a prioritised menu given that we may not receive funding for everything.
The Board believe there is a compelling financial case for these investments - very disappointing if the owner says
there isn't enough money
RC thought that a HMG loan may be more feasible than straight subsid'
The Board noted the overall numbers.
The Business was asked not to limit its opportunity/options by availability of funding
ACTIONS:
1. Develop clearly articulated story for HMG and engagement plan — (e.g. when ME/MD
should The Chairman meet SoS?)
2. Prioritise the requirement ME
3. Work with UKGI to develop the funding ask ME/RC
4. Develop options for external financing to share with UKGI ME
5. Link to further work on ownership options that might move POL out of public ME
sector (but careful not to complicate the story with Ministers)
Conclusion and next steps
Key conclusions and next steps
What would the Board like the Business us to cover when we come back with more
detailed plans in Sept/Oct?
1. View of capacity and capability requirements and constraints ME
2. Clear view of prioritisation:
a. firm vs aspirational plans;
b. “fixing the old” vs “building the new”
c. Risk / return trade-offs; identification of any diminishing returns
3. View of the major milestones for delivering the strategy
4. Identification of where POL can move fastest and with the greatest impact— taking
decisions early to get things settled
5. Clear practical plans for delivering the savings
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Scenario analysis / stress testing
Reassurance that we are not missing any opportunities (specifically on cost)
Explanation of “why now?” (this will help RC_ manage BIS/HMT)
Communication plan and narrative to manage the change
0. Inform the Board early, including by email over the summer — don't wait for the next Board
meetings
= Oe No
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Status Report as at: 18/07/2016
Post Office Limited Board
IREFERENCE ACTION Action Owner Due Date STATUS Open/Closed
(GE Member)
January 2016 CEO Report and Transformation Update Neil [September Open
POLB 16/2 (c) ]IHow should the Business recognise exceptional Hayward/Mark IBoard Meeting
contribution by individuals. Consideration to be given to IDavies
Chairman's awards or best Post Office awards.
January 2016 Project Trinity General Counsel ISeptember ARC Open
POLB 16/14 (I) To undertake a review of the initial procurement process
leading up to the decision to award the contract to IBM,
ito ensure that any lessons from that review were
captured. The findings of the review are to be reported to
the ARC,
March 2016 Status Report ‘CFO September ARC IThis should be covered as part of the IOpen
POLB 16/17 (d) IThe CEO proposed that a supplier strategy be presented IT Strategy.
Jat a future ARC covering the Top 20 Supplier
relationships and Supplier compliance.
March 2016 CEO Report ‘CFO July Board IT strategy on July Board. Closed
POLB 16/18 (g) IThe IT Strategy would be presented as a topic for
discussion at the July Board meeting.
May 2016 POLB /Approval of 2016/17 Annual Bonus (STIP) Design Neil Hayward ISTIP design recommended to BIS. Closed
16/30 2016/17 Annual Bonus design and metrics to be Approved by BIS Ministers.
recommended to UKGI Recommended to Treasury.
July 2016 POLB IPost Office Card Account (Poca) Procurement Division ‘Chris Doutney End July Open
16/41(e) The CEO suggested that CD provide a note on Sabadell
for the Board.
July 2016 POLB IPost Office Card Account (Poca) Procurement Division ‘Chris Doutney Before the Open
16/41 (g) The Board asked Chris Doutney to ensure that all legal contract is
risks were closed down before the contract was signed, signed
land that HPE did not try to dilute the terms once they
received the preferred bidder letter,
July 2016 POLB i Martin George [Board on 29th Open
16/41 (h) MG assured the Board that the work on digital wallet [September
would be accelerated and aligned with the wider digital
strategy promised to keep Board updated.
July 2016 POLB IPost Office Card Account (Poca) Procurement Division Carla Stent IARC on 28th Open
16/41 (i) IARC to pick up the risks concerned with the trasnfer of September
Poca accounts (Court order part 7) and CYSCS8.
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POST OFFICE BOARD
CEO’s Report
Author: Paula Vennells Meeting date: 25 July 2016
Executive Summary
Context
Our goal for 2016-17 is to achieve Our 3 year goals are:
EBITDAS of (£10m). 1. To accelerate the transformation
of Post Office.
2. To secure commercial
sustainability for the long term
3. To establish a business that can
ultimately fund investments and
the social purpose from profits
rather than subsidy.
In summary, our strategy is to secure our position as the UK’s number one
parcels and letters retailer, grow in financial services and protect our network
and social purpose - all supported by a much leaner central organisation.
Questions this paper addresses
1. What is on my mind? (successes, challenges, opportunities and risks)
2. What are the implications for our outlook and plans?
Conclusion
1. EBITDAS at the end of Q1 is £1m favourable to budget and the business is
on track to meet its targets for the year.
2. However, the current market and political environments entail significant risk
which will change the markets we operate in. We are monitoring closely.
3. In addition, we face significant industrial relations challenges across the
business. Although we continue to make every effort to engage with our
trade unions, we are expecting and planning for future industrial action.
Input Sought
The Board is invited to note the report and highlight any issues where a future
discussion would be welcome.
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The Report
Looking Back
WHAT HAS GONE WELL?
e Financial Performance — P3
— EBITDAS at the end of Qi is £1m favourable to budget although P3 was
£0.2m below target.
— Expenditure in P3 is £1.8m favourable to budget - driven principally by
agents’ remuneration and staff costs.
— Mails trading in P3 was 0.6% above target; all insurance products performed
well across the portfolio of products with life, home and motor insurance all
exceeding target for P3 and travel recovering to 102% vs target YTD.
e Industrial Relations
— An agreement has been reached with Unite (subject to a ballot) on our
proposed 1.9% salary increase for manager grades and a joint review of
broad banding. In exchange, we have an agreement on cooperation with our
changes in Supply Chain, Network Transformation and Crowns. The risk of
joint strike action with CWU on these issues is now minimal and our
contingency plans for Industrial Action are strengthened.
— Our redundancy programmes to (subject to consultation) in Finsbury Dials,
Supply Chain, Crown Network Development and Network Transformation are
on track with only 4 days lost so far through official or unofficial industrial
action. Since April, 1,604 employees have been placed at risk of redundancy
and 113 have left through voluntary redundancy.
— Our Industrial Action Contingency Plans have been completed and subjected
to a series of reviews, including the CEO and GE members. The training
required to provide cover will be completed before any Industrial Action.
WHAT HAS NOT GONE WELL?
e Financial Performance — P3
— Gross income was £2.6m adverse to budget in P3.
— This was largely driven by underperformance in financial services (£2m
adverse to budget) and telecoms (£1m adverse to budget).
— Non-staff costs are £0.4m adverse to budget, but underneath that are costs
in IT of £2.5m adverse to budget. The IT strategy paper for this month’s
Board sets out the pressures in greater detail.
e = Third Party Fraud
— EY'’s investigations to date have not uncovered anything materially different
on the third party frauds, to what was originally reported in Alisdair
Cameron’s note of 6 July.
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— We are therefore hoping to issue final reports on 22 July and there is an
additional ARC on Monday 25 July to sign off the accounts. If that changes,
we will let the Board know.
— Weare progressing with an automated solution. In the meantime, we have
implemented additional measures to identify any further instances. However,
these are not fool proof and we believe there has been one further instance
with an accompanying loss of £19,000.
Looking Ahead
OPPORTUNITIES?
« POCA
— We have made further progress since the Board’s discussion on 11 July on the
award of the new POCA contract, including:
o we have asked for written confirmation from TSB that Sabadell are fully
supportive of TSB bid (reinforcing verbal statement in various meetings);
o the outstanding legal risks have been set out in the Preferred Bidder letter
sent to HPE on 11 July and returned signed by HPE and TSB 13th July. The
issues will be worked through in meetings scheduled for the next two
weeks to fit in with timescale of contract signature by one month from
issue of Preferred Bidder letter; and
o we have established POcaPlus/Digital Wallet steering group under GE
sponsorship, to align both projects and resolve key questions.
—+ We will keep the Board informed.
e Strategy to Plan
— Following the Board’s strategy days last month, we have set up the processes
and governance for developing a full plan for implementing the strategy.
— Workstreams include people and capabilities; technology and the wider
operating model is required to deliver our commercial ambitions and cost
reduction plans; and financial projections out to 2020/21, including our
funding requirements for the period.
— We will provide the Board with an update on progress in September, with a
full update in October.
e Communication and Development
— With significant levels of change across the business, we have increased the
flow of communications to our colleagues and the network, to build and
sustain organisational resilience and engagement.
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— For example, we hold monthly calls and regular events with our top 300
leaders (L300); I have started a monthly blog and we post a weekly news
update to colleagues and the network on One; and we are holding “town hall”
events this week in Bolton, Chesterfield and Finsbury Dials.
— In addition, we have launched a new training and development offer for the
L300 which can be rolled out across the organisation; and the GE has
discussed management development and early career talent this month to
supplement our succession plans at more senior levels.
— We will bring a paper to the Board on recognising the contribution of
colleagues and branches in September.
RISKS OR CONCERNS?
Industrial Relations
— CWU have announced they will ballot members for POL wide Industrial Action,
but no formal notification has been received at the time of writing. Our
planned direct communications with employees is being implemented and a
verbal update will be provided at the Board.
— Our Pension proposals have been communicated to employees and Unions,
following their submission to the Trustees resulting in some media coverage
generated by Unite.
— Amedia and political campaign has been launched by the CWU on
redundancies, franchising and pensions. Communication plans for
stakeholders are being implemented and there will be a verbal update.
Brexit
— We have been monitoring business, political and other impacts following the
outcome of the EU referendum.
+ It is still too early to predict the impact of the decision to leave the EU on the
business. However, significant risks are emerging - notably, but not
exclusively - in financial services and POCA, should there be a cut in interest
rates.
— The GE discussed our approach last week and have established a group to
monitor commercial, political and environmental developments over the
coming months with a brief to escalate key concerns.
— Following the Cabinet reshuffle, ministerial responsibility for the Post Office
sits in the new Department for Business, Energy and Industrial Strategy.
— Rt Hon. Greg Clark MP is the new Secretary of State. Baroness Neville-Rolfe
has been promoted to Minister of State in the new department. It is not
known at this stage if she will retain day-to-day responsibility for Post office
matters.
— We will keep the Board informed.
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In Conclusion
At the end of Q1 the business is on track
to meet its targets for the year. However,
the current market, political and
industrial relations uncertainty entail
significant risk which will - and to an
extent - already are changing the
markets we operate in. Consequently,
any assessment of current performance
is under constant review.
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Significant challenges still lie ahead in
achieving our financial targets and
notably, in managing our industrial
relations. Although the rationale for
change is clear, the impact on colleagues
affected is hard. We will provide them
with as much support and guidance as
we can going forward.
We will also monitor external
developments closely and the potential
impact on the business. We will keep the
Board informed.
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JULY BOARD MEETING
Transformation Update
Author: Michael Brown = Sponsor: David Hussey Meeting date: 25"" July 2016
Executive Summary
Context
The Post Office is undertaking a complex transformation programme, designed to
modernise our network and IT infrastructure, simplify our cost base and create the
platform for customer-led growth. The core objective is to create a profitable,
commercially sustainable business equipped to cope with lower levels of government
funding after March 2018.
Questions this paper addresses
1. Overall, are we on track to deliver our Transformation programmes?
2. What are the implications of any variance, for our outlook and plans?
Conclusion
1. At the end of the first quarter of 2016-17 we are broadly on track to deliver our
transformation plans. However two programmes are currently being replanned:
+ The project to automate Post Office Card Account (POCA) transactions in our
directly managed branches is being replanned due to technical interface issues
between suppliers to validate PIN numbers.
+ The project to transition Back Office applications to a new infrastructure
provider is being replanned following receipt of the exit plan from Fujitsu with
an end date beyond the project end date.
2. The latest view of costs and benefits have been included in the three year plan.
+ There is no material impact on three year plan benefits arising from the Back
Office project replan. Further analysis is underway to assess the impact on cost.
+ The delay to automation of POCA transactions has created a £1.5m profit gap
for 2016-17. To mitigate, a second tranche of 20 branch franchises is being
accelerated and this will close £0.4m of the 2016-17 profit gap. Work is
ongoing to identify additional activity to mitigate the remaining shortfall.
+ All other programmes are on track to deliver Transformation financial benefits
that are included in the three year plan.
Input Sought
The Board are asked to note the progress made, key challenges faced and actions
taken to address them.
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The Report
Looking Back
WHAT HAS GONE WELL (SINCE LAST PROGRESS REPORT IN MAY)?
+ Network Transformation
+ Whilst falling slightly short of the target of 346 by 33 builds at the end of
Q1, we are on target to recover the position by the end of Q2 and are
broadly on track against our 2016-17 target to modernise 1,075
branches
+ Weare ahead of our contracts signed target.
+ There has been a risk of negative reaction to the removal of fixed pay for
the branches that had not agreed to modernise or leave the network.
This risk has not yet materialised and continues to be closely monitored.
+ The current size of modernised branch estate is 3,123 locals and 3,204
mains with cost saving of over £10k per annum for every local delivered
and 200,000 extra hours open across our network.
+ We have commenced formal consultation with the unions on the wind
down of Network Transformation Programme. Consultations with both
unions have started constructively and all staff have been briefed.
+ Crown Network Development
+ Changes to Directly Managed branches are progressing to plan. Public
consultations are underway and to date we have announced franchise
partners for 28 sites (27 with WH Smiths and 1 independent).
+ Acceleration of the second tranche of 20 branch franchises is underway
to partially address the benefit shortfall caused by delays to POCA
automation.
* These activities help to achieve our aspiration of a £10m profit run-rate
from our Directly Managed branch network by March 2018 as detailed in
our 2015 strategy.
+ Support Services Transformation Programme
+ Staff recruitment has completed for the consolidated support centre in
Chesterfield.
* Refurbishment of Chesterfield site on track for completion by 1%* August
2016.
+ Delivery of annualised savings of £3.3m benefits in 2016-17 is on track
and in line with the business case.
+ The pilot of Robotic Process Automation software has completed. The
pilot will now go live, delivering benefit of between £259k and £373k p/a
from 2017-18. The pilot results are being reviewed to identify and
progress business wide opportunities.
+ Point of Sale Software
* Enhancements on our Point Of Sale software are progressing to plan and
will be delivered incrementally between August 2016 and March 2017.
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+ Network Development (Simpler To Run Network)
+ The Network Strategy was presented to and endorsed by the June Board.
The project team are progressing to plan with the work to complete
detailed analysis for September Board.
+ IRIS - Supply Chain Transformation
+ Union consultation is underway. Following legal advice, activity will now
start at the end of consultation on day 90 (rather than day 45).
+ The plan has been adjusted to accommodate this and the benefits
position has been maintained. The project is on track to realise £10.3m
p/a of benefits from April 2017.
Defined Benefit Pension Scheme
* The Trustee meeting took place as scheduled on 12th July where our
revised proposal was presented.
+ The Trustee require more time to deliberate further before responding to
our recommendation.
+ Back Office Tower Transition
+ We have received Fujitsu’s exit plan for transitioning our Back Office
applications from their current infrastructure to our new provider
(Accenture).
+ The exit plan does not allow us to meet our planned transition date for
one application (POL SAP).
+ Originally we had planned to move POL SAP in September 2016.
+ To protect the majority of the plan we are reviewing our approach and
will transition applications individually, rather than simultaneously. This
will reduce overall risk and allow benefits to be realised from October
2016.
+ There is no impact to 2016-17 benefits. Though there is likely to be an
increase in cost as a result of the change.
+ Post Office Card Account Automation
+ The previously identified risk to £1.5m profit in 2016-17 from delayed
delivery of POCA automation has materialised.
+ This is due to issues with the technical interfaces between suppliers to
verify the POCA PIN number.
» Atechnical solution has been agreed with Fujitsu with a targeted
implementation date of April 2017.
* To partially mitigate the consequence of the risk, a second tranche of 20
branch franchises has been accelerated. This will close £0.4m of the
2016-17 profit gap and enable larger savings in subsequent years.
+ Work is ongoing to identify additional activity to mitigate the remaining
shortfall.
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Looking Ahead
UPCOMING ACTIVITY
+ Defined Benefit Pension Scheme
* Continuing engagement with the Trustee on proposals to change the
Defined Benefit pension scheme.
+ HR Transformation - Learning Management System (LMS)
+ Following the launch of the Post Office Learning Academy in April 2016
the new LMS will go live to a pilot group in July, with roll out to
employees during August.
+ Through centralisation of resources and standardisation of approach and
systems, we will reduce our Learning & Development spend by £1.4m in
2016-17 whilst improving the user experience.
+ The LMS is the first module of the SAP Success Factors human capital
management suite which will replace our out-dated and disparate HR IT
systems over the course of the next 15 months. Further updates on the
full roll out and implementation will follow in the September Board
update.
+ IRIS - Supply Chain Transformation
* Collective consultation for the changes to Supply Chain ends in mid-
August. Following this we anticipate serving notice on our external clients
and beginning individual employee consultations for the first phase of the
programme.
+ Support Services Transformation Programme
* The Chesterfield site refurbishment will complete on the 1* of August
with the official launch on 9" August.
e We have no major concerns at present though our risk management process
enables us to identify, capture and manage risks as they emerge.
e We have a very busy delivery schedule with more change required to deliver
our transformation end state. Consequently, we can foresee extra demand on
constrained financial, IT, subject matter experts and project resources.
e Itis likely that we will not have the resources to do everything we need to do.
« Mitigation:
o Prioritisation of current and anticipated activity (July).
o Monthly financial Deep Dives with programmes (July).
o Complete Strategy to Plan activity to determine funding requirement
and negotiation approach with Government (Sept & Oct).
o Continue to use integrated resource plan to identify scheduling and
resource issues (Ongoing).
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In Conclusion
We remain confident that we are on track
to deliver our current Transformation
plans:
1, We have no major concerns at present
though risks are emerging.
2, Progress across Transformation
programmes and benefit delivery is in
line with plans.
However risks do exist across the
portfolio and there is an increased risk of
industrial action as a result of
Transformation activity.
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We are on track to broadly deliver
Transformational financial benefits that
are included in the current three year
plan.
We need to continue to closely manage
and mitigate risks in line with risk
appetite.
Appendix — Programme Dashboard
Network
Transformation
Crown Network
Development
Transforming
Agents Proposition
Strictly Confidential
Quarter 1 branch opening targets have been missed
by 33 branches. On plan to recover the position by
the end of Quarter 2.
The directly managed network exceeded the break
even target delivering £2.7m profit in 2015-16.
Amber status is due to a delay to automation of POCA
transactions, which defers £1.5m 2016-17 in-year
benefits delivery. A revised solution is forecast to
deliver £2.4m of recurring EBITDAS benefit in 2017-
18. The acceleration of the second tranche of
franchised branches commenced on 6th July and is
forecast to deliver £0.4m benefit this year. Further
options to accelerate other activity to close benefits
gap are being considered.
On track. Design phase will close at end of July with
the Network Development (STRN) programme
inheriting the longer term strategic approach to the
proposition. Quick wins identified in the design phase
will contribute £2.1m saving in 2016-17.
Board Intelligence Hub template
POL-0023847
POST OFFICE
Network
Development -
Simpler To Run
Network (STRN)
EUC Branch
IT Networks -
Branch
Point of Sale
Software
Back Office IT
Transition
Support Services
Transformation
Defined Benefit
Pension
HR Transformation
(SAP Success
Factors)
IRIS (Supply Chain
Transformation)
Strictly Confidential
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Extended project team is now being mobilised
following June Board meeting with the Amber status
reflecting that we have yet to secure all of the
necessary resources/capability. Work is progressing
on product simplification, retailer proposition and our
IT Proof of Concepts.
Project has been paused while the Network strategy
and its technical requirements are finalised.
IT Network to be upgraded alongside the rollout of
the new branch counter equipment and updated POS
application. Rollout of the first tranche scheduled to
commence February 2017. Future plans are
dependent on the STRN recommendation in
September.
Improved user configuration changes which will allow
much faster pricing and rate changes was
implemented on 8" July. Good progress made on
product simplification changes with implementation
dates agreed for August and December.
Fujitsu’s exit plan for transitioning our Back Office
applications from their infrastructure to our new
provider (Accenture) does not allow us to meet our
planned transition date for one application (POL SAP).
To protect the majority of the plan we are reviewing
our approach and will transition applications
individually, rather than simultaneously. This will
reduce overall risk and allow benefits to be realised
from October 2016.
On track to deliver a rationalised, consolidated
Support Services operation into Chesterfield by the
end of July 2016 and annualised savings of £3.3m.
Continuing engagement with the Trustee on
proposals to change the Defined Benefit pension
scheme.
The implementation of the Human Capital
Management suite is on track. The first module
(Learning Management System) will go live to a pilot
group in July, with roll out during August.
On track to realise £10.3m p/a of benefits from April
2017. Key dependency on conclusion of consultation.
Board Intelligence Hub template
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@
June 2016 — P3
Financial Performance
Al Cameron
25% July 2016
Post Office®
Post Office Limited — Commercial in Confidence
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P3 and YTD Financial Performance
Context
. Budget of £(10.0)m EBITDAS for 2016-17 representing 100% of bonus.
Questions
° How is our scorecard performance?
. What is the financial performance of the business in P3 compared to budget?
© Are we appropriately funded?
Conclusions
oO P3 EBITDAS of £(4.4)m is £(0.2)m adverse to budget. YTD of £(10.2)m is £1.0m favourable to budget.
° Gross Income of £74.8m is £(2.6)m adverse to budget, largely driven by underperformance in Financial
Services of £(2.0)m and Telecoms of £(1.0)m partially offset by Government Services £0.5m favourable. YTD
£239.1m £(2.1)m adverse.
D Expenditure £1.8m favourable: agents’ pay £1.1m favourable, Staff costs £1.0m favourable, offset by non staff
costs £(0.4)m adverse.
. Brexit impact c.£5.0m adverse in 2016-17 if rates are cut (3m POCA, lower volumes travel money and
mortgages)
. Net cost pressures emerging which require re-balancing. Pensions and Supply Chain consultations/accounting
to be finalised.
. Cash of £983m and headroom of £344m (including £200m retained for prudence).
Input Sought
The Board is asked to note the financial performance.
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Q1 represented a steady start with much to deliver
. P3 YTD Full Year I 2915-16
Key Performance Indicators Act Target Var. Act Target Var. Target I Outturn
Growth
Total Gross Income (excl NSP) £m 74.8 77.3) 239.1 241.2 984.0 981.1
EBITDAS £m (100% bonus) (4.4) (4.2) (10.2) (11.3) (10.0) (24.0)
Headroom £m (vs Board minimum limit) ~ 344 200 344 200 200 485
Digital Net Income £m (measured using Credence) 3.2 3.2 Get. 9.4 39.9 21.8
Customer
Customer Effort 74% 68% 74% 68% 68% 67%
Net Promoter score 63 65 64 65 65 63
Acceptable Wait Time % 91% 89% 91% 89% 89% 79%
Branch Compliance - Financial Services - basket of 11 measures 30 <=50 23 <=50 <=50 26
Footfall (weekly) m (customer sessions from Horizon) 10.48 11.25 10.62 11.00 11.14 11.14
People
Line Manager Engagement Index % (Once a year March) * YTD Score 68% 68% = 68% 68%
Internal senior manager appointments (3A and above) 25% 50% 23% 50% 50% 14%
Representation (Senior Managers) - Gender 36% 37% 36% 37% 37% 35%
Attendance 97.0% 96.7% 97.0% 96.7%! 96.7% 96.8%
Modernisation
Number of branches (one month in arrears) Same as YTD 11,652 11,500 >=11,500] 11,643
INT Branches Transformed In Year 79 129 313 346 1,075 1,904
~ Actuals include £200m retained for prudence.
* Measured annually in March with a ‘Pulse survey‘ due in September.
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Overall, P3 £0.2m adverse, YTD £1.0m favourable
P3 PY Period YTD (Q1) PY YTD Full Year Prior Year
£m Actual Variance Actual Variance Actual Variance Actual Variance Budget Outturn
TOTAL GROSS INCOME 74.8 (2.6) 77.6 (2.8) 239.1 (2.1) 239.3 (0.1) 984.0 981.1
Cost of Sales (8.8) 0.6 (9.0) 0.2 (28.1) 1.4 (27.1) (41.0) = (120.0) ~— (110.4)
TOTAL NET INCOME 65.9 (2.0) 68.6 (2.7) 211.0 (0.7) 212.2 (1.2) 864.0 870.7
Staff Costs (18.4) 1.0 (19.6) 1.3 (58.5) 1.4 (60.0) 1.5 (226.4) (232.9)
Agents Pay (29.9) 1.1 (32.9) 3.0 (97.2) (0.5) (104.5) 7.2 (391.1) (413.1)
Non- Staff Costs (25.3) (0.4) (29.5) 4.2 (75.4) 0.8 (84.6) 9.3 (292.3) (284.2)
Total Expenditure (73.6) 1.8 (82.0) 8.4 (231.1) 1.7 (249.1) 18.0 (909.8) (930.3)
FRES - Share Of Operating Profits 3.3 0.0 4.2 (0.9) 9.8 (0.0) 10.6 (0.8) 35.8 35.5
EBITDAS (4.4) (0.2) (9.2) 4.8 (10.2) 1.0 (26.3) 16.1 (10.0) (24.0)
Net income variance of £(2.0)m adverse as follows;
. FS £(1.9)m adverse;
. £(1.4)m Insurance. £(0.6)m Travel Insurance due to price decrease which has not been offset by a sufficient increase in volumes,
£(0.8)m Car and Home Insurance due to timing and lower renewal volumes.
. £(0.5)m remaining variance due to £(0.1)m Mortgages, £(0.1)m Credit Cards and a number of smaller variances across remaining
products.
. Commercial is on budget;
° Telecoms £(0.6)m adverse due to lower call volumes
. Retail is £(0.1) adverse and Lottery is £(0.8)m adverse continuing the recent market trend, offset by
. Mails £0.9m favourable due to in year catch up of Royal Mail barcoding income
. GS is £0.6m favourable (Passports and ID services).
e Other £(0.1)m adverse, mainly Supply Chain.
while Costs are £1.8m favourable to budget;
° Staff costs £1.0m favourable, driven by pensions accrual release and lower staff costs in Network.
. Agents pay is £1.1m favourable due to lower than budgeted income.
. Non staff costs £(0.4)m adverse driven by the following;
. adverse costs; £(2.5)m higher IT costs consisting of £(1.2)m for Computacenter due to budget phasing and £(0.3)m task, £(0.5)m for
Fujitsu one-off adjustment, £(0.4m) POMS. £(0.5)m Brand and Marketing.
. favourable costs; £0.9m for FX, £0.5m for other finance, £0.6m staff and agent related costs, £0.4m property costs.
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P3 Gross Income is £(2.6)m adverse to budget due to
underperformance in Financial Services and Telecoms
P3 PY Period YTD PY YTD Full Year Prior Year
Gross Income (£m) Actual Var. Actual Var. Actual Var. Actual Var. Budget Outturn
Mails & Retail 2.5 09 253 O2 811 O7 £801 10 3296 3341
Retail & Lottery 32 (09) 37 (05) 103 (14) 114 (44) 49.2 45.6
Financial Services 23.5 (2.0) 243 (0.7) 744 (16) 736 O08 3139 3036
Government Services 10.2 O05 122 (2.0) 325 29 35.3 (29) 1160 1283
Telecoms 98 (10) 97 O41 326 (2.5) 313 13 1414 1298
Supply Chain 21 (0.2) 241 0.0 69 (04) 65 04 298 29.2
Other 04 O14 04 0.0 13 0.2 10 O02 43 10.5
TOTAL GROSS INCOME 74.8 (26) 77.6 (28) 239.1 (21) 239.3 (0.1) 984.0 981.1
Cost of Sales (88) 0.6 (9.0) 0.2 (28.1) 1.4 (27.1) {4.0). (120,0), (110.4)
Net Income 65.9 (20) 686 (27) 211.0 (0.7) 212.2 (1.2) 864.0 870.7
Mails is £0.9m favourable due to the catch up of barcoding income from P1 and P2 as this has now been agreed with
Royal Mail. Underlying performance of the product portfolio is on budget for the period. YTD Mails is 0.7m favourable.
Retail & Lottery is £(0.9)m adverse of which £(0.8)m relates to Lottery. This continues the recent trend and is due to
poor rollovers in Euromillions and Lotto. YTD Retail & Lottery is £(1.4)m adverse.
Government Services is £0.5m favourable mainly due to Passports £0.1m and ID services £0.2m both of which
showed higher than budgeted volumes. Rod & Game was also £0.1m favourable in the period due to higher than
expected volumes.
Telecoms £(1.0)m adverse with £(0.8)m driven by lower call revenue against budget. Although customer additions
were favourable in the period average customer volumes are adverse in P3 and account for the remainder of the
variance. The movement in income is partially offset by lower cost of sales of £0.4m giving Net income which is £(0.6)m
adverse in P3 and £(1.1)m adverse YTD.
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P3 Gross Income is £(2.6)m adverse to budget
(Continued)
Financial Services is £(2.0)m adverse
Insurance (POMS) is £(1.4)m adverse:
* Travel insurance £(0.6)m as in P2 prices were reduced by £6 per policy to stimulate sales volumes, particularly in
branch. Although this has increased new sales volumes from 49,000 in P2 to 76,000 in P3, the increase is not
sufficient to offset the change in price.
* Car insurance £(0.5)m, £(0.3)m of which due to low renewal volumes and the remainder to timing.
+ Home insurance £(0.3)m due to low renewals in month, however YTD performance is on budget.
POMS profit contribution to the group results of £1.2m is £(1.3)m adverse to budget in the period driven by the below
budget income performance.
Other Financial Services are £(0.6)m adverse:
+ Mortgages are £(0.1)m adverse in the period and £(0.4)m adverse YTD.
+ Credit cards are £(0.1)m adverse in P3 but £0.2m favourable YTD.
+ Payments are £(0.2)m adverse in P3 driven by Housing payments, which YTD are £0.1m favourable.
Supply Chain is £(0.2)m adverse in the period and £(0.4)m YTD due to no new external business following recent Supply
Chain changes.
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Total expenditure in P3 is £1.8m favourable
(YTD is £1.7m favourable)
P3 PY Period YTD (Q1) PY YTD Full Year Prior Year
£m Actual Variance Actual Variance Actual Variance Actual Variance Budget Outturn
Staff Costs (18.4) 1.0 (19.6) 1.3 (58.5) 1.4 (60.0) 1.5 (226.4) (232.9)
Agents Pay (29.9) La (32.9) 3.0 (97.2) (0.5) (104.5) 7.2 (391.1) (413.1)
Non- Staff Costs (25.3) (0.4) (29.5) 4.2 (75.4) 0.8 (84.6) 9.3 (292.3) (284.2)
Total Expenditure (73.6) 1.8 (82.0) 8.4 (231.1) 1.7 (249.1) 18.0 (909.8) (930.3)
° Staff costs are £1.0m favourable in the period driven by £0.5m lower bonus costs and £0.5m driven by pensions.
Both are due to 2015-16 provision release after bonus payments were made in P3.
YTD staff costs additional benefits from lower headcount.
Headcount is 6,519 compared to PY outturn of 6,605.
. Agents pay £1.1m favourable in the period driven by the lower income in P3.
YTD Agents pay is £(0.5)m adverse despite YTD income also being adverse due to:
* (£0.7)m as a result of the split of income through the network driving up variable pay. Agency network performing
2% above target.
* (£0.3)m due to mix of local/mains converted branches in 2016/17.
* £0.4m due to lower tax charges as a result of more agents moving across to the new contracts which attract VAT
rather than NI.
* £0.1m due to lower holiday/sick payments as a result of the terms of the new NTP contracts.
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Total expenditure in P3 is £1.8m favourable
(YTD is £1.7m favourable)
(Continued)
Non Staff Costs are £(0.4)m adverse in the period driven by;
+ £(2.5)m IT overspend, £(0.3)m of which is savings task, £(0.5)m additional costs with Fujitsu and £(0.4)m in
POMS. The remaining £(1.2)m is Computacenter budget phasing as a result of changes to the timing of EUC kit
rollout to branch. The Computacenter overspend will be recovered in later periods.
* £(0.5)m brand and marketing due to accounting phasing of charging the Financial Services marketing provision.
Offset by;
+ £0.9m unrealised Treasury gains at the 24 June mark to market rate applicable at month end. This rate reflected
the weakening of the pound following the referendum result. This offsets the losses of £0.9m made in P1 and P2
giving a flat YTD position on treasury gains/losses.
* £0.8m lower managed services with £0.6m relating to project expenditure and £0.2m lower postage costs.
+ £0.6m lower staff related costs, £0.3m driven by lower T&S and £0.2m by lower recruitment costs.
+ £0.4m lower property costs due to favourable rent reviews and lower property maintenance costs.
YTD non-staff costs are £0.8m favourable;
Property costs are £1.3m favourable. £0.6m due to rent and rate reviews and £0.5m due to utilities. Staff related costs
£0.9m favourable due to T&S £0.4m, recruitment £0.2m and staff benefits £0.2m. Other operating costs are also
favourable due to postage of £0.9m and card processing costs, the benefits of both have been budgeted for later in the
year. These variances are offset by a £(1.9)m adverse variance in IT expenditure.
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P3 Loss Before Tax of £(6.4)m is £(6.6)m adverse to budget
YTD Profit Before Tax of £11.9m is £8.7m favourable to budget
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£m Actual
TOTAL GROSS INCOME 74.8
TOTAL NET INCOME 65.9
Total Expenditure (73.6)
FRES - Share Of Operating Profits 3.3
EBITDAS (4.4)
Depreciation (0.0)
Network Payment 6.2
EBIT pre exceptionals items 1.7
Interest (0.3)
Impairment (6.4)
Exceptionals (incl BT & VR) (12.2)
Government Grant Utilisation 10.8
Profit/(Loss) On Asset Sale (0.0)
Total Profit/(Loss) Before Tax (6.4)
. YTD EBITDAS of £(10.2)m is 102% of the full year budget of £(10.0)m but £1.0m favourable YTD.
Variance
PY Period
(2.6) 77.6 =~ (2.8)
(2.0) 68.6 = (2.7)
1.8 (82.0) 8.4
0.0 4.2 (0.9)
(0.2) (9.2) 48
0.0 (0.0) 0.0
0.0 10.0 (3.8)
(0.2) 0.8 1.0
(0.6) 0.5 (0.8)
8.9 (4.9) (1.5)
(1.6) (28.0) 15.8
(13.1) 28.2 (17.5)
(0.0) (0.0) 0.0
(6.6) (3.4) (3.0)
YTD (Q1)
Actual Variance Actual
239.1
211.0
(231.1)
9.8
(10.2)
(0.1)
20.0
9.7
0.4
(18.5)
(27.7)
47.8
0.2
11.9
(2.1)
(0.7)
1.7
(0.0)
1.0
0.1
0.0
1a
(0.5)
18.7
2.3
(13.1)
0.2
8.7
PY YTD
239.3
212.2
(249.1)
10.6
(26.3)
(0.1)
32.5
6.1
1.4
(14.5)
(52.6)
50.4
0.0
(9.2)
Variance Actual Variance
(0.1)
(1.2)
18.0
(0.8)
16.1
(0.0)
(12.5)
3.6
(0.9)
(4.0)
24.9
(2.6)
0.2
21.1
Budget
984.0
864.0
(909.8)
35.8
(10.0)
(1.2)
80.0
68.8
3.8
(180.0)
(172.0)
140.0
0.0
(139.4)
Full Year Prior Year
Outturn
981.1
870.7
(930.3)
35.5
(24.0)
(0.4)
130.0
105.5
3.5
(136.5)
(293.0)
150.0
0.0
(170.5)
. Impairment and exceptionals net favourable due to slower project and capital expenditure, especially on branch kit.
This is balanced by a slower accounts release of the Government Grant.
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Balance Sheet
Net assets of £150m comprise fixed assets, working capital,
pension surplus less provision and debt
Balance Sheet S016 (unaudited) “ariance The P3 Balance Sheet variances to March 2016 year
£m end are:
Fixed Assets 130 120 10
Debtors 204 419 (125) + Debtor variance is largely due to decreases in
Cash 983 ap 579 client debtors for card account and ATM balances
a as March 2016 coincided with Easter.
Creditors (707) (684) (23)
Pension (deficit)/surplus 195 196 (1) + Network cash is high as a result of prefunding
the network ahead of the Supply Chain changes.
Provisions (147) (167) 20
Other 7 7 0 + Creditor balances have increased by £23m,
Loan (606) (465) (141) within this client creditors have decreased by
Net Assets 150 138 12 £83m giving a remaining variance of £106m.
. This is largely due to the government grant for
[Capital and Reserves 150 138 12_ I the year which is received in April, immediately
held on the balance sheet, and then released
over the year on a straight line basis.
Network Cash
£m YTD IMarch 2016 + Provisions have fallen primarily due to the
Actual I (unaudited) utilisation of the provision for Agents
Retail, Cash Centres 808 534 Compensation.
Bureau at monthvend rate is aa * The loan balance movement is consistent with
Cheques, debit cards 45 45 the cash flow in month, net of bank deposits.
Network Cash 966 653
Cash not in Network 17 59
Total Cash 983 712
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Q1 Cash outflow of £179m and Net Debt of £589m
Cashflow YTD
£m Actual Budget Variance
EBIT 10 7 3
Working Capital 5 4 2,
Client Balances (8) 21 (29)
Network Cash (313) (48) (265)
Capital Expenditure (19) (37) 19
Government funding 200 200 i}
Exceptional Items (46) (54) 8
Other (including interest_and tax) (9) (9) (0)
Operating Cashflow (179) 85 (264)
YTD March 2016
Actual (unaudited)
£m —m
Net increase/(decrease) in cash and cash equivalents 272 (109)
‘Add/(deduct) movement in cash in the network included in
net cash inflow (313) 55
Deduct proceeds of borrowing from BIS (141) (155)
Net increase in net debt (183) (209)
Net debt brought forward at the beginning of the year (406) (197)
Total net debt carried forward at the end of the period (589) (406)
Net debt consists of:
BIS loan (606) (465)
Cash (excluding cash in the Post Office network) 17 59
Total net debt carried forward at the end of the period (589) (406)
Cash outflow of £(179)m for Quarter 1 is £(264)m adverse to
budget YTD.
* Network cash is £(265)m adverse entirely due to prefunding the
network ahead of the Supply Chain changes.
* Client balances are £(29)m adverse to budget due to a number
of smaller variances across our client portfolio including
Santander, DVLA and UKPA.
These adverse movements were partially offset by capex which is
£19m favourable as spending plans track behind budget.
Increase in cash and cash equivalents of £272m equates to the
balance sheet variance on Page 10.
Net debt of £589m is £183m higher than the start of the year,
driven mainly by higher network cash.
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Appendices
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1. Gross Income
P3 Prior Year 1D Prior Year Full Year I Prior Year
Gross Income £m 5 mein
Actuals Budget Var. I Rotimi cyronvry I Actual Budget Var. I jv cyronve) I Budget I *Aceval
Parcelforce 1.3 1.2 O14 14 (0.1) 4.3 3.9 0.4 4.2 0.0 16.5 18.0
Special Delivery 3.9 3.9 (0.1) 4.0 (0.1) 12.5 12.7 (0.2) 12.5 0.0 49.9 49.6
International Priority & Standard 2.2 21 O14 2.2 (0.0) 74 7A 0.2 74 0.0 31.0 32.1
[Stamps (1st & 2nd Class plus other stamps; 15 15 0.0 17 (0.2) 5.0 5.0 (0.0) 5.4 (0.4) 25.5 27.2
Labels (1st & 2nd Class) 6.6 6.6 (0.0) 6.9 (0.3) 216 216 0.0 219 (0.2) 84.2 87.7
IRM Signed For 17 17 (0.0) 1.8 (0.1) 5.7 5.6 On 5.6 0.0 22.7 22.5
Home Shopping Returns ti 1.0 0.1 0.9 0.2 3.5 3.3 0.2 2.8 0.7 13.6 11.7
Mails Other (trading) 11 13 (0.2) 1.2 (0.1) 3.7 4.2 (0.5) 3.8 (0.1) 17.5 17.5
HTotal Mails Trading 194194 0.0 I 20.1 (0.7) I 63.6 63.4 0.2 I 635 O01 261.0 I 266.2
Fixed fee 41 4.1 (0.0) 4.2 (0.1) 13.2 13.3 (0.0) 13.5 (0.3) 53.1 54.2
Mailwork & Mails non trading 2.1 1.2 0.9 11 1.0 43 3.7 0.5 3.0 1.2 15.5 13.8
[Total Mails 25.5 (24.7 0.9 25.3 0.2 81.1 80.4 0.7 80.1 1.0 329.6 334.1
Retail 0.6 0.7 (0.1) Os O14 1.9 19 O14 1.7 0.2 10.0 77
Lottery. 2.6 3.3 (0.8) 3.1 (0.6) 8.4 9.9 (1.5) 9.8 (1.4) 39.2 37.9
Total Mails & Retail 28.7 28.7 (0.0) I 29.0 (0.3) I 91.4 92.4 (0.7) I 91.5 (0.1) I 378.8 I 379.7
[HomePhone /Dual & Broadband Customers 95 10.5 (1.0) 94 O14 31.7 34.2 (2.5) 30.3 14 137.5 125.9
Mobile 0 0 0 0.0 (0.0) 0 0 0 0.0 (0.0) 0 0
IOther Telephony 0.3 0.3 (0.0) 0.3 (0.0) 0.9 0.9 (0.0) 1.0 (0.2) 3.7 3.9
[Total Telecoms Services 98 10.8 (1.0) 9.7 O.1 32.6 35.1 (2.5) 31.3 1.3 141.1 129.8
Motoring Services 0.7 0.7 0.0 1.0 (0.3) 2.3 2.5 (0.2) 2.9 (0.6) 7.8 10.2
Icard Account 56 56 (0.0) I 64 (os) I 173° 170 03 I 199 (2.6) 65.9 75.3
Passport Services 220 24 0.1 24 (0.2) 78 69 09 8.0 (0.1) 20.3 23.0
Digital ID Serv UKVI & Asylum 0.7 05 0.2 0.9 (0.1) 2400«1302~*«12 19 0.6 at 10.6
ID - Assurance (Verify) 04 04 00 12 (0.7) 120070 05 15 (0.3) 9.5 4.2
lother Government Services 05 03 O01 0.3 ou 141.202 12 0.2 4.4 5.2
Total Government Services 10.2 9.70.5 I 422 (20) I 325 29.6 2.9 I 353 (29) I 1160 128.3
Bil Payment 20 22 (0.2) I 25 (0.5) 69 6.7 0.1 77 (0.9) 24.9 29.8
Payment Services 0.3 03 (0.0) I 02 0.0 10 0.90.0 0.7 0.2 6.2 5.9
Personal Banking Clients 2.8 3.0 (0.2) 2.6 0.2 9.3 8.9 0.3 8.1 1.2 36.7 33.9
Business Banking 20:19 2 Od 2.0 0.0 63 58 04 5.9 0.4 20.4 24.0
laTm 26 27 (0.0) I 27 (0.0) 84 87 (0.3) I 86 (0.1) 34.2 34.3
PFS- Savings 3.6 3.7 (0.0) 5.2 (1.6) 10.9 10.9 (0.0) 15.7 (4.8) 51.5 59.7
PFS-Lending 0.5 0.7 (0.2) 0.6 (0.1) 1.8 24 (0.3) 19 (0.0) 11.2 10.0
Insurance (incl POMS) 3.3 47 (1.4) 2.4 0.9 116 «134 = © (1.8) 7.0 45 48.0 36.2
Bureau & Travel Money Card 2.5 2.3 0.2 2.2 0.3 6.5 6.4 0.2 6.2 0.4 26.8 23.7
MoneyGram 2.4 25 (0.1) 241 0.3 7.2 7.3 (0.1) 6.6 0.6 30.2 26.5
Postal Orders 1.4 14 (0.0) 1.6 (0.2) 46 4.6 O14 5.1 (0.4) 17.5 19.6
INS&I 0.0 0.0 0.0 0.7 (0.7) 0.0 0.0 0.0 ar (2.1) 0.0 45
lother 0.0 Ot (0.1) (0.7) 07 0.0 0.2 (0.2) I (2.1) 21 6.1 (4.5)
[Total Financial Services 23.5 25.5 (2.0) I 24.3 (0.7) I 744 76.0 (1.6) I 736 08 313.9_I 303.6
lother Income 0.4 03 O01 0.4 0.0 13. i102 1.0 0.2 4.3 10.5
Supply Chain 21 2.3 (0.2) 24 0.0 6.9 7.3 (0.4) 6.5 0.4 29.8 29.2
[Gross Income 748 (773 (2.6) I 776 (28) I 2391 241.2 (2.1) I 239.3 (0.1) I 984.0 I 981.1 Fan
13
Post Office® Post Office Limited — Commercial in Confidence “ow!
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POST OFFICE GROUP EXECUTIVE DECISION PAPER
Technology Strategy
Author: Rob Houghton Sponsor: Al Cameron Meeting date: 25 July 2016
Executive Summary
Context
Our IT strategy has been partly delivered and now requires evolution. IT is not fully
meeting the needs of the business, being expensive to run and difficult to change.
POL’s business strategy will require a different level of technology and change
capability than we have today. While the business’s requirements are not yet all clear,
IT must become more a more effective enabler if it is not to become a block.
Questions addressed in this report
« Are the business’s IT needs clear?
e What is the state of the IT organisation?
e¢ What principles will we follow?
e¢ How do we reduce our cost base and how far can we go?
e What is the architecture roadmap that can enable our strategy?
e What are our target operating model and supplier strategies?
e What are the major risks?
« What are the next steps?
Conclusion
e IT is not yet fit for purpose: it is too expensive and hard to change.
e While IT will take a strong leadership position over technology, it is important that
it serves the business strategy and “the tail doesn’t wag the dog”. In some cases,
following the board awayday, business strategies need conversion into detailed
plans before the full IT strategy can be determined. We do not therefore have a
full, costed set of plans and this paper focuses on IT functional improvements and
IT architecture roadmaps.
e There is an immediate task to improve the functioning of IT- our control and risk
management - based on greater visibility of performance. This may require some
insourcing of service integration. We have designed a new team structure for IT
and are recruiting senior roles to increase our in-house capability.
e« We are designing a flexible architecture based on 5 roadmaps: Digital, Retail, Back
Office, Data & Analytics; and Infrastructure and Security.
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e Three pieces of enabling technology will be developed as the foundations of future
delivery: a single integration platform; a set of digital services; and an enterprise
information platform.
e¢ Costs must fall from the current 11% of turnover. Supplier conversations are
already underway as most of our spend is third party, with the bulk contractually
fixed. We can reduce costs to 7-9% within three years and we believe that 5% is
achievable in the longer term as contracts change and we can properly variabalise
costs. Greater funding may accelerate contract change. Cost estimates are subject
to the run cost impact of new digital and branch technologies.
e The supplier base will continue to change, with the insourcing of “control” and a
reduction in suppliers in the back office. Individual supplier strategies are in
development. We are improving our vendor management capabilities.
e Key risks include internal capability, the need to comply with public procurement
and TUPE legislation and the evolving nature of cyber threats.
e In addition, the costs of these changes are not yet clear and therefore the amount
of change we can deliver in a set period will vary as we agree budgets and funding.
e Next steps include the development of these strategies into detailed plans, aligned
to the business’s 5-year plan.
Input Sought
The Board is asked to support the direction set out in this document, requesting
further updates on cyber security (at the ARC in September), the financial outcomes
(as part of the business plans in October) and overall in January 2017.
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The Report
Context
1. In 2013, the Board approved a strategy to outsource IT into a “towers!” model
and deliver an ambitious transformation of our technology, spending £300m for a
£30m pa return and significant de-risking. Separation from Royal Mail created
urgency, the capability of our IT team was low, we were required to follow public
procurement processes and the approach was encouraged by central government.
2. PO conducted a 2 year procurement exercise to select the right technology
partners. We chose top-quartile suppliers to replace customer software and back-
up (IBM), desktops and laptops (Computacentre), back office infrastructure
(Accenture), the branch network (Verizon) and to provide a layer of service and
change integration and management (Atos).
3. In early 2016, we terminated the IBM relationship and reverted to Fujitsu,
extending our existing contract to use - and improve - Horizon and its Belfast
data centres. Our current supplier set is as follows:
Key Suppliers Budget I Subjective View on % Costs End Date
16/17 performance Fixed
Atos £6.2m Med 90% 09/2018
Accenture £3.4m High 75% 01/2017
BT (migrating to £9.7m Med 90% 01/2018
Verizon)
Computacenter £13.2m Med 0% 03/2019
CSC (Back office) £5.4m Med 80% 04/2018
Fujitsu £38.0m Low 80.5% 03/2023
Verizon £4.8m Med N/A 05/2023
3M (Branch kit) £3.8m Med 90% 03/2020
Are the Business IT needs clear?
4. The business strategies discussed at the Board away day in June have technology
dependencies. For example:
e¢ enabling customers to access and make real-time, multi- product choices
digitally, especially in financial services;
¢ creating online propositions in Mails;
. improving digital systems interactions with clients (personal financial
services) and corporate customers (energy companies);
e delivering simpler, integrated retail technology; and
. reducing back office costs will require automated processes on better
supported systems.
is a cluster of cap ch as data centre services
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5. While the direction is clear, we have not yet agreed which plans we will fund in the
next 2-3 years. In addition, we have not yet made some important decisions:
¢ The Commercial and Financial Services teams need to determine the
priority digital customer journeys;
. Following Project Peregrine, Financial Services needs to set out the degree
of systems integration required with which partners (legacy system
integration is more complex and expensive than completing the digital
front end);
e the Network team must determine which devices are required for which
branches and where we require EPOS integration; and
e« ARC must agree our security risk appetite to determine the level of change
and investment required
6. Until these decisions are made and the level of change agreed, the exact choices
for IT cannot be determined in detail; otherwise, “the tail will be wagging the
dog”. The bulk of this paper is therefore focused on the underlying IT choices that
can be made now.
What is the diagnosis of the Post Office Technology organisation?
7. While we deliver a service that is largely functional, our IT organisation needs
fixing across multiple dimensions: it is expensive (£104m) and slow to change.
8. The Operating Model is a ‘hybrid service model’. While multiple service providers
were envisaged, the plan was to have 4 dominant suppliers — one for each cluster
of activity - with a fifth supplier providing integration. The reversion to Fujitsu and
a part solution in back office means that we retain 93 IT suppliers, making life
very difficult for the integrator and the small, internal team. The existing situation
is not desirable and a service and organisation model re-design is required.
9. The applications and data architecture is very fragmented and complex driving
significant operational risk and manual compensating controls on data.
10. End-to-end business change processes are complex and expensive. Delivery can
take 12-18 months for simple change from concept. A lack of strong business
sponsorship, diffuse accountability and an IT supplier management mentality has
exacerbated the cost of change and slowed decision-making. The business has
sometimes contracted directly (“shadow IT"), increasing the risk of change and
service and security failure.
11. The cyber threat is mutating so swiftly that different defence attitudes and
organisations will be required. While we have encrypted the rather limited
personal data we retain, we need to develop IT tools to mitigate risk beyond our
management controls framework. This will be discussed at ARC in September.
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12. We do not have a simple end-to-end service or security “dashboard” looking
across the estate. Running a complex IT estate requires stronger instrumentation
to give earlier warning of potential issues and a more developed response team to
address threats. Until then, assessing risks and dealing with daily operational
problems is undertaken with sub optimal information and, in the main, reactively.
What principles will we follow as the bedrock of the strategy? We will..
13. Strategic:
Not expose the Post Office to service/ security unacceptable risk
Treat the Post Office spend as our own spend
Engage with fewer partners on no more than 5-year contracts
Drive contracts to variable spend
Centralise all IT spend to avoid “shadow IT” activities
Focus on incremental change with small commitments of spend
14. Architectural:
. Design and build the architecture to offer flexibility and innovation
e¢ Create a modular reusable library of services
e Adhere to a “Adopt not adapt” policy
. Minimise system adaptation through adoption of standard processes
« We will make best use of our existing and new IT investments
15. Operating Model:
. Have strong business and technical experience
e¢ Keep within the Post Office activities that enable us to be in control
. Have sole responsibility for run and change of IT systems
. Ensure IT is strongly represented and engaged into the business
¢ Operate as strong guardians and agile innovators
e Retain strong governance and control over the IT ecosystem
How do we drive to a lower cost base and get control of costs?
16.A standard retail organisation would have an IT spend of c. 5% of revenue, with
simple, single transaction, online businesses much lower. Benchmarks are
complex: we operate in 11,600 individual locations, support multiple products and
partners and process over £60b of transactions to earn £1b of revenue.
Nonetheless, our current ratio, at c. 11%, is unacceptable and 5% is a good target
for our like-to-like activities.
17. However, out of our £104m cost base, £90m is paid to third party suppliers
(FY16/17), of which 68% is fixed price and the largest driver of variability is the
number of locations, where we have least flexibility.
18.In the next 2-3 years, we will reduce spend through agreed changes in contracts.
We are also in new discussions with individual suppliers to see how we can evolve
the way we work: not paying for unnecessary service, reducing “gold-plating” etc.
In the next three years, we can realistically target 7-9%.
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19.In the four-seven year timescale, we can go further, substantially renegotiating
and replacing contracts, insourcing if appropriate, moving onto the cloud - agreed
in principle with Fujitsu - and simplifying the underlying vendor structure. 5%
should be possible with a singular focus on costs. It may be possible to accelerate
some changes if, as set out in the Board Funding paper, we can invest to buy
ourselves out of current contracts.
20. However, we do not yet know and cannot include the impact on run costs of doing
more digitally, moving to handheld terminals in stores, integrating retailer EPOS
etc. Business strategies will create an impact on IT run costs as well as an initial
capital outlay and the different business imperatives will need balancing as we
make decisions.
21. Cost reduction has significant operational and execution risk. All the following
would need to be true to deliver benefits and are all high risk propositions:
. Deliver cost savings in the existing plan
. Renegotiate substantial contracts which currently have strong defensive
contractual positions and a limited appetite/ incentive to change
e An ability to negate run costs increase from business strategy changes
e — Increasingly flexible ability to deliver in different ways
22. Appendix B summaries our current activities to reduce short-term costs
What is the Architecture roadmap to enable the business strategy?
23. Our architecture philosophy is to enhance the digital platform, build flexibility and
simplify the estate.
Service
Future
Front
Middle
Bank of Insurance a I
Ireland II Platform I
Back
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24. We can think of the architecture of the Post Office as a front, middle layer and
back. The front is how the customer interacts with the Post Office - whether it be
at a counter or digitally online through a web site or mobile app. The back handles
the transactions that the customer wants to perform (ie send a parcel, buy travel
insurance). The middle is the software which “connects” the front to the back.
25. We want the middle to connect the front seamlessly and simply to many different
backs including clients, like a brilliant concierge in a hotel. The front says “I want a
service” and the concierge has to go and get that service from the back speedily,
reliably, resiliently and do it 24x7.
26. The “front” may be under profound change, with Network plans driving “tablet”
type devices and EPOS integration, fundamentally different to the current counter
footprint. We also have ambitious direct to consumer digital agendas.
27.We will leverage our investment in the Common Digital Platform. However, our
digital capability and experience is immature and has to be strengthened:
e We have a basic ability to manage internet content and two deployed
transactional digital journeys (Mails Small Business Club Drop & Go and
Rod Fishing Licence. We have a very simplistic My Account, an
authentication capability provided by Digidentity and PCI compliant
payments capability delivered through Global Pay.
e We can author and publish simple web content but complex content
requires agency or supplier involvement to offer calculators or quotation
tools.
« We have limited user centred design capabilities. Our capabilities do not
extend to internal mobile development engineering, API design/deployment
or deep/big data analytics. All of these services rely upon 3rd party
partners and are capabilities we should have within.
28.The “middle” needs building and is a fundamental foundation for any digital
architecture. Ensuring the “back systems” (ie BoI) can provide services through
the middle is usually where all the cost is. “Making elephants dance” is a common
saying for the work required to get old legacy systems integrated into a digital
environment
29. We also want the ability to connect the front to many more “back” services -
funds, mortgages, bank accounts. The back usually comprises old, legacy
platforms that are difficult to change. Our back also includes our finance, supply
chain and HR systems, some of which need urgent upgrading and securing.
30. Our digital capability and experience is immature:
e We have a basic ability to manage internet content and two deployed
transactional digital journeys (Mails Small Business Club Drop & Go and
Rod Fishing Licence). We have a very simplistic My Account, an
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authentication capability provided by Digidentity and PCI compliant
payments capability delivered through Global Pay.
We can author and publish simple web content but complex content
requires agency or supplier involvement to offer calculators or quotation
tools.
We have limited user centred design capabilities. Our capabilities do not
extend to internal mobile development engineering, API design/deployment
or deep/big data analytics. All of these services rely upon 3rd party
partners and are capabilities we should have within.
31. We will develop and execute five IT roadmaps; all require strong business
sponsorship and alignment to business transformations/ proposition development.
All require assistance to develop.
I. Digital. Provide an outstanding on-line experience and seamlessly join
up online/ physical channels. All digital strategic initiatives will be
delivered using agile techniques and focused on a “mobile first”
channel agenda.
Il. Retail channel and integration. Roadmap to integrate our sales
channels onto a single logical platform, providing consistent product
journeys as well as a single point of integration with our third parties
and the services they provide us
Ill. Back office. Securing our back office estate to provide accurate, safe
and robust processing, information and reporting services, simplifying
our back office operations and shared services.
IV. Data and Analytics. Our journey to provide the business with
accurate and insightful reports and analysis of our business
performance, based on data that is understood and is consistent
across our information systems
V. Infrastructure and IT Security/ Operations. Roadmap which
demonstrate how we migrate to cloud, build the command and
security layers/ operations centres and get visibility. Ensure a culture
of “Security First” in the Post Office; protect critical data assets and
ensure a strong perimeter. Establish an Enterprise Security Operations
Centre
32. These roadmaps will require and be supported by three core enablers:
A single integration platform that brings together our disparate IT estate
and acts as a single point of integration with our clients and service
providers.
A set of digital services that provides a view of all the customer’s
transactions and accounts of both the Post Office and opted in third
parties.
An enterprise information platform that provides a single view of business
performance by combining data from our digital, point of sale and back
office systems, including financial and marketing data.
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33.We can immediately commence a proof of concept of the “no regret” customer
journeys that we will definitely require irrespective of product prioritisation
objectives or sequencing. This activity will assist with delivery acceleration.
What is our target operating model, supplier management strategy and
capabilities required?
34. The intended operating model was to have a SIAM layer (Service Integration and
Management) supported by “four towers”. We have reviewed the existing
operational effectiveness of the SIAM layer, which operates our “Run” and
“Change” activities within Post Office IT.
35. Over the next 18 months, we are expecting to insource services which are
required to enable us to be in control, especially in the service integrator layer.
The contract with ATOS expires during this period. This requires us to bring in
additional talent.
36. We are developing negotiation strategies for our key suppliers to enable lower
costs and easier change. We have already established a monthly suppliers’ day
with all engaged.
37. By October, we will have a back office roadmap to reduce from 93 suppliers.
38. Appendix D sets out how we expect the SIAM model to evolve. In addition, Post
Office IT organisation changes are required. Appendix E includes an organisation
structure that we are moving to, with recruitment underway for a number of
senior roles.
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What are the major risks?
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39. We have identified the Risks below as a threat to the delivery.
Risk
Mitigating Action
By
when
Strategic Definition of Requirements from
Product Team: Strategies are still at very
early stage of evolution having just
received Board endorsement.
Detailed definition and
prioritisation is a pre-requisite for
Digital/IT to get started on
detailed delivery planning
3Q16
Suppliers contracts are 68% fixed. Our
leverage position is not strong - there are
few obvious reasons why suppliers are
willing make their contracts more flexible or
offer substantive cost savings to the Post
Office
Negotiating strategies for each
provider
Leverage both government and
entire scope of delivery (ie FJ
telecoms contract)
Agree drivers and have cost
playbook for each provider
External specialised advice
3Q16
Government procurement processes and
regulation will necessitate a long tail impact
to any adjustment of the towers model or
sourcing
Close engagement with legal and
procurement through strong
impact analysis and planning
4Q16
Any insource of activity will trigger a high
cost through TUPE, union interest and
disengagement of existing team (and hence
service risk)
Close engagement with HR, legal
and union reps
Clear plan, impact and NDA
around the work
Top down GE/ Board leadership and
support might not be evident, undermining
the impact
Engagement and approval on IT
strategy
Reinforcing messages and
tangible leadership support
End
2016
Appetite for end to end change of process
and risk of continued “blame IT” mentality
Organisation Model change and
embedded CIOs
Review and redesign of change
process
End
2016
Lack of funding in prioritised change
portfolio for IT operational/ security
investment or digital enablers will slow
execution
Explain dependencies on digital
platform
Explain security and operational
risk against corporate risk
appetite
3Q16
It will cost more and take more time to
reshape the operating model, get control
and deliver service, security and change
improvements. Whilst doing this; existing
services get disrupted
Needs detailed design and
planning stage with investment
in a committed project team to
manage the transition
2016
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Next steps - this year
40.Our immediate next steps are summarised in the table below:
Activity Investment - 2yr 3Q16 4Q16 1917
Architectural roadmaps detailed planning in parallel with business product proposition c0.75m Dig/ BO Infra/
planning and design Horizon
4 I Commence a digital Proof of concept to create a robust demonstration of the core Part of digital ESTABLISH SPRINT 1 SPRINT 2
5 capabilities that we will need to deliver the Digital aspirations that are emerging in TEAM DELIVERY DELIVERY
tu I Mails, FS and Government Services. We will pick some features from each of the
= product pillars
O I Build out a detailed digital/IT roadmap and investment profile that reflects the c0.5m LEARN ENGAGE DESIGN
& investment and delivery commitments required from our third party partners (Bol,
FRES) to modify their systems to provide Post Office access to the data and future
processes that we wish to directly offer to our customers
Cost Reductions for 2015/2016 TBC Ongoing delivery
Build a strategic cost model - drive transparency TBC PROPOSAL
i Suppliers negotiations (investment excludes any Penalty Exit clauses for contracts) 0.5m - 2m PLAN NEGOTIATE
8 Specialist
Commercial / Legal
advice
Build and populate Organisation Design N/A COMMS OPERATION
Initiate the strategic re-work of our IT supply chain (aka Tower model & SIAM) by TBC LEARN/ PLAN DESIGN
modifying our relationship with Atos, potentially insourcing critical IT capabilities.
ij Implement Phase 2 of Service Model transition TBC COMMS OPS
x Change. Complete the change process “learn” and “redesign” phase - removing waste N/A LEARN REDESIGN
and overhead in the system TACTICAL
Design and build Operational Command Centre (assuming no OJUE) c2-5m LEARN DESIGN BUILD
Design and build enterprise SOC (assuming no OJUE) c2-4m LEARN DESIGN BUILD
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41.Our medium term is as follows
* Joint business/ IT
proposition
development
* Architecture roadmaps
* Supplier negotiations
* Operating Model
design and solution
* Change process tactical
fixes
* Operational systems
proposals:
* Form digital
development
capability
© Engaged POLIT team
* Building trust in the
business
PREDICTIVE and ENABLING
(1-2 yrs)
© Executing retail and
digital strategies -
build integration,
digital and branch
enablement
* Post Office IT
Operating Model
implemented and
operational
* In-house digital
development and
services capability
* Transparent and
predictive operational
capabilities
* “On the road” to an
agile change process
© Build security and risk
detection profile
© Performing POLIT
capability
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and DYNAMIC
« Integrated legacy
systems and strategic
roadmap for Horizon
platform
* Flexible and dynamic
digital retail
proposition
* Build and exploit retail
and FinTech innovation
partnerships
Secure and preventive
capabilities
© High performing team
— partners to the
business
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Appendix
A. SUMMARY ON A PAGE
Statement of IT Strategy: We want a Post Office IT organisation that powers the UKs largest retailer and top brand. Itoutlines how IT needs to
adapt to meet the emerging digital and retail business strategy for the next generation of the Post Office.
State of IT in 21
State of ITin 2016
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B. Cost Playbook
a. We are tackling the cost base in three ways:
(1) Analysing the “cost of change” through understanding rate cards,
what “work gets done”, complexity of process, overheads, location,
seniority and the specification of what we are asking for (existing
conversation suggest we are over specifying and are overlayered)
(2) Reviewing the benefits committed by each supplier and progress
against this/ assumptions and threats
(3) Requesting additional cost opportunities through either reduction in
cost against existing scope or reduction in scope through increasing
scope
b. Strategically, we need to drive greater transparency and ownership of IT
costs into the business to enable the business to control volume and make
appropriate decisions.
c. Opportunities in flight are below. All require leverage and flexibility in
supplier against fixed contracts:
(1) Short term:
« Stop core SIAM services where we are not getting value
e Investigate and drive Software Licensing reductions.
« Meet all suppliers and drive cost reductions through altering demand
drivers, taking more risk, changing specification and/ or challenge
¢ Action short term outcomes from KPMG contractual and commercial
reviews of suppliers - require goodwill from suppliers
(2) Strategic opportunities >1m (but may commercially offer short term
opportunities):
e Utilise commercial leverage - there is no discounts on Run based on
Change spend volume and alignment of core consultancies
e Reshape SIAM to insource key services
e Renegotiate contracts to assess productivity clauses, re-price
indexation, reduce SLA CAPs or change payment terms
e Implement a Software Asset Management tool to control the
software base
¢ Aggressive migration of Fujitsu on-premise infrastructure services to
cloud platforms.
e Replacement or retirement of expensive devices (SSKs/ AEIs c4/5k
per unit)
e Detailed deep review of each contract to remove duplication and
overspecification of services (service management/ reporting)
across providers
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C. Measurements of IT strategy
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Measure Activity Today Target 2020
Lower Cost Aim to meet budget in first year and with 104.8M 70-80M
target investment reduce costs by 5-10% Dependent on
beyond that; without increases. Note that growth
business change (rightly) increases IT
cost
Faster speed to I Previous experience dictates that this 12-18 months 3-6 months
market (Flash requires end-to-end change. Aim to halve incremental
to bang): end to end cycle teams across the system value
Increased Requires end to end change but through Expensive, Agile, cheaper,
productivity agile and systems thinking the process - layered, high quality
from initial view; aim to save at least 30- waterfall
50% on cost of delivery
Security Use a capability measure from Deloittes Limited High
Effectiveness
against 5 key risk areas to assess and
gain an accurate measure of IT/Cyber
visibility; limited
testing; low risk
understanding;
robustly tested;
security maturity. profile; higher risk
profile
Digital Our current capability is well behind Web site High
Capability leading retail peers. The development “brochure transactional
Maturity work over a year should be to get us toa ware”; capability;
level appropriate to our needs. immature; online/ offline
limited journeys;
transactions MyPostOffice/
SME
Always On Aim for a consistent reduction in lost Regular Sev 1/ I 20% reduction
service business revenue year on year for key Sev 2 per on critical
services and avoidance of lost hours month (last 6 business hours
through predicting events. months -
Severity 1 = 16
Severity 2 = 67
Total = 83)
Colleague Aim to establish a mechanism across the Low trust; High trust; IT
Feedback company on how technology is business/ as a partner
performing from a branch, end user and supplier driving value
business change perspective. Improve
and resolve root cause
attitude; low and innovation
expectations
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D. Existing/Prospective Towers and Supplier Mix
The existing IT service management model is based upon a partially implemented
SIAM (Service Integration & Management) and Service Integration & Service Desk
(SISD) model. The process started in early 2012, with four SIAM towers and one SISD
tower identified:
¢ SISD - ATOS August 2013
« EUC - Computacenter September 2014
¢ Network - Verizon May 2015
e Front Office - IBM May 2015 (cancelled February 2016)
e Extended Fujitsu Managed Service Agreement February 2016
¢ Back Office - Accenture March 2016
Over time, we have consciously introduced a hybrid service model, where our legacy
incumbent suppliers (currently 93) and Fujitsu have not been contracted into the
SISD/SIAM services model, which has resulted in the full range of ATOS SISD
contracted services not being able to be delivered.
These constraints in the model
have resulted in Employee and
Branch user base being unhappy
with the service experience.
Existing Service Model
The pain points are largely caused
by the hybrid IT services being
delivered in a highly complex
multisource environment.
Specifically, the contractual
agreements with the service
providers is held by POL, which has ® SISD Services
meant that under the current SISD
model, ATOS have very little if any leverage to flow-down their obligations.
A review identified Proposed Tower/Supplier Model
opportunities for cost a
reduction and service Service Integration
enhancements through
insourcing capability,
automation of service
integration activities, and an
overhaul of the service level.
The impact of this requires
further planning and investigation to mitigate risk and minimise contractual penalties.
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E. Organisation Structure
PAGE 17 OF 17
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CTO - Strategy and
Architecture Lead
Financia d Network and
Commercial ClO
Business Performance
Director and
Transformation Lead
Run the business
Service Management
Supplier/Vendormngt
Capacity/ Event/
Incident ete mngt
Gsoc
+ Leads are embedded into appropriate businessteam/ engage with business support
+ Responsible for IT strategy, operational service aligned to the business, communication and
change execution
+ Each lead will be supported by Architecture Lead/ Service Lead and Change Lead(as appropriate)
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DECISION PAPER
Banking Framework
Author: Martin Kearsley Sponsor: Nick Kennett Meeting date: 25" July 2016
Executive Summary
Context
The Banking Framework seeks to create a commercially sustainable contract with a
standard set of basic banking services for all UK bank customers at Post Office counters.
At the December 2015 meeting the Board gave approval for management to proceed
to terminate all existing bi-lateral contracts with banks, and conclude the negotiation of
new standard contracts to participate in the Framework. The terminations were made
in December 2015 to come into effect in January 2017, allowing the Parties a year to
conclude negotiations.
Conclusions
1. The Framework is on-track to be operational from 1%* January 2017. This will
generate additional projected EBITDAS of £3.4 million in 2016/17 and £20 million
additional income in 2017/18.
2. The standard set of terms and services applying to all participants will simplify
branch and operational processes, removing paper and manual transactions. It will
also enable Post Office to market the service more broadly.
3. Of the top five banks, HSBC, Barclays, Santander and Lloyds are fully committed to
the Framework, with HSBC and Lloyds due to sign this month; Santander and
Barclays will sign by the end of September.
4. While RBS is still working through an internal business case, and thus the position
is uncertain, we remain confident that they will join the Framework from inception.
5. With the stated intent of banks that account for c.81% of transaction volumes to
participate, management believes that the financial and capacity requirements of
the Framework are in place.
Actions and decisions sought from the Board
1. To note the progress in delivering the Banking Framework.
2. To note that RBS participation remains at risk.
3. To note that there are no material changes to the risks and liabilities incurred by
Post Office in creating the Banking Framework.
4. To confirm agreement to stand-up the Framework from 1* January 2017.
5. To authorise the CEO or CFO to countersign contracts that exceed management's
delegated authority.
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Input Sought Input Received
e¢ The Board is asked to confirm its e Legal, Network, Security, Operations
support. input has all been included.
e Legal has created a combined Key
Terms and Liabilities and Key Risk
report. A summary is in the
Appendix.
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The Report
1. Since Post Office terminated the existing banking services contracts in December
2015, we have been negotiating multilaterally through the services of the BBA and
increasingly bi-laterally with each bank to conclude the Framework.
2. To join the Framework, each bank will sign:
e The standard Framework terms and conditions (including service level
agreements), with no variations for an individual institution; and
e A ‘side-letter’ highlighting specific variations relevant to that bank (see
paragraph 13). The individual and aggregate effect of these issues has no
material impact on the core terms or of operational consistency.
3. The initial Framework will run to 31%* December 2019, with an option to extend for
a further three years.
4. The implementation of the Framework is on track for launch in January 2017:
e All banks with existing Post Office contracts are joining the Framework and a
number of small, challenger banks are also engaged to join’.
e Six banks (HSBC, Lloyds Banking Group, TSB, Handlesbanken, First Trust and
Danske) have completed internal governance and have signed, or are ready to
sign. They account for 35% of current transaction volumes.
e A further six banks (Barclays, Santander, Virgin, Nationwide, Co-Operative
Bank and Bank of Ireland (UK)) having concluded negotiations with Post Office,
are now working through internal governance; they have each confirmed their
intent to sign by September. They account for 46% of transaction volumes.
e Three banks, Metro, APS and Think Money have indicated that they will be in
a position to sign by the end of December and join the Framework immediately.
e Clydesdale Bank has a live service contract that only expires in June 2017; as
a result we only terminated this contract in June 2016; the bank will join the
Framework from 1% July 2017.
e RBSG (and its affiliates) is the only major bank yet to confirm its participation.
5. In June RBS advised Post Office that for cost reasons it is considering only joining
the Framework for selected services, disallowing consumer balance enquiries and
withdrawals (these services generate c13.5 million transactions per annum).
6. In subsequent discussions with RBS, Post Office:
e Advised that we will not negotiate a partial service, as it would undermine the
veracity of the single-service philosophy under-pinning the Framework;
e Confirmed to RBS that it is the only materially-sized bank that has not
confirmed its intention to participate; and
¢ Reconfirmed that if we have not received confirmation by 31% July of their
intent to participate fully we will commence planning to remove existing branch
services for commercial and consumer customers from 31% December 2016.
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7. Recent discussions with RBS have been more positive, with the Bank committing
to confirm its position by the end of July; we will provide an update at the Board
meeting.
8. The Framework will be managed through a multi-party Forum, with
representatives from each participant bank and the Post Office. There are sub-
groups with subject matter experts covering security and risk (AML, bribery,
corruption, fraud etc); marketing; new product innovation; and operations.
Key risks identified in Legal Risk Note
9. While the Framework does not include any new material obligations or risks it does
codify certain matters within the new contract, in particular:
10. Post Office policies; when the Board was updated in December 2015, policies for
issues such as HR Vetting, Disaster Recovery and Business Continuity were being
updated by the relevant internal teams. It was stated at that time that once
complete, those policies would need to be followed by the Post Office. The
Framework obliges Post Office to follow its own internal policies.
11. Operational and Service Level Agreements; Recognising the establishment of a
sustainable commercial model, and the resulting Framework Fee, the banks have
requested (and Post Office has agreed) to service levels that include credits in the
event of poor service delivery. Existing SLAs and credits (particularly relating to
Santander) will be removed, initially saving Post Office c.£225,000 per annum.
e All relevant teams (Network, Operations, sub-contract suppliers and IT) have
been involved and confirmed agreement to the Service Level Agreement
commitments - management is confident that their inclusion does not result
in a material risk to Post Office.
Side-letter issues
12. The standard terms prohibit the modification of key terms, including fees,
termination rights, change control, dispute resolution, liability, audit access, FCA
and regulatory requirements and service levels. These apply equally to all
participants for the duration of the Framework (unless modified by unanimous
agreement by all participants, including Post Office).
13. A confidential ‘side-letter’ allows an individual bank to make small amendments,
normally to accommodate internal processes. These are immaterial and do not
change the standard terms and conditions, either singly or in aggregate. Some
examples of the type of side issues raised are:
e Barclays - requested that Post Office notify them of any roles specifically
supporting them that would require Regulatory Approval (there are none). If
any emerge in due course, that we would consult with the Bank and ensure
that our staff had the required clearance and training.
« HSBC - any personal customer data that we might seek to export outside the
EEA should be identified and HSBC prior permission sought.
e Nationwide - requested Post Office to confirm that if the Framework New
Product Committee endorsed a new product, Nationwide would not be forced
to offer that service to their customers if they did not wish to - while this was
called out by Nationwide, this condition applies to all participants.
e Virgin Money - requested Post Office to agree that if it created a new product
which we supported in branch that based on their Intellectual Property the
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Framework could not be used to offer the service to all other banks, without
formal license agreements in place. Note: Post Office is not restricted in any
way from developing additional services that do not utilise Virgin IP.
Liabilities
14. Except for the areas of unlimited liability, which are generally standard (negligence
leading to personal injury or death, fraud, fraudulent misrepresentation, breach of
confidentiality provisions or regulatory penalties as a result of Post Office’s breach
of data protection obligations or under the indemnity relating to a failure to comply
with PCI and any third party claim for infringement of intellectual property rights),
Post Office’s liability under the Framework is limited in any 12 months to the
aggregate of transaction and annual framework fees paid in that period.
Risks
15. A summary of the key risks to Post Office from the Framework are set out in the
Appendix.
Conclusion
16. Negotiations with the banks have reached an advanced stage with strong
participation from the UK banks, giving management confidence that the
Framework can be stood-up:
«Banks representing 81% of transaction volumes have committed to join the
Framework and sign by end September; by countersigning Post Office will
confirm that the Framework will be operational from 1* January 2017.
e While the final position of RBS is uncertain, the Framework is on track to deliver
an additional c£20 million income per annum from 2017/18
e The Framework terms do not add risks or materially change obligations on Post
Office; and
e By simplifying the products and terms, processes can be streamlined and paper
removed from branches and operational centres.
Decisions
17. Management is seeking board authority to stand up the Framework and sign
contracts with participating banks.
18. As the CEO’s delegated signing authority is capped at a maximum liability of £5.0
million per annum and the projected annual income (and hence liability maximum)
of a number of the banks will exceed this level, management is also seeking
delegated authority from the Board for the CEO (or in her absence, the CFO) to:
e “approve (i) the pro forma Framework Contract to be entered into with each
bank that wishes to become part of the Banking Framework and whose annual
income to Post Office from the Framework exceeds £5.0 million?; and (ii) the
Side Letters relating to the Framework contracts with each such bank; and
* execute each of those Framework Contracts and Side Letters in accordance
with Post Office Limited’s normal signing processes.”
Likely to comprise Santander (revenue £31m), Lloyds (£12m) Barclays (£8m), RBS (£9m).
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Appendix
1. Banking Framework Risk Summary
Key Risks
Having now completed a substantial part of the negotiations, no additional risks have been identified.
The main material update since the Board’s previous discussion in December 2015 is:
e the development of Post Office’s corporate policies which are required to be in place prior to January 2017; and
« the finalisation of the Service Level regime.
Material Risks
Risk Mitigation Probability Material
change to
pre-existing
Potential Regulatory
Breach
There is a risk that a
regulator would expect Post
Office to comply with the
Payment Services
Regulation.
Operational Risk -
Subcontractors
Post Office must ensure that
its contractual arrangements
are enforced where
appropriate with its agents
and subcontractors.
Post Office contracts enforce and ensure that its subcontractors comply
with these issues but Post Office would be obliged to make the necessary
instructions to them to ensure compliance.
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Bank Insolvency
The Framework continues in
the event of relevant Bank
triggering an “insolvency
event”.
Post Office has reserved the right to terminate immediately in the event
that our Regulator (which includes the Government in its capacity as our
shareholder) requires POL to terminate.
Moderate Risks
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Risk
Mitigation
Implementing the revised corporate policies
and enforcing them
The Framework requires Post Office to implement
and enforce its own corporate policies
Post Office has a staff vetting policy and rolls out
training on key issues, such as Data Protection and
Anti-Money Laundering on an annual basis.
Liability
There is an unlimited liability for both parties in
relation to various negligent actions
Except for above, liability under the Framework
in any 12 month period is limited to the
aggregate of fees paid in the same 12 month
period and is pro-rated in the first 12 month
period of the contract term.
This is a fairly standard basis for unlimited liability.
The Limited Liability cap has been discussed and
agreed with ISAG, Legal and Financial Services
Product
VAT
The Banks and Post Office do not believe that
these services attract VAT.
The Parties have committed to cooperate in
challenging any such change to this status.
In the event of this being unsuccessful there is a
mutual 12 month termination right.
Strictly Confidential
Banking Framework
July 2016
Probability
Impact
Material
change to
pre-existing
position?
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2. Bank Update - status as at 17" July 2016 (a further verbal update will be provided at the meeting)
Bank Internal Governance Status Next Step July signing September Signing I 3yr income
‘TOP 5’ BANKS.
Barclays Well advanced. Project team Extension letter concluded - service till
have meetings booked with UK I end October to cover signing period.
CEO for final sign off.
PIN-based deposit timeline delivered —
live by 31/12/16
No outstanding issues
HSBC Well advanced. No issues remain
Signing July
RBS/Nat West/Williams &
Negotiations on side letter
Pressure being exerted to gain
Glynn/Coutts interrupted by request to commitment to proceed by 31/7/16
exclude cash-out transactions
Santander Internal Governance is well Detailed negotiations to conclude;
underway discussions held weekly/daily.
Lloyds Agreed variations embedded inI Addition of business banking now
side-letter and internal
governance underway
unlikely before 2017.
Side letter being finalised.
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Banking Framework
July 2016
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Bank Internal Governance Status Next Step July signing September Signing I 3yr income
‘2"4 Tier’ Fis
TSB Side letter signed Post Office to sign
Nationwide Intend to join, and expand retail I Side letter in advanced negotiations
services to new customer
groups
Co-operative Santander currently supports Santander to formalise pricing to
Coop Business banking, This
may continue into Framework.
Coop yet to decide.
Retail contract is direct with
Post Office.
Coop, Coop to decide on whether to
stay with Santander or move to direct
model with Post Office.
Bank of Ireland (UK)
Internal governance underway
Regional/challenger/new
entrant Fis
Danske
Side letter signed
Post Office to sign.
First Trust (AIB Group)
Side letter signed
Post Office to sign
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July 2016
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Bank Internal Governance Status Next Step July signing September Signing I 3yr income
Handlesbank Side letter signed Post Office to sign £155k
Metro Bank Internal governance underway. Progress with their legal team to agree
side letter.
Virgin Money Negotiations less advanced as Negotiations underway
not part of BBA process.
Banks with continuing
contracts
Clydesdale Current contract continues to Termination letter sent in June. NIA N/A £7.1m
30/6/17
Think Money Current contract continues to Likely to move to Framework at end of I N/A N/A £400k
31/12/20 2016 to ensure they are not left out.
APS Current contract continues to APS is keen to join if that brings them I N/A N/A £2.1m
28/2/20
into the mainstream.
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Banking Framework
July 2016
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POST OFFICE BOARD
Performance Review - Health
and Safety
Author: Martin Hopcroft Sponsor: Neil Hayward Meeting date: 25 July 2016
Executive Summary
Context
1.1 Keeping our employees healthy and safe is fundamental to Post Office success. This
is reflected in the Post Office Board’s legal responsibilities - directors can be
personally liable when health & safety duties are breached and members of the
board have both collective and individual responsibility for health and safety. This
Paper gives the Board a comprehensive update on our health & safety performance
and our work to promote wellbeing.
Our Health & Safety performance has improved significantly in the past 5 years
and we have a rolling 3-year plan to drive health and safety compliance and risk
reduction. The key risks of driving and robberies are the subject of mitigating
activities. Our reporting and safety management system is measured against the
externally recognised health and safety standard - OHSAS 18001. We recognise
the importance that wellbeing can play in creating engaged and motivated
employees and have developed and implemented an extensive wellbeing plan.
The aim for 2016/17 is to continue the year-on-year improvement by targeting a
reduction in four key safety metrics: accidents; lost time accidents; days lost;
and personal injury claims.
Questions this paper addresses
2.1 How are we doing against the four key safety metrics?
2.2 What are we doing to mitigate the key risks of driving and robberies?
2.3. What are we doing to improve the health and wellbeing of all employees?
2.4 The current position on property and facilities management risks?
2.5 Are there any significant emerging risks?
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Conclusion
3. During the first quarter of 2016/17, there is strong performance against all four of
the key health and safety metrics, including absence accidents and lost days.
4. There is an extensive range of mitigating activities to reduce road risk and current
performance is a 14.75% improvement on 2015/16 performance. The majority of
incidents are minor bumps and scrapes. At fault incidents are also down 17.65%
to P3. There is also an extensive range of controls to reduce the risk of robberies
and the number of robberies is currently at an all-time low.
5. The roll-out of a second programme of health checks to all employees via face-to-
face clinics and stand-alone digital wellbeing kiosks continues across the Post Office
with positive feedback from all areas. Three kiosks have been programmed for use
across all largely populated sites (>25) during first half of the year.
6. The emerging non-compliance and health and safety risks related to property and
facilities management are now assessed as medium / low and are being mitigated
by a programme of checks and inspections and closure of risk assessment actions
Input Sought
We ask that the Board to note the current safety and wellbeing performance and
risk reduction opportunities.
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Loo
2)
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e Report
king Back
.1 HOW ARE WE DOING AGAINST THE FOUR KEY SAFETY METRICS?
e¢ Accident and lost time incident performance for the start of 2016/17 remains
relatively strong. Accidents and ‘lost time’ accidents are down 43.7% and 83.3%
respectively at Period 2 (May) compared to 15/16 and against a continuous
improvement target of a year on year 5% reduction.
The volume and value of personal injury claims is another indicator of the
effectiveness of the safety management system. The number of claims over the
past year remains at a very low level both from employees and members of the
public. The trend in claim numbers and value is reflected in the provision for ‘live’
claims reducing from £2,050,344 to £866,370 compared to 2013/2014 insurance
year and reflects the improving safety performance. £293,500 of the provision
relates to pre-October 2012 incident claims.
Robberies involving Post Office Cash and Valuables in Transit (CViT) crews are
significantly down from 31 in 2014/15 to 15 in 2015/16 — an unprecedented low
level of robberies.
A programme of wellbeing activity has been running for the past 12 months,
including raising awareness of mental health conditions, symptoms and the
support available. Mental health conditions remain the single most common cause
of longer term absence (17% of occurrences and 30% of total absence days at
Period 2 - May 2016/17 which is a slightly improving trend). A new online
Occupational Health website, providing advice and guidance for Managers
supporting employees with health conditions has been developed and will be
launched in July. Attendance levels have reached 97% YTD at Period 3 (June
2016/17) with Crown Offices and Supply Chain showing a recent reduction in long
term absences.
e¢ Property - Formal planning and delivery of risk assessments in accordance with
Health and Safety at Work Act is now virtually complete. Remedial work for all
identified high risk items has been completed and plans for addressing medium
risk electrical, asbestos, building fabric and legionella have been built and
included in the agreed 16/17 budget. Overall property risk has now reduced from
high to medium and to low, once all identified actions closed.
We have engaged with Network Operations to propose the implementation of:
e Peer to peer compliance review in accordance to industry best practices or an
equivalent alternative process.
e Regular reviews and appraisal of PiCs Property compliance performance by their
line managers.
e Clear audit trail of compliance actions identified and resolved.
e Improve communications processes between Property, Network Operations and
H&S teams.
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WHAT HAS NOT GONE SO WELL
Property
The most significant area to improve is in housekeeping to manage fire risk. This was
reported by CBRE to the Property Compliance Board as a finding from their risk
assessments.
- Persons in Charge have been issued with the results of the fire risk assessment
audits and requested to address any areas identified. We are defining a process
which will provide assurance that all steps to address risk have been actioned.
Customer Harassment
Concern has been raised by the Westminster local authority regarding Post Office
Policy for dealing with violence and abuse by customers, especially in London where
there is a growing problem with the homeless population and their presence in our
branches and entrances. The Head of Health & Safety is liaising with the
Environmental Health Enforcement Officer, Post Office Legal team, Security Manager
and agreeing action to refresh and relaunch the Post Office Policy, guidance to
managers and staff and refresher training to be issued in August across the Crown
Network. Local risk assessments in offices in Westminster area also being updated
and incidents logged using the ERICA Incident reporting database.
Looking Ahead
2.2 What are we doing to mitigate the key risks of driving and robberies?
Road Risk: Driving activities have the potential for high impact/loss and therefore
remain as a significant residual risk. We are mitigating this risk through:
Continue road risk forum to scope and develop road risk reduction initiatives
Analysis/deployment of interventions for reversing incidents eg on site coaching
Case conferences to ensure consistent approach to accident investigation
Programme of driving and road risk communications
Revised approach to incident management introduced including:
Driver welfare discussion; In depth incident analysis with driver and risk profiling;
Training needs analysis and provision;
>» ‘How's my driving’ initiative introduced to provide other road users with a
feedback channel via a contact number.
> Governance of all three areas of vehicle use (commercial, business car and
private vehicle) is being tightened to mitigate the associated risks.
VVVVV
Robbery Risk: Robberies have the potential for high impact/loss and remain as a
significant residual risk. We are mitigating this through the following opportunities:
>» Active liaison activities with the police to understand ‘at risk’ areas and to deploy
surveillance teams;
>» Increased use of ‘advertising’ on vehicles of new deterrent technologies.
> Piloting new point of transfer arrangements to reduce exposure at Post Office
counters where most robberies take place.
> Significant reduction in opportunities for duress-type robberies linked to the
introduction of single person vehicles.
>» Reduced access to ATM cassettes to mitigate the ‘high prize’ risk
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» Ongoing monitoring of the risk profile to inform the assessment of the need, or
otherwise, of body armour. The Risk Assessment has been reviewed May 2016.
2.3 Wh re wi in improve the health and wellbeing of all empl 2
Health and Wellbeing: We recognise the benefits that wellness can bring to the
organisation and therefore there is an extensive programme of healthcare interventions
to all areas of the business. Examples are:
> Wide ranging programme of health check visits to Crown branches, providing
feedback on physical wellbeing. Support from the Trade Unions H&S Reps.
>» Anonymised data analysed to develop future health and wellbeing campaigns
and targeted interventions, supported by OH Assist ™.
> ‘Roll out’ of electronic health check kiosks for use in larger units (>25)
> Online ‘Lifestyle on line’ health check tool as a ‘self-help’ option.
> Continued roll out of Mental Health Awareness training across business areas.
> Wellbeing events to promote general health, exercise and dietary initiatives.
>» Launch of OH Assist Manager Portal for health advice / guidance - July 2016.
> Involving Engagement Champions to help raise awareness.
2.4 The current position on property and facilities management risks?
Property:
The fire risk area of compliance remains a high priority for the Post Office and further
communication with the PiCs is planned for early July to ensure satisfactory conclusion
of outstanding items. The risks profile continues to trend down and Property remains
confident of being able to demonstrate alignment with the risk averse appetite of the
Board by the end of 16/17.
An exercise to produce a Property Compliance Control Framework has been undertaken.
This has been completed for the key areas and the following areas have been
addressed:
>» Duty holder roles now all in house and training programme in progress
>» Facilities management contractors’ polices, compliance regimes and
competencies checked and approved
>» Recruiting a senior Facilities and Compliance Manager and training up a Facilities
Manager Assistant
>» Policies and handbook have been reviewed and will be signed off shortly
>» Strong improvement in the H&S and property teams working together and joint
reporting to the POL Executive Board
> Training for Property Team in key statutory compliance areas and IOSH
> BNP supplying expert compliance manager support so that POL benefit from their
property compliance expertise
> Compliance remedial projects for building fabric, electrical, legionella and
asbestos will be completed in 16/17 to reduce remaining medium risks to low.
> Further training in statutory compliance for the Property Team has been delivered
>» Improving relationships between property, Operations and Equipment team
The compliance controls activities for PiCs and H&S teams are finalised and integrated
with the activities of the Property Team, agreed at a workshop held on 25** May.
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2.5 Are there any significant emerging risks?
Fleet Management
> The restructure of Fleet Management team and Supply Chain may lead to a change
of focus and support for the effective initiatives referred above that had been
developed to mitigate road risk.
> Head of Health & Safety to attend Supply Chain Operational Meetings and Road Risk
Forums to ensure focus and support provided where risks and trends identified.
>» Concern raised that mobile phones are still being used by Business drivers on hands
free, including joining conference calls. Communication to be issued by a Group
Executive Director to reiterate the Policy and consequences of failure to comply.
Property:
Fire — A recent Property Compliance review reported the need to address housekeeping
risks (e.g. ensure fire exits are clear at all time), following a programme of Fire Risk
Assessments, carried out by CBRE and completed in May.
Person in Charge (PiCs) have been issued a soft and hard copy of their Fire Risk
Assessment at 351 premises and an explanatory communication on the next steps
required of them to address remedial actions. The PICs and the retail line are fully
aware of the urgent nature of many of the actions they need to take particularly in
relation to housekeeping matters i.e. ensuring fire exits are not blocked or rubbish
stored on stairs etc. The retail line are now following these actions through to closure.
Environmental policy and reporting requires enhancement:
e The Environmental Policy needs to be refreshed during July/August. A meeting
has been planned between Head of H&S and Head of Property on July 14 and
recommendations will be made to the Group Executive in the August Reports
e A draft is already in place. It needs to expanded to include for example;
sustainability, noise, waste, water, energy usage, climate change and energy
depleting substances landfill
e« A KPI and reporting mechanism is required for gas, water, electricity and fuel
consumption
e It requires linking to CSR team for sustainability clause to be included in the
Environmental policy.
e H&S should own this with Property support, POL CSR involvement & CBRE or
Safety Boss expert consultancy support
Director ownership considerations
e POL directors to be made aware of the significance of environmental reporting,
how it is affecting our brand image, the potential for personal liability and
consider appointing a director with responsibility for overseeing environmental
policies.
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Significant Incidents
A recent Property Compliance Review has also highlighted that local property risks are
managed by the manager of the building under person in control (PiC) arrangements.
There is a gap in the competence of managers to carry out their PiC responsibilities and
a revised on-line training product has been developed by the H&S Team, and a
requirement that all PiCs undertake training by the end of July 2016. Local Risk
Assessments, H&S tasks and Certificates of Compliance will be completed by end of
August 2016.
In Conclusion
There remains some residual risk in relation to driving operations, property regulatory
compliance and CViT/Network robberies, both of which have the potential for high
impact/loss. Any significant change in Supply Chain risk profile or service provision will
require a full re-assessment of the position on body armour. Risk Assessments have
been reviewed in May 2016 by the Head of Health & Safety and Security Manager.
Recognising this, we have robust mitigating activities in place to control these risks. All
metrics indicate health, safety & wellbeing performance remains generally strong with
effective safety management and mitigating activities where significant residual risks
do exist. Renewed focus on ‘property’ related H&S responsibilities will reduce risk
further.
Health & Safety DEEP DIVE Review - June 2016
Following a ‘deep dive’ review in June 2016, a number of Health & Safety
recommendations were approved by the Post Office Group Executive and are being
progressed.
Strictly Confidential Health & Safety Report July 2016
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POST OFFICE - BOARD PAGE 1 OF 2
Post Office Limited Sealings
Author: Alwen Lyons Meeting date: 25 July 2016
Executive Summary
Context
The Directors are invited to consider the seal register and to approve the affixing of
the Common Seal of the Company to the documents set out against items number
1422 to 1431 inclusive in the seal register.
Input Sought
For the Directors to resolve that the affixing of the Common Seal of the Company to the
documents set out against items numbered 1422 to 1431 inclusive in the seal register
is hereby confirmed.
Strictly confidential
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POST OFFICE LIMITED
Date Register of Sealings Company Number
18 July 2016 21554540
Seal Number Date of Date of Persons Attesting Destination of
Sealing Authority Description of Document To Document Document
1 File Ref.
1422 01/06/2016 31/05/2016 I Lease in respect of premises at Toplin House, 242 Ferndale Road, Victoria Moss Jean Reynolds
Lambeth, London SW9 between M J Squire and H R Squire as trustees
for Squire & Partners (a partnership) and Post Office Limited
1423 01/06/2016 31/05/2016 I Deed of Surrender relating to premises at Toplin House, Ferndale Road, I Victoria Moss. Jean Reynolds
London SW9 between Michael James Squire and Henry Raglan Squire
and the Post Office Limited.
1424 01/06/2016 31/05/2016 I Licence to Alter premises at Toplin House, Ferndale Road, London SW9 I Victoria Moss Jean Reynolds
between M J Squire and H R Squire and Post Office Limited
1425 07/06/2016 07/06/2016 I TRI relating to 4 Abbey Place, Tavistock, Devon between Post Office Victoria Moss Jean Reynolds
Limited and Ekraj Limited
1426 08/06/2016 08/06/2016 I Executive Director's Service Contract between Post Office Limited and Victoria Moss Nisha Marwaha
Paula Vennells
1427 08/06/2016 08/06/2016 I Power of Attorney granted by Paula Vennells in favour of Post Office Victoria Moss Nisha Marwaha
Limited in accordance with the terms of the Director's Service Contract
between the same parties.
1428 08/06/2016 07/06/2016 I Licence to underlet relating to Flat 4, 130c Lord Street, Southport between I Victoria Moss Jean Reynolds
Post Office Limited, Kingscrown Properties Limited and Dawn Hunter.
1429 08/06/2016 07/06/2016 —_I Licence to underlet relating to Flat 21, 130c Lord Street, Southport Victoria Moss Victoria Moss
between Post Office Limited, Kingscrown Properties Limited and Jean
Brookes.
1430 24/06/2016 21/06/2016 I Underlease relating to Part Ground Floor, 131 Brent Street, London, NW4 I Victoria Moss Jean Reynolds
4AA Post Office Limited and M. Harsini Limited
1431 28/06/2016 28/06/2016 I Deed Of Variation Of Agreement between Post Office Limited and Postal I Victoria Moss Sealing Folder
Heritage Services Limited and Postal Heritage Trust Limited and Mail Rail
Trading Limited
Register of Sealings Alwen Lyons Page 2
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Post Office Board and Committee Dates
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Last updated : 18/07/2016 @ 15:15
30th 31st
January
14.00hrs to 16.00hrs 09.30hrs to 14.00hrs
February 9th 9th
10.00hrs to 11.30hrs 11.30hrs to 13.00hrs
h
March 27th 28t!
14.00hrs to 16.00hrs 09.30hrs to 14.00hrs
April
May 18th 30th 30th 30th
10,30hrs - 12.30hrs 09.00hrs to 10.00hrs 10.00hrs to 11.00hrs 11.15hrs to 15.30hrs
27th and 28th
June
TBC
25th 25th 25th
July
09.00hrs to 10.00hrs 10.00hrs to 11.00hrs 11.15hrs to 15.30hrs
‘August
emits 25th 26th
14.00hrs to 16.00hrs 09.30hrs to 14.00hrs
October Bist
09.30hrs to 14.00hrs
Notenben 16th 24th 24th 24th
10.30hrs to 12.30hrs 09.00hrs to 10.00hrs 10.00hrs to 11.00hrs 11.15hrs to 15.30hrs
December
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