Present:
In attendance:
GROUP EXECUTIVE
AGENDA
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for the meeting to be held on 12" February 2015 in Boardroom
Paula Vennells (Chair), Alisdair Cameron, Martin George, Kevin Gilliland,
Neil Hayward, Nick Kennett, Jane MacLeod, David Ryan and Alwen Lyons
Gavin Lambert, Joe Connor, Brett Davies, Mark Davies, Angela Van-Den-Bogerd
and Belinda Crowe
Start time : 09.30hrs Endtime: 15.00hrs
Time Item Sponsor/ Presenter
09.30 - 10.15 Resourcing update, Christmas paid work experience Neil Hayward / Joe
and Leaving the business with dignity projects. Connor & Brett Davies
What's on the books for 2015
10.15 - 11.00 SLT Events Mark Davies
11.00-11.15 I BREAK
11.15 - 12.15 I POMS strategy and its relationship with POL Nick Kennett
12.15 - 13.00 I LUNCH
13.00 - 13.45 Branch Improvements Angela Van-Den-Bogerd
13.45 - 14.15 Responses to the Second Sight Theme Report Angela Van-Den-Bogerd /
Belinda Crowe
14.15 - 14.30 I GE Action Log
14.30 - 14.45 Noting paper:
e Health & Safely Report
14.45- 15.00 I AOB
15.00 CLOSE
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POST OFFICE LTD GROUP EXECUTIVE
Communications Calendar 2015/2016
1. Purpose
The purpose of this paper is to:
1.1. seek agreement from the Group Executive on the proposed Communications
Calendar 2015/2016.
2. Background
2.1. We are refreshing and stepping up the Teamtalk suite of internal communications as
well as moving more of our regular publications on to digital formats.
2.2. The aim of this initiative is to further ensure that every employee and branch has
access to a regular flow of information, focused on sales, performance and insight,
with weekly contact as the baseline.
2.3. In making these changes we can build on a solid base of regular, direct
communication and increase its pace.
2.4. There are two broad target audiences, which in turn split into categories. However,
as well as focusing on audiences by format (Crown, agencies etc) we propose to do
so now also by content: customer and sales, strategy and leadership.
2.5. Our key audiences are:
° Employees, which split into front line sales roles, support functions,
senior leaders and central teams
. Non-staff, which split into agents, multiples and staff in these branches
2.6. These groups are currently served by a range of communications channels:
Employees
. Teamtalk briefings: conducted by managers based on content
provided by relevant teams to communications team and held weekly
and monthly
. Wow magazine: provided to Crown branches in printed form, a bi-
monthly magazine which is moving to digital only from the new
financial year
Weekly email to supply chain colleagues
Crown vision events: face to face every six months
Crown focus: weekly email to Crown branch managers
Teamtalk Live: aimed at all in central teams, extended to wider
audience in July and now proposed as an annual event rather than
quarterly
° FS Focus, which reaches the financial services community
eoee
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Non-staff
. Subspace News is sent weekly to 6,000 postmasters (private email
addresses)
. All postmasters can access Subspaceonline — the main site is on
general view and all have log-in details for the protected pages. This
receives around 1,200 unique visitors a week
. We produce a postmaster version of Teamtalk each month on
Subspaceonline — delivery is optional
° Subspace magazine is sent to all postmasters every two months (due
to end next FY and move to digital channels)
. Branch Focus: operational sales and marketing guidance currently
fortnightly, but fully digital from April
. a range of sales-focused events led by the network team
2.7. In Crowns colleagues also benefit from the weekly WTL sessions led by branch
managers.
2.8. Our communications channels are measured through the engagement and pulse
surveys and page views.
2.9. As indicated above, and partly in response to the business’ cost challenge, we are
engaged in work with IT and our suppliers to move to a single digital communications
platform in the new financial year. This will provide greater flexibility and the
potential for colleagues and agents and others to access communications channels
via PC, mobile and tablets. We are thinking digital in all that we do by seeking to
offer communications solutions which remove paper from branches and enhance the
effectiveness of our communications channels.
2.10. This move has enabled in year savings in 2014/15 of £400k and recurring savings
of £1.4m p.a. Transition is being managed through engagement with key teams.
2.11. This development will also offer the opportunity to create a single Post Office
Teamtalk digital bulletin which could reach all employees and agents on a regular
basis.
Proposal
3.1. In order to refresh this suite of materials, we have stepped back to consider them
from a content as well as an audience perspective. The aims of our communications
with counter colleagues, for instance, should be the same whether we are
communicating with a Crown colleague or an agent: to drive sales, give them a two-
way information flow and deliver superb customer service. While segmenting
audiences is the right thing for some audiences, there is also a case for building on
the existing suite of communications around core content. We also believe we can
reach more colleagues - whether directly employed or in the wider network — through
this development.
3.2.To this end, we are currently reviewing the methods (ie media) we use to
communicate and engage with our people. This research is helping us determine
what information audiences are seeking together with a clearer view on how they like
to receive it. We are also looking into defining our audience into segments based on
their intent type (what are their emotional/commercial drivers) as well as where they
work. This will help inform our channel and content strategy going forward as we
move towards digitisation.
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3.3. On content channelling, in addition to existing channels, the digital approach will
allow us to tailor the content to an individual based on their requirements as well as
what we perceive to be relevant. For example a story could be created with different
variable paragraphs relevant to a particular branch type and this would surface the
appropriate content based on the reader. We will also be able to create bespoke and
targeted e-channels very quickly and very specifically.
3.4. We have identified this core content around three themes:
. Customer service and sales along with an effective feedback
mechanism
. Strategy
. Leadership
3.5. Some of the existing communications activity which takes place across the business
is being increasingly refocused around these themes. But there is a case for
building it further as follows:
SALES AND CUSTOMERS
Monthly:
. Teamtalk with a sales and performance focus, but distributed across
the entire business. Managers mandated to deliver, with Q&A
capability. Q&As to feature on intranet (with name of branch/team).
. In addition make a concerted effort to promote delivery of this process
in our mains branches as well as Crowns.
. We are also examining breaking channels down further to provide
tailored content by branch type and using digital preference tools.
. This would mean removing weekly Teamtalk cascade briefings to
central teams in order to focus content for these teams on monthly sessions,
but retaining and refreshing capacity for regular bulletins via digital channels.
Quarterly:
Sales focused events with key sales and product teams aimed at setting out
sales, product and marketing plans by quarter and reflecting on performance
and building momentum (in addition to current initiatives on coaching/driving
sales effectiveness). I am currently exploring options for these events with
colleagues from commercial, FS and network teams. There is potential for
(low cost) regular meetings in Finsbury Dials with key leaders (up to 150). We
are exploring options for events on a larger scale with our core suppliers,
through the procurement team.
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STRATEGY AND INSIGHT
Fortnightly:
. Update e-channel for central teams to provide a regular beat rate of
business news.
Monthly:
. SLT teleconference/town hall with key business leaders from Group
Executive and Executive Team, held after monthly Board meeting with
Q&A. Strategy, performance and insight focus. [New Finsbury Dials
site will provide opportunity for more face to face gatherings]. These
events would intend to include as standard updates from CEO, CFO
and Transformation Director, with other colleagues contributing by
theme/content as agreed in advance by Group Executive.
Quarterly:
. Ask the Exec — virtual Q&A sessions with leadership team. This would
include evening sessions to allow agents and counter staff to take
part.
LEADERSHIP
Quarterly:
e Development focus sessions for senior leadership team led by Sarah
Malone’s team
ALL (sales, performance, strategy, insight, leadership)
Annually:
. Teamtalk Live: building on the success of the July 2014 event and
turning it into an annual event held remotely across the country with
evening sessions to allow agents to attend, with more regional venues.
The London event would be filmed to allow online access. Open to all
central teams, key network colleagues, agents, branch managers,
counter colleagues [subject to agreement we would agree a final,
strategic target audience].
4. Other
4.1. We will measure impact of these initiatives through our existing metrics but also
through mandated requirement to carry out monthly Teamtalk and report back. The
move to a digital platform will allow further metrics to be analysed in real time.
4.2. In relation to existing Teamtalk sessions for central teams, we are able to measure
downloads of briefing material (average 200 per week) and we request feedback
through delivery logs. This is, however, voluntary and response rates are patchy
(ranging from 20-40 per week). We would like to drive this higher by reducing the
number of detailed briefings but mandating a response.
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5. Timing
5.1. Many of the proposals above are either in train or in implementation. We propose to
move to this approach in full from April, through the launch of our new vision
statement.
5.2. Time has been set aside in Group Executive agendas to consider themes and
messaging for monthly SLT updates. Content will be driven by business
performance, Board updates (where appropriate) and key developments.
5.3. A timetable for the move to a new digital platform is at Annex A.
6. Resource
6.1. There is a significant cost related to Teamtalk Live (on this scale) and to sales
events where we seek attendance in excess of 150 people.
6.2.We are discussing resource for the proposals in this paper through the
Transformation Management Group and relevant budget holders. The enhanced
framework as set out above — much of which comes at no cost other than colleagues
devoting time and energy — will make a material difference, alongside the renewed
vision work which we are working on with the marketing team, in terms of promoting
motivation and understanding about business performance and its transformation. It
is critical work for the engagement agenda and the development of our vision.
6.3. In relation to sales conference events, we are exploring options — as set out above —
with our suppliers, via the Procurement team and with relevant colleagues in
commercial and network and sales teams. I will update colleagues on this work in
due course.
7. Risks
7.1. There are risks around moving to a fully digital approach. The team is putting a
transition plan in place and will be discussing in detail with key stakeholders. This is
a bold step change for the organisation and we should also be prepared for
resistance in some areas.
7.2. There is a further risk that we are unable to reach the hardest to reach groups. We
will look to address by balancing “push” communications though face to face
briefings with the new platform.
8. Recommendation
The Group Executive is asked to:
8.1. note and agree the update and actions set out above.
Mark Davies
5 February 2015
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Annex A
Digital Platform for Internal Communications
1. Branch migration/influencing plan and campaign — Feb:March
2. Communication channels research/segmentation report — mid Feb
3. Operational publications fully online (web and Horizon based platform) — 1 April
4. Commons comms platform developed — Feb:July
5. One common communications platform campaign — April:July
6. Launch of communications platform (consolidation of all existing web platforms) —
July
7. Ongoing review and usage metrics — July onwards
8. Further development — Sept:Nov
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5 February 2015
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POST OFFICE LIMITED GROUP EXECUTIVE
POMS - Transformi 0 ing Model
mM ing G Ri
Purpose
This paper updates the Group Executive on the insurance transformation programme and
sets out the governance relating to the management of POMS, in particular:
1.1.1. How the relationship, controls and oversights between POMS, its Board, Post
Office and the Post Office Board operate;
1.1.2. The implications for Post Office from operating POMS; and
1.1.3. Overview of the POMS’ regulatory obligations and their impact on the operating
relationship with Post Office.
Background
The insurance transformation programme is targeted to increase Post Office’s gross
income from insurance to £138 million in 2020 and net income to £86 million.
The first phase of the programme is to establish a specialist, wholly-owned insurance
broking subsidiary, Post Office Management Services Ltd (“POMS”) and the migration of
the travel insurance business from the Aon/Axa to POMS. POMS was established in 2014
and the travel insurance transition occurred in January 2015.
2.2.1. The strategic plan assumes that travel insurance migration alone will generate an
NPV of £27.3 million by 2017/18;
POMS provides the platform, capacity and capability to enable subsequent phases of the
insurance strategy, viz acquiring the insurance businesses from Bank of Ireland (Project
Hawk) and the subsequent migration of other insurance businesses into POMS as
contracts expire.
POMS launched on 1“ January; it is fully operational for travel insurance and initial results
suggest that the benefits will exceed the business case forecasts.
The business model
The current insurance business model has a significant number of participants, each
extracting value. The underlying premise of the value of POMS is derived from removing
participants and taking the value that they receive, while launching new products
(predominately on-line and via the contact centre).
POMS will be the broker of Post Office’s travel insurance business, contracting directly
with underwriters for the provision of insurance capacity. Previously Aon provided broker
services and Axa provided underwriting services. POMS has assumed all the broker
activities that Axa was providing.
The net effect of establishing POMS is to increase the operating margin (overall amount
paid to Post Office Group) from 28 percent to c35 percent of Gross Written Premium.
For general insurance products there are also several participants with Junction/BGL, as
broker, taking c60 percent of the £37 million income. Of the remainder Bank of Ireland
(Bol) takes 35 percent despite playing a minimal role in the provision of the products;
Project Hawk, assuming it is successfully concluded, will remove Bol’s involvement.
Subsequently, the plan targets that POMS would take over/replace the role of BGL.
Overall, the real value in the POMS operating model comes as economies of scale are
generated through reducing the number of parties taking a margin from the business,
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offering additional product lines, consolidation of call centres into one environment and
enhanced cross sell through a single customer view with enhanced upsell capability.
3.7. Putting all current and additional new products through this model and operating the
customer-centric sales model is expected to create a business with gross revenues of
c£138 million and an associated cost base of c£52 million by 2020.
4. Governing the new model
4.1. POMS is in the process of being established as an FCA regulated company, authorised to
act as an insurance broker, in which it will:
4.1.1. Design insurance products, source underwriting capacity, manage underwriter
relationships and ensure products are managed in accordance with regulatory
review frameworks;
4.1.2. Administer products, through an outsourced contact centre, claims management
(up to First Notice of Loss) and quote and sales processes; and
4.1.3. Perform regulatory and financial management, as required.
4.2. While POMS is a wholly-owned subsidiary of Post Office Limited and subject to the
governance and controls of its Board, as an FCA authorised company, it will need to
demonstrate that it has robust governance and control arrangements. As an unregulated
parent, the Post Office must not exert undue control over the regulated entity (e.g., by
Post Office executives/directors acting as, or being seen to act as "shadow directors").
4.3. Diagram 1 shows the high level governance structure of POMS and how it reports within
the Post Office group. The roles for each part of the governance structure are set out
below, including how POMS is subject to Post Office control and how this works
alongside the FCA's regulatory requirements of POMS.
Diagram 1 - POMS Governance structure
Post Office Lid Board
—$_$§_ Es
Board
Distribution Managerment Faciities & Services: 3° Party Management
4.4. Post Office Board
4.4.1. As POMS’ parent and sole shareholder (and thus POMS’ Controller'), Post
Office is responsible for:
defined by the FCA, is an entity that holds a % of shares in the regulated company . As Post Office will hold 100
percent of POMS? shares it will be the controller,
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. Establishing its Articles of Association, including the powers of directors,
officers and shareholders; the mode and form in which business is to be
carried out. These were ratified in October 2014;
° Setting the business remit and risk parameters of POMS;
° Ensuring POMS is adequately capitalised for regulatory and operational
purposes; and
° Appointments to the POMS Board.
4.4.2. Post Office Board will also exercise general oversight functions as shareholder:
. POMS and its management will be expected to meet the behaviours,
standards and brand values of Post Office;
° The removal of POMS Directors and executives will need to be notified to
the FCA, with replacements requiring FCA approval.
4.4.3. As the overall controller of the Post Office Group, the Post Office Board is
responsible for setting and enforcing group policies on matters ranging from HR
to general risk management. It is a matter for the Post Office Board as to how
these apply to POMS. POMS will be required to ensure that such policies do not
give rise to a conflict with its statutory duties and regulatory obligations.
4.4.4. To ensure that it operates within clear guidelines, Post Office will/has:
. Require POMS to submit an annual business plan to Post Office Board for
approval (due March 2015). This will ensure that POMS is aligned to the
strategy and plans of Post Office (please see section 4.6 below);
. Require POMS to operate within defined limits (its Articles and the Plan);
e Establish reserved matters which require the formal approval of the Post
Office Board (for example material capital expenditure and risk appetite);
such delegated limits have been set; and
. Establish the regulatory risk appetite; this will be presented to the Post
Office in March 2015.
4.4.5. POMS will report regularly to Post Office on the performance of the business and
any material issues. There will be a comprehensive exchange of relevant MI to
ensure that both Post Office and POMS can operate effectively.
4.4.6. Post Office will be able to bring POMS within its overall group policy relating to,
for example, data security without this being regarded as exercising undue
control. However, as FCA requirements for regulated firms may exceed Post
Office’s standard requirements, POMS would need to retain the ability to
augment group policies to the extent necessary to meet regulatory obligations.
4.4.7. POMS will be required, by the FCA, to demonstrate that it understands
customers’ needs and has designed products to meet these, ensuring that they
are for the customers’ benefit. This includes monitoring and reporting on
performance and how POMS is meeting these standards. Post Office can require
POMS to demonstrate how it is meeting the Post Office brand values through the
distribution agreement (signed in December 2014).
POMS Board and Management
4.5.1. POMS currently has two directors, NK and Chris Aujard. The January 2015 Post
Office Board meeting approved that Al Cameron and Jane Macleod could be
appointed as directors. This will occur once POMS has received the FCA’s
Minded to Approve for POMS to act as its own principal (due in February).
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46.
4.7.
4.5.2.
4.5.3.
4.5.4.
4.6.1.
4.6.2.
4.6.3.
4.6.4.
4.6.5.
4.7.1.
4.7.2.
4.7.3.
4.7.4.
4.7.5.
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An independent Chair of POMS has been identified; his appointment is awaiting
confirmation that Hawk will be executed.
All POMS directors need to be FCA “approved persons”.
. As part of the process candidates applying to undertake a Significant
Influence Function ('SIF') may need to undergo a 'SIF Interview’, in which
the FCA will assess their fitness and propriety. This would involve the FCA
assessing a candidate's ability to ensure POMS would be organised,
controlled and monitored effectively. It would also include questions to test
candidate’s understanding of POMS' business model and strategy, the
relevant market, financial analysis, risk management, governance/controls
and the regulatory framework and FCA requirements and expectations.
POMS is currently staffed by secondees from Post Office and interims/
contractors. Following the completion of Hawk, staff from Post Office Insurance
will move to POMS and secondees will be transferred.
Commercial Management
The relationship between POMS and Post Office for the sales of insurance
products is governed by a Distribution Agreement signed in December 2014.
This sets out the roles of the management teams of Post Office and POMS®.
To ensure alignment of the strategy and plans of the businesses, the Plan must
be signed-off by Post Office as shareholder and that POMS and POL will consult
with each other regarding the plan at the quarterly Senior Business Review
Meeting. This creates a process for the POMS senior product team and the Post
Office Financial Services team (and thence the Post Office Executive) to discuss
and agree the plan and business strategy for financial services products as a
whole, prior to it going to the Post Office Board.
Separately, there is also an annual marketing plan which will need to be agreed
between Post Office and POMS.
These processes ensure that the POMS and Post Office sales and marketing
plans are aligned.
Post Office has a right to suspend sales (after consultation through the dispute
resolution process) in the event Post Office reasonably believes POMS is acting
materially outside the annual business strategy plan or marketing plan.
Post Office and POMS Audit & Risk Committees
POMS is responsible to ensure that it complies with its regulatory obligations.
POMS has its own Audit and Risk Committee (“POMS ARC”), reporting to the
POMS Board to oversee regulatory and other risks and report to the POMS
Board on issues or concerns.
The POMS ARC has a dotted line to the Post Office ARC, identifying compliance
and risk issues which might be material at a group level.
POMS and Post Office ARCs operate a “two-way” risk identification and
mitigation process, including POMS ARC needing to ensure that Post Office is
able to deliver its services to POMS.
The Post Office ARC has the authority to monitor and audit POMS:
An approved person is an individual, approved by the FCA, to perform one or more controlled functions on behalf of an authorised firm.
Appendix C sets out the governance structure as defined in Schedule 5 of the Distribution Agreement.
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. Post Office’s monitoring of POMS is anticipated to be undertaken by Post
Office Risk but can be sub-contracted to external auditors.
. The internal audit function will be carried out by Post Office Group Audit,
likely using a specialist external firm.
4.8. Facilities and services provided by Post Office to POMS
4.8.1. I POMS is expected to draw on Post Office for a number of services such as HR,
cash management, payroll, office space and desktop services. These
arrangements will be established through a commercial contract due to be
finalised shortly.
4.8.2. Although provision of services by Post Office is the preferred option, POMS
could source externally; this would remove the need for the FCA to have comfort
as to Post Office’s capability to supply services to a regulated business.
4.9. Diagram 2 below set out the structure of relationships and participants that will support
POMS deliver the insurance solution.
Diagram 2 - POMS functional design
‘Ghai Head uncerwriter)
4.10. Regulatory Oversight
4.10.1. Post Office is already familiar with the FCA's requirements in its capacity as the
Appointed Representative (AR) of Bol’. This allows the FCA to request access to
Post Offices’ premises (including through “dawn raids’) demand sight of
documents and require that directors and offices answer questions. The
enforcement of this right by the FCA can be seen in the recent mortgage deep
dive. However, under the current arrangements regulatory responsibility for Post
Office’s acts and omissions as the AR falls to Bol and not the Post Office.
4.10.2. Despite travel insurance being outside the Bol relationship, Bol is the principal
regulated entity for Post Office for this product. There is a specific AR agreement
for which Bol is paid c£450,000 per annum.
4.10.3. Following the completion of Hawk, Bol will no longer continue to be the principal
for branch sales.
4 :
For travel insurance as well as other insurance and banking produets manufactured by Bol
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4.10.4. On-line and contact centres sales already operate with POMS acting as the AR
to Thistle/Resolution, POMS’ specialist advisor and a principally regulated entity
in its own right.
4.10.5. Once FCA authorisation has been granted and POMS has assumed its full
permissions, POMS will become its own principal. At that stage it is anticipated
that Post Office will be the AR of POMS. The decision for POMS to take over full
permissions will be tabled to the March Post Office Board.
1. Regulatory limits on Post Office’s governance of POMS
4.11.1. The parent/subsidiary relationship between Post Office and POMS will be under
regulatory scrutiny, including under POMS' regular supervisory cycle.
4.11.2. It is critical that POMS is managed as an independent business with clear
contractual relationships between the parties. The FCA will seek to test the
validity and veracity of these relationships and the robustness of the oversight,
governance and control frameworks that support them. This will include seeking
assurances and evidence that Post Office is able to meet its contractual
obligations, where these apply.
4.11.3. No Post Office employee or board member should exercise “significant influence”
over the board or management of POMS in the carrying out of it duties as a
regulated entity. If this were to occur the member might be regarded by the FCA
as, in effect, acting as a “shadow director’ of POMS.
4.11.4. Post Office will not be able to require POMS to act in a way that would put it in
breach of its regulatory obligations.
4.11.5. There are limits on what Post Office will be able to do to POMS, or require
POMS to do. In practice, these are not significantly different from the
requirements that would operate between two group companies, reflecting the
fact that directors owe their duties to the company of which they are a director,
rather than to the wider group.
4.11.6. A number of corporate steps which Post Office, as parent to POMS, might
ordinarily expect to be able to do will be restricted because POMS will be
regulated; for example, all appointments to the Board of POMS will be subject to
FCA approval.
2. In conclusion, whilst POMS must be run in-line with FCA requirements and expectations
in relation to parental undertakings, the Post Office Board can, through the articles of
association and on-going oversight processes as shareholder, ensure that POMS
operates within business and risk parameters set by Post Office insofar as these do not
conflict with POMS' regulatory obligations.
Managing risk
Governance and controls
5.1.1. POMS will operate to a business plan and risk appetite statement (both
requirements of the FCA) and agreed by Post Office Board. This will set out the
objectives of POMS and how it should operate and within what parameters.
These will be tabled to Post Office Board in March.
5.1.2. It is expected that the POMS Board will report to the Post Office Board, at least
quarterly, showing how it is meeting its objectives.
5.1.3. POMS will:
. Be required to monitor and ensure compliance with all relevant sanctions
regimes (e.g., Office of Foreign Assets Control “OFAC”);
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5.2.
6.1.
6.2.
6.3.
6.4.
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. Be required to operate its own risk register which will assess the key risks
to the business. All risks will be assessed by the POMS Exco and reported
to the POMS Board to ensure effective supervision and monitoring; and
° Potentially be subject to “super complaints” relating to Travel Insurance.
This will be managed through the Risk & Compliance Team, supported by
Thistle and working with our underwriting partners.
5.1.4. In addition, once Post Office is the AR of POMS, POMS will be required to
provide regulatory 2™ line supervision of Post Office’s sales and marketing
processes. This will include approving sales activities, incentives of Post Office
sales staff/supervisors and carrying out financial promotions oversight and sign-
off.
. It is not proposed that POMS takes on this responsibility until Project Hawk
has been concluded.
5.1.5. POMS will be directly regulated by the FCA and as such will have to meet the
duties and obligations set out in the FCA Handbook, legislated through inter alia
FSMA.
5.1.6. Establishing POMS as a regulated business will, however, not result in Post
Office becoming directly regulated by the FCA.
Conflicts of interest of Directors and Executives
5.2.1. Robust governance, systems and controls will need to be in place to identify and
manage potential conflicts of interest between Post Office and POMS, at both an
individual (for example, for persons on the Boards of both Post Office and
POMS) and corporate level (for example where an executive is employed by
Post Office but operating within POMS).
5.2.2. The fact that such conflicts may arise from time to time is not necessarily a
problem, provided that they can be identified and appropriately managed.
Problems arise when the conflict inhibits effective decision-making or puts
individuals in a position where they cannot discharge their legal/regulatory
function adequately or are unclear as to whom they owe their duty.
5.2.3. The FCA expects all regulated firms to take appropriate steps to identify and
manage conflicts of interest to ensure that the regulated firm can meet its
regulatory obligations and that the interests of customers are not put at risk.
Summary and Recommendation
POMS generates significant long term income and capital value to Post Office.
The establishment of POMS will however require POMS to undertake a number of new
activities and will require some new processes and responsibilities to be implemented by
Post Office.
This paper has set out the various operating business model that has been established to
run commercial, contractual and risk implications of POMS.
The Group Executive is asked to note the paper.
Nicholas Kennett
Director, Financial Services
February 2015
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Appendix A - POMS Governance
Role of FCA approved persons, directors and non-executive directors
An approved person is an individual who has been approved by the FCA to perform one or
more controlled functions on behalf of an authorised firm.
Under the Financial Services and Markets Act 2000, the FCA may approve an individual only
where it is satisfied that the candidate is fit and proper to perform the controlled function(s)
applied for.
When considering a candidate’s fitness and propriety, the FCA considers:
1. honesty, integrity and reputation;
2. competence and capability; and
3. financial soundness.
Approval must be obtained before a person can perform a controlled function.
Responsibilities as an approved person (AP)
Being an AP brings with it a number of key responsibilities, including a duty to be aware of and
comply with FCA regulatory requirements and expectations and, understand how they apply to
the day to day exercise of controlled functions. Specifically, APs must:
e meet and comply with the FCA’s Fit and Proper test for Approved Persons;
e comply with the Statements of Principle and the Code of Practice for Approved Persons.
set out in the APER. These Statements of Principle describe the conduct that the FCA
requires and expects of the individuals it approves;
e report to the authorised firm and to the FCA any matter that may impact on their ongoing
fitness and propriety
e Non-compliance with these regulatory requirements may result in the FCA taking
enforcement action against the approved person.
Directors
The rules regarding the roles of Directors and Senior Management are embedded in the FCA’s
Senior Management Arrangements, Systems and Controls (SYSC) chapter of the Handbook.
In summary directors and senior management are required to:
e take appropriate practical responsibility for the firms' arrangements on matters likely to
be of interest to the regulator;
e take reasonable care to organise and control its affairs responsibly and effectively, with
adequate risk management systems;
e vest responsibility for effective and responsible organisation of the firm’s affairs; and
e create a common platform of organisational and systems and controls requirements for
the business.
Non-Executive Directors
Non-executive directors have responsibilities in the following areas:
e Strategy: Non-executive directors should constructively challenge and contribute to the
development of strategy giving regard for the regulatory requirements of the firm.
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e Performance: Non-executive directors should scrutinise the performance of
management in meeting-agreed goals and objectives and monitoring and, where
necessary, removing senior management, and in succession planning.
e Risk: Non-executive directors should satisfy themselves that financial information is
accurate and that financial controls and systems of risk management are robust and
defensible.
e People: Non-executive directors are responsible for determining appropriate levels of
remuneration of executive directors and have a prime role in appointing and where
necessary removing senior management, and in succession planning.
NEDs should also provide independent views on:
Regulation
Resources
Appointments.
Standards of conduct
eeee
Non-executive directors are the custodians of the governance process and require approval by
the FCA to perform this function.
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Appendix B - POMS Governance
FCA requirements for material outsourcing contracts
Based on SYSC 8, which forms part of the FCA's Handbook of Rules and Guidance, the FCA would
expect to see evidence of the following, as a minimum, in relation to any material outsourcing
arrangement entered into by POMS, including appropriate terms in the contract:
(1) the service provider must have the ability, capacity, and any authorisation required by law
to perform the outsourced functions, services or activities reliably and professionally (so,
for example, there should be evidence of the due diligence done by POMS to satisfy itself
on these points);
(2) the service provider must carry out the outsourced services effectively, and to this end
POMS must establish methods for assessing the standard of performance of the service
provider;
(3) the service provider must properly supervise the carrying out of the outsourced functions,
and adequately manage the risks associated with the outsourcing;
(4) appropriate action must be taken by POMS if it appears that the service provider may not
be carrying out the functions effectively and in compliance with applicable laws and
regulatory requirements;
(5) POMS must retain the necessary expertise to supervise the outsourced functions
effectively and to manage the risks associated with the outsourcing , and must supervise
those functions and manage those risks;
(6) the service provider must disclose to POMS any development that may have a material
impact on its ability to carry out the outsourced functions effectively and in compliance
with applicable laws and regulatory requirements;
(7) POMS must be able to terminate the arrangement for the outsourcing where necessary
without detriment to the continuity and quality of its provision of services to clients;
(8) the service provider must co-operate with the appropriate regulator and any other relevant
competent authority in connection with the outsourced activities;
(9) POMS, its auditors, the appropriate regulator and any other relevant competent authority
must have effective access to data related to the outsourced activities, as well as to the
business premises of the service provider; and the appropriate regulator and any other
relevant competent authority must be able to exercise those rights of access;
(10) the service provider must protect any confidential information relating to POMS and its
clients;
(11) POMS and the service provider must establish, implement and maintain a contingency
plan for disaster recovery and periodic testing of backup facilities where that is necessary
having regard to the function, service or activity that has been outsourced.
In addition, POMS should ensure that the respective rights and obligations of POMS and of the
service provider are clearly allocated and set out in a written agreement (SYSC 8.1.9R.).
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Appendix C - Schedule 5 of the Distribution Agreement — POL/POMS Governance
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Meeting
Attendees
Frequency
Purpose
Business Review
A quorum will consist of a business manager from
each of the Parties.
Additional attendees may be invited as determined by
the agenda of the individual meeting.
Monthly
Review and assess current business
performance:
e sales performance;
e marketing update;
¢ competitor insight;
e service/operational performance;
¢ change management;
e risk and compliance management;
¢ issue management;
e changes to persons or contact
details for notification or escalation
purposes;
¢ AOB - items to be tabled at
discretion of either Party.
Senior Business Review
A quorum will consist of two senior managers from
each of POMS and Post Office. Initial attendees will
be the Head of Products, Commercial Manager, Head
of Compliance, General Manager and CEO of POMS
and for Post Office the Head of Financial Services
Products, Head of Financial Services Risk and
Compliance, Head of Financial Services Sales and
Head of Post Office Managed Services.
Additional attendees may be invited as determined by
the agenda of the individual meeting.
All decisions of the Senior Business Review meeting
shall be made by simple majority provided always that
at least one member of this meeting appointed by
Quarterly
To discuss the Annual Business
Strategy Plan in accordance with
clause 8.1.
Review and assess current business
performance:
e sales performance;
« marketing update;
e competitor insight;
e market insight;
e change/development programme
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Meeting
Attendees
Frequency
Purpose
POMS and at least one member of this meeting
appointed by Post Office shall be required to vote in
favour of a decision for it to be approved.
review and priorities;
e service/operational performance;
¢ issue management;
e risk and compliance management;
e changes to persons or contact
details for notification or escalation
purposes;
e planned restocking policy;
« AOB - items to be tabled at
discretion of either Party.
Evaluate previous Financial Year's
performance and carry out business
planning for subsequent Financial
Year
Sales and Marketing
A quorum will consist of a senior manager from each
of POMS and Post Office Additional marketing
attendees shall be invited as determined by the
agenda of the individual meeting. Initial attendees will
be the Head of Financial Services Products and the
Head of Financial Services Sales for Post Office and
for POMS the General Manager and Head of
Products.
All decisions of the Sales and Marketing meeting shall
be made by simple majority provided always that at
least one member of this meeting appointed by POMS
and at least one member of this meeting appointed by
Post Office shall be required to vote in favour of a
decision for it to be approved.
Quarterly
e Agree the Marketing Plan in
accordance with clause 8.2.
e Pricing Strategy
e Targets
e Business Performance against the
current Marketing Plan and agreed
targets.
e Sales and Marketing calendar
review sales
e Review sales compliance, sales
improvements (cross/up sell),
customer experience and
guidelines, PR and external
media.
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POST OFFICE GROUP EXECUTIVE
Branch Support Programme Improvements Update
1. Purpose
The purpose of this paper is to:
1.1. update the Post Office Executive Committee on the improvements made to the
support offered to postmasters as a result of the Branch Support Programme.
2. Improvements to Training
2.1. The content of the classroom training provided to new postmasters has been
refreshed with more focus on:
e balancing and how to look for discrepancies when they occur within branch.
e contractual obligation regarding discrepancies that do occur and how to
process discrepancies correctly
e explanation of False Accounting and the potential consequences i.e. criminal
offence
2.2. A revised balancing guide has been introduced to help new postmasters
balance their accounts correctly; this is a hand-out from the initial training
provided to new postmasters and assistants where appropriate. A further best
practice guide to identify discrepancies in branch has been introduced. This is
a hand-out at on-site training for new postmasters and follow-up visits where
branches are experiencing balancing difficulties.
2.3. A revised training offer that replaces approximately two thirds of the
classroom training for new operators with online training to be completed prior
to attending classroom training has been designed. Partnering with Capita
Digital Learning, we have created multi-media online learning, including video,
games and quizzes to ensure to appeal to the broad range of end users that
will consume content. The on-line training for Postmasters, and their
assistants went live on 5" February 2015.
e The learning material wraps in messaging around customer service and sales
conversations, and has been developed with a cross-Post Office team
including Crown, Network and Commercial teams. The first classroom training
for the blended training offer takes place we 23rd February.
e To ensure that each postmaster has a smooth onboarding journey, access to
compliance training and to the product training is available via SubSpace
Online. Options to extend the availability of the on-line training are being
scoped with a view to delivering in Q2 15/16.
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2.4. Compliance testing is a precursor to new postmaster training and is an annual
regulatory requirement for all branch staff. This is now being provided on-line
to the branch network replacing the traditional paper workbooks.
3. Balancing/Accounting Support Improvements
3.1... A refreshed approach to supporting branches with discrepancy issues was
introduced in 2013. Where NBSC is unable to resolve a caller’s query/issue
this caller is referred to the Branch Support Team who can provide more in
depth telephone support to the branch. This team also assesses whether on-
site additional support or further training is required and will organise if
appropriate. The learning from the Mediation Scheme investigations is that the
recording of the support given needs to be consistently documented. A
revised approach will be introduced in Q1 15/16.
4. NBSC Improvements
4.1. The volume of calls from branches is now assessed by the Network Business
Support Centre (NBSC) with the branches that have a higher than average
call volume being proactively contacted by the Branch Support team to
understand the reason for the high level of calls; establish what extra support
can be offered and whether any changes need to be made to training etc.
4.2. I Anew approach has been developed to analyse the calls received by NBSC
to identify the root cause of the issue; to identify the solution for the branch in
the first instance and implement wider business changes if appropriate eg
content of and method of delivering new product training.
5. Managing Postmaster Material Contract Breaches
5.1. The suspended termination approach was launched in April 2014 to deal with
postmasters where mitigating circumstances are such that it is inappropriate
to terminate the contract. The Postmaster remains in post on the condition
that if a further material breach of contract occurs in an agreed period (set by
the nature of the first breach and typically a year) then the contract termination
may be triggered. Postmaster suspensions are running at 33 at period 10. 112
postmasters have been kept in post that would probably been suspended pre.
policy change. A condition of remaining in post is that the postmaster makes
good the audit deficient. This has resulted in £552k being made good by
period 10 which pre approach change would have transferred to agent debt.
6. Horizon System Transaction Improvements
6.1. The transaction for customers paying by debit or credit card for bureau
transactions was changed in Sept 2014. The transaction now includes an
automatic re-print of the receipt which includes the card and identification
details (last 4 digits only) of the customer, which needs to be presented in
case of fraudulent use of the card. Previously, the branch would have to
remember to request a reprint and would be liable for the loss if they failed to
provide it to Finance Service Centre. Postmasters were held liable for £65k in
13/14 (average per branch £2.5k). Since introduction no chargebacks to
Postmasters have been made.
6.2. The end of day cheque remittance process has been reviewed and a new
solution to drive out errors has been identified. This is scheduled for the next
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software release in May 2015 reducing calls into NBSC (650 per month) and
the Transaction Corrections (c.570 pm periods 1-5 2014) issued by Finance
Service Centre. Efficiencies in resource realised as a result are £86k pa
7. HORIce
7.1, The HORIce information tool was commissioned from Fujistu for £100k (as
opposed to the £1.7m Detica alternative) in 2014 and has been in pilot for the
last 4 months. The pilot has proved that HORIce is an effective and an
efficient tool - and an improvement on anything we have had to date - for
focusing on any one particular branch and extracting the information for a
number of purposes including those below. Comprehensive list of benefits is
at Appendix 1.
e investigating accounting anomalies whilst considering whether to
precautionary suspend a postmaster.
e NBSC accessing branch data when assisting a branch with an accounting
problem so that they establish exactly what the branch has done rather than
relying on what they say they have done. This results in the branch being
provided with the correct advice rather than advice based on the information
from the branch.
e HORIce reports raising flags to support branches and identify branches for
further checks by Grapevine team. This results in telephone calls being made
to branch to establish whether there are any training needs. If fraud is
expected an audit will be arranged.
7.2 We are currently working with Fujitsu to refine the outputs of HORIce so that it
highlights anomalies in branch performance across the whole network with a
view to moving to risk based audits only which is a more targeted and efficient
model.
8. Recommendations
The Group Executive is asked to:
8.1. note the update on improvements as a result of Branch Support Programme.
Kevin Gilliland
12" February 2015
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Appendix 1
HORIce Benefits
Reduction in Audit/Special Audits (Grapevine to supply numbers) as Contract Advisors
and Grapevine team can monitor branches remotely and/or verify transaction balancing
information
Contract Advisors able to verify information given at time of audit from HORIce to
improve decision making if loss identified.
Improved quality of support to branches-Enables queries to be answered at first point
of contact (NBSC) where previously some enquiries would have been escalated to
other teams or for intervention. (Examples answered to date include alleged rogue
stock unit being set up, ATM balancing verified, duplicate Horizon transaction entries
and phantom cheque entries explained.
Visibility of data not previously available- For example internal stock unit transfer
information, Cash declaration, Branch Trading Statement, Mails despatch, TC
information now available.
6 months data available on most HORIce reports previously only 3 months data
available in Credence.
Near real time transaction data available, (Credence data available next day).
HORIce reports are now raising flags to support branches and identify branches for
further checks by Grapevine team. (In last week since new reports made available 5
branches allocated for audit, 17 offices telephoned and supported with training on cash
declarations, 7 branches flagged to National Multiple Partners for support or action).
Coin safe saving - £1310 saving per office 4 requests already avoided. (Total saved
£5240).
Assisted Rollovers for Horizon, avoided cost (£1500 per branch £16,500 to date).
FSC-Less Fujitsu support needed to investigate enquiries.
Reduction in time spent sending ARQ requests to Fujitsu.
Assists with Police/Security manager requests for info.
Ability to identify branch users onsite prior to contact. Branch Standards Team to track
contact information for time saved on aborted calls. (For example -Regulatory
Compliance chase up/Failed mystery shopper/Dangerous Goods scanning
performance/Sales capability Branch Standards to supply numbers.
Ability to check automated bill payment enquiries. Customer Care Unit able to speed
up customer enquiries and avoid the need to escalate certain enquiries to Finance
Service Centre.
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POST OFFICE GROUP EXECUTIVE
Post Office Response to Second Sight’s “Thematic Issues”
1. Purpose
The purpose of this paper is to:
1.1. update the Post Office Group Executive on Second Sight’s “Thematic Issues”
and what Post Office has done to address these.
2. Background
2.1. In recent years a small number of postmasters have through the Justice for
Subpostmasters Alliance (JFSA) alleged that Horizon was responsible for
discrepancies in their Post Office branch accounts causing them detriment
including the loss of their business and in some cases imprisonment.
2.2. I To address these concerns, in June 2012, and in collaboration with the JFSA
and a group of MPs led by the Rt Hon James Arbuthnot MP, Post Office
appointed independent forensic accountants, Second Sight Support Services
Limited (Second Sight), to investigate.
2.3. As Second Sight (SS) discussed with the former postmasters their concerns,
they concluded that there were common issues being raised by the former
postmasters; SS started to document what they called “Thematic Issues”.
Following a years work with a number of postmasters, Second Sight
published an Interim Report on 13 July 2013 in which they referred to these
“Thematic Issues”
2.4. In August 2013 Post Office established the Initial Complaint and Mediation
Scheme (The Scheme) in order to provide an avenue for any postmasters
with concerns to raise them directly with Post Office. SS has maintained their
“Thematic Issues” report and further populated with the issues of the 150
Applications that were accepted into the Scheme. Second Sight’s “Thematic
Issues” report details 17 “Thematic Issues”
3. Current Situation
3.1. As Post Office has investigated each of the 150 Applications to The Scheme,
the findings and potential improvement opportunities have been cross
referenced with SS “Thematic Issues” report.
3.2. Of the 17 “Thematic Issues” documented Post Office conclusion is that:
e Qwere due to user error;
¢ 2were due to fraud;
e 4 were due to lack of awareness of the postmaster and/or their staff;
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e there was no evidence to support the issue raised for 1 of the “Thematic
Issues” raised.
e training and support issues were claimed by 130 Applicants to have been an
issue and whilst our investigations have found that in the main training was
adequate and was provided to the business standard at the time, we could
have done better in some cases and in areas such as ATM and Lottery.
4. Improvements to Date
4.1. As a result of our investigation process and in conjunction with the Branch
Support Programme we have already introduced improvements to address
the “Thematic Issues” and/or have identified further improvement
opportunities. These are set out fully at Appendix 1.
e User error — to mitigate the risk of user error within branch we have for 6 of
the “Thematic Issues” already introduced improvements. For 7 of the
“Thematic Issues”, further improvement opportunities have been identified.
¢ Fraud — the 2 “Thematic Issues” detailed are False Accounting and Pension &
Allowance reintroduction fraud. Improvements have already been introduced
to raise awareness of False Accounting and to offer support to postmasters at
the earliest opportunity. Pension and Allowances were replaced by POCA.
e Lack of awareness - in 3 of the 4 “Thematic Issues” improvements have
already been made to raise awareness with and improve the understanding of
the postmaster. Further improvement opportunities have been identified for all
issues raised.
e No evidence to support — this is where postmasters have claimed they were
not aware of the terms of the Spmr contract they entered into and/or had
never received a copy of that contract. Although there is no evidence to
support this claim, improvements to raise awareness of the terms of the
contract have been implemented.
e Training and Support — improvements to the training offer have been
introduced in recent years to reflect the new Mains and Local operating
models. Further improvements have been made to classroom training content
with online training going live 5" February.
5. Key Risks
5.1. Whilst through the investigation of the 150 Scheme Applications Post Office
has demonstrated that Second Sight’s “Thematic Issues” are not thematic but
in the main simply a collection of the errors the Applicants have made, there is
a risk that Second Sight will draw different conclusions and be damning
towards Post Office in the publication of their final Part 2 which is scheduled
for April 2015.
5.2. In order to mitigate this risk, the Sparrow team is working very closely with
Second Sight to try to inform the content of the report by providing factual
information to Second Sight on the topics they have identified. Furthermore a
robust and well-articulated communication strategy is wrapped around The
Scheme.
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6. Conclusion
6.1. Through the work of the Branch Support Programme and the outputs of the
Mediation Scheme Investigation team the “Thematic Issues” raised have all
been addressed by Post Office. Second Sight has as evidenced by the Select
Committee evidence session on 3% February chosen to ignore or not believe
Post Office investigation findings or the formal responses Post Office has
made to Second Sight’s questions.
6.2. Given 6.1, the Sparrow team need to continue to engage Second Sight in the
content of their final Part 2 report with a view to ensuring its factual accuracy.
7. Recommendations
The Group Executive is asked to:
7.1. note the update on Second Sight’s “Thematic Issues” and what Post Office
has done to address these.
7.2. receive a further update ahead of the publication of Second Sight's final Part 2
report scheduled for end April 2015.
Kevin Gilliland
12" February 2015
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Appendix 1
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Post Office Response to Second Sight’s Thematic Issues
Issues identified Number I Post Office Findings I Improvements I Further
by Second Sight of to date improvements
Cases
that cite
this
issue
Transactions or 51 No evidence of remote I Horizon change I Once Horizon change
transaction access. All claims of request in train request is completed,
corrections not ‘ghost transactions for auto-reversal I this change and
entered by the have been explained as part of horizon recovery
postmaster or staff in POIRs: enforced log I recovery process refresh
out from Horizon; process to be communication to be
Operator error stated as such published in Subspace
supported by receipts I on the online and Branch
and recovery screens. I transactional Focus to ensure
log, rather than awareness.
the User ID.
This will remove
any confusion
for the
user/postmaster
Transaction 39 PO investigation has Simpler advice notes
anomalies identified user error in are required to ensure
associated with all cases. Given that alignment between the
CASH or STOCK there is no information on the
Remittances reconciliation between advice note and the
Swindon and branches Horizon system i.e.
this could mean that value or volumes the
discrepancies in same as Horizon
remittances have gone requirements. Scope
unnoticed resulted in a the cost and benefits of
loss or gain at branch. introducing: (1)100%
check for new
branches/operators for
a fixed period. (b)
100% check for all
remittances into
Swindon.
Transaction 15 Scheme cases None as P&As NA
anomalies investigated have were replaced
associated with shown branch by POCA
Pensions and fraudulent activity. several years
Allowances ago.
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Transaction 59 A loss of The Horizon A network wide
anomalies telecommunications or I recovery communication is
following power in branch will process has required to ensure that
telecommunication not directly cause been re- postmasters
or power failures discrepancies. This is communicated understand that power
dependent on the to branches in failures and loss of
postmaster correctly Branch Focus. connectivity in
following the Horizon themselves cannot
recovery process on cause discrepancies.
the screen. A lack of
understanding of the
recovery process was
found in the earlier
cases in particular.
Transaction 34 POIRs detail a number I New operator (1)Post Office to
anomalies of postmasters did not I guide was monitor via HORIce
associated with follow PO procedures issued to ATM that all ATMs have
ATMs. Stock user correctly. Not having branches in Feb I separate stock units
management. individual ATM stock 2013. and that they are called
units exasperated the Introduced Post I the same to enable
in-branch issues. Office delivered I filtering by HORIce.
on site training (2)ATM on line training
for all new to be developed; go-
ATM's installed. I live Q1 15/16.
TC's issued (3)Scope whether on-
more timely. line link to horizon
(PING) is possible.
(4)More user friendly
issue resolution
process between POL
and postmaster to be
introduced. (5) Easy to
understand reports
from BOI. (6)Ensure
knowledge base at
NBSC is up to date and
regularly reviewed.
Transaction 39 POIRs show that PING 2012 Mandatory stock unit
anomalies scratchcards activation I addressed for Lottery. Clearer
associated with and rem in process lottery sales and I instructions regarding
Lottery Terminal or caused problems for Scratchcard scratchcard TC's to
Scratch Cards branches. Branches activations TCs. I cover both parts of the
would probably have Post Office transaction Auto rem
benefitted from face to I introduced in/activation. Ensure
face training. policy of face to I knowledge base at
face training to NBSC is up to date and
be provided with I regularly reviewed. On
lottery and line training module for
scratchcard Camelot products to be
network developed; go-live Q1
extensions. 15/16.
Transaction 14 Time expired as MVL
anomalies discs no longer used.
associated with
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12" February 2015
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Transaction 21 Other than for one Bureau de
anomalies case in the Scheme change 2nd
associated with that involved receipt
Foreign Currency postmaster selling at introduced
unauthorised 19/09/2014
exchange rates, since which
POIRs evidence user point no charge
error. backs have
been to
postmasters.
Transaction 53 Problems with Rem Horizon change I Further work required
anomalies out cheque process request in train to scope ways in which
associated with were due to user error. I for automation the risk of mis-keys can
Bank/GIRO/ Giro deposit errors of cheque rem be mitigated.
Cheques were due to mis-key out process. Go-
errors by users. live May 2015.
Transaction 41 Stamps Rem in initiative
anomalies Philatelic/definitive barcode sheets of
associated with move from one to stamps. Labels - better
Stamps, Postage other. Postage labels - instructions to be
Labels, Phone rejects/spoilt lack of communicated to
cards or Premium understanding network.
Bonds difference.
Phonecards not an
issue isolated user
error.
Hardware issues 75 Lack of understanding Need communication to
e.g. printer of what hardware explain functionality of
problems, PIN functionality/capability. hardware and that
pads, touchscreens hardware problems in
and Pay Station themselves cannot
cause discrepancies.
Failure to follow 81 Whilst some HORIce tool has I Customer satisfaction
correct procedures
or mis-advice by
POL'S Helpline
Applicants have
claimed wrong advice
from the NBSC there
is no evidence of this
in the call logs. That
said the Operator can
only respond to the
caller's explanation of
the problem and where
the explanation offered
by postmaster is poor
this could lead to
inaccurate advice
being given by NBSC.
been trialled
with tier 2 and
the results are
favourable in
being able to
look at branch
data to establish
what the branch
has actually
done rather than
rely on the
branch relaying
this information
to NBSC
operator.
metrics to be
introduced by NBSC
and hardwired into
performance scorecard
for NBSC. More
information on the call
log is required
especially when
recording the advice
given to the branch.
HORIce user licences
to be extended so that
more operators are
equipped with the tool.
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12" February 2015
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Training and 130 Claims of lack of Work aids On-line training for new
Support issues training at various reviewed and entrants goes live Feb
including Helpline stages. PO refreshed for 2015 with a network
and Audit investigations have new entrants. wide roll out in Q2
found little evidence of I Escalation 15/16. New HORIce led
lack of training across I approach for support approach to be
the 150 cases rather balancing formally introduced Q1
that Applicants were related issues 15/16.
adequately trained at has been
appointment but that refreshed to
some chose not to be I ensure the flow
hands on choosing of appropriate
instead to rely on their I referrals from
staff. NBSC to Branch
Support team
and the field
team where
necessary.
Limitations in the 73 Postmasters claim of HORICE - 6 More emphasis on
Transaction Audit lack of paper trail months data balancing and the use
Trail available to however since the of in-branch reports
Subpostmasters. introduction of Horizon included in new training
postmasters have had package - go-live Feb
access to in-branch 2015. Self-help via on-
reports for up to 42 line training modules
days after the and ‘how to' videos.
transaction. This was Network wide
extended to 60 days communication
on the introduction of required to raise
Horizon on-line. awareness of the
reports that are
available in branch and
how to use them to
best effect.
Process issues at 78 Applicant's claim of NBSC now have I More emphasis on
the end of each
Trading Period
having to falsify
account in order to
trade the next day is
incorrect. Some
Applicants appear to
have been or claim to
have been not aware
of the in-branch
reports available to
them to search for
discrepancies. PO
investigations have
evidenced that some
Applicants chose not
to seek help from
NBSC or any other PO
facility.
access to
HORIce that
enables them to
look at branch
data and see
what the branch
has done. This
results in the
correct advice
being given to
the branch
rather than the
NBSC relying on
what the branch
tells them
they've done.
balancing and Branch
Trading included in new
training package - go-
live Feb 2015. Access
to HORIce to be
embedded into NBSC
BAU.
PO Response to SS “Thematic Issues”
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The contract 63 Scheme applicants The extracts of I Contractual obligations
between the Post claim they didn't the contract regarding misuse of
Office and realise the terms of the I regarding Post Office cash and
postmasters contract. PO responsibility for I false accounting will be
investigations cash and stock included in new entrant
conclude that and misuse of training - go-live Feb
applicants did receive I PO funds is 2015. Refresh of
contract and in all explained during I contractual
probability understood I interview responsibilities
the terms as they had I process and throughout PTV,
worked within those PTV visits
terms for a
considerable time
before claiming lack of
awareness.
The lack of an 97 SS claim that some Introduced a To introduce a
outreach
investigations
function
Applicants had an
expectation beyond
Post Office contractual
obligation in that they
expected someone to
go to branch and find
their discrepancy or
tell them where the
money had gone.
refreshed
escalation
process from
NBSC to Branch
Support for
large or
unexplained
losses or where
branches
request support.
If NBSC or
Branch Support
is unable to
resolve an
onsite visit is
arranged.
Mediation Scheme type
investigation process
into BAU. Need to.
formalise FSA report
visits etc. and offer the
opportunity to
postmasters for a face
to face meeting to
share the findings and
improvement
opportunities. HORIce
to be an integral part of
this process.
PO Response to SS “Thematic Issues”
12" February 2015
Angela Van Den Bogerd
Page 8 of 8
Strategic Risk - Contingency Risk
meeting 8 May ~ Ac
Current Actions and Decisions Log
nd
08/05/16
Action 15
Chris Day to share the finance stress testing of the plan with the ExCo, to ensure
contingencies are identified for the big programmes
Significant Litigation
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In progress - due
Nov/Dec
03/07/05 Action 1 Schedule an ExCo discussion on losses and prosecution policy CAVAL 34° Aug
ExCo Meeting 16" Oc - Actions and Decisions
Project Titan
16/10/2014 Action 6 Overlay the Risk Appetite framework and operational risk for POMS. NK/CA
U 12 the or PO!
appetite fi
ExCo meeting 21*
Crown P & L
21/10/2014 Action 1 Report to the ExCo on the DWP mediation for compensation for the over payment, I MG End February 2015
to understand the possible timeline and its effect on this yeai
ey have
next week. We are
targetin
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ExCo meeting. amber 2014 ~ Ac’
Sparrow
20/11/2014 I Action 1 Ensure that enough budget has been set aside next year for the mediation. COs
20/11/2014 I Action 2 Sparrow to come to the January ExCo or Transformation Committee with a paper I Angela Van Den 12" February ExCo
covering the responses to the Second Sight themes and the improvements into the I Bogerd/Belinda & 25" March Board
Business. Crowe
Telecoms
20/11/2014 Action 3 Commercial Committee, including LS, to work up the possible options for the Geoff Smyth / February 2015
future of the telecoms strategy. MG/ComCom
20/11/2014 Action 4 Present the options and a recommendation to the ExCo in early February for Geoff Smyth February 2015
discussion and recommendation to the March Board.
ExCo meeting nber 2014 - Actions and Dec!
Review of Budget 2015-16
16/12/2014 Action 2 Scenario plan for lower revenue numbers to understand what actions we would AC January
take if the revenue moved away from the plan
Period 8 Performance
16/12/2014 Action 1 Paper to ExCo to cover working capital cash management, and the actions to be Martin Edwards February/March and
put in place to ensure tighter control on cashflow.
May Board
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OD Wave 2
16/12/2014 Action 3 Provide a “staff cost: income” ratio measure for consideration and possible Nick Sambridge February
inclusion in the 2015/16 scorecard
16/12/2014 Action 4 Review the delegated authority levels and any changes needed to align with Waves I AL/ CD/ CA March
1&2
16/12/2014 I Action 7 Narrative for Business Transformation to be circulated to ExCo MD/Pete Markey End January
Updated 09/01/15. Vision project in progress - scoping exercise underway
POca Call off agreement
[26/12/2014 I Action 1 [Undertake a lessons learned review with the ShEx team [ou [January
Business Transformation
16/12/2014 Action 3 Paper to explain the gainshare agreement with McKinsey and the use of DR February
professional consultants eg. McKinsey, PWC, Deloitte.
Update: In progress as part of the ‘Transition Plan’ and will be completed for review
by ExCo in line with the deadlines indicated
Corporate Governance Training
16/12/2014 Action 2 Organise a seminar session to look at case studies for good and bad corporate CA March
governance, including conflicts of interest
Risk Framework & Risk Data
[46/12/2014 [Action 1 [Provide a risk scorecard with metrics to measure the risk appetite statements [Dave Mason [February
Christmas Network Support
16/12/2014 Action 1 Provide a list of people who have not turned up for Network Support, all to follow I KG/ All End January
up and find out why.
Update 7" Jan: Work in pi
ExCo meeting
nuary 2015 - Actions and Decisions
Technology Strategy & Transition plan including Fujitsu
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15/01/2015 Action 6 Consider the feasibility and impact of bringing the Fujitsu contract forward instead I AC/LS End January
of extending
15/01/2015 Action 7 Agenda a slot for GE to discuss ‘Capability and Retention of critical employees’ NH/AL April GE
Paper on Retaining Talent will be submitted to Aprii GE meeting
Financial Performance
15/01/2015 Action 1 Circulate the dates of the weekly Win in Mails meeting, Exco are invited to attend MG End January
15/01/2015 Action 5 Decide who is leading the negotiation with Fujitsu on the £7.6m in year claim AC/MG End January
15/01/2015 Action 8 Provide the CFO with investment cases for spend this year which would support NK/MG End January
next year’s revenue, especially in FS awareness, and defence of Mails.
15/01/2015 Action 9 Use time at the Monday morning GE meeting to track the big out turn items, eg. AC On-going
DWP signature, Hawk signature, Fujitsu settlement, Mails settlement, and also the
effect on the Crown P&L
15/01/2015 Action 10 Provide a paper on State Aid including worst case scenario for discussion at CA 26 January
Monday GE
Mails
15/01/2015 I Action 1 Set up Scenario planning and financial modelling for the future Mail strategy and MG End February
relationship with RM. Clear TOR for the work with the top 3/4 themes and then
under each, what questions are we trying to answer to be agreed.
Network
15/01/2015 Action 2 Bring approach to NFSP to a future GE meeting for discussion NH March GE
15/01/2015 Action 3 Consider recognition bonus for the NT and CTP teams NH/KG End March
Meeting Friday 6" Feb to discuss with KM and KG
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Digital
15/01/2015 Action 1 Commercial group to discuss who is responsible for digital sales and bring back for I MG End January
GE discussion
15/01/2015 Action 2 Giles, Henk and David to visit Bol in Dublin to see their work on digital GD/HVH/DR End Feb
improvements a and decide how they could use to drive POL growth
all parties.
15/01/2015 Action 3 Giles to work with Martin Edwards to produce a Business case and options on how I MG/GD/ME End March
to prioritise and drive opportunities in digital, with an ambitious challenge to
increase on-line sales by 4 times
SME
15/01/2015 Action 1 Include SME as part of the March Board, detailed paper required on what needs to I MG GE on 12" March
be done to deliver the SME offer. Pick up SME at a later GE Meeting. and Board on 25"
March
Health & Safety
15/01/2015 Action 1 Feedback to the Health & Safety committee that the GE would like a wider focus in I NH Next committee
the Pavel including wellbeing measures
Item v on Agenda for 6" March H&S Committee
SLT Events
15/01/2015 I Action 1 Circulate the SLT events calendar and ensure enough time on GE agendas to MD/AL End January
agree content well in advance of the events
ExCo meeting 20° January 2015 - Actions and Decisions
Budget, Operating Plan and Proposed Scorecard
20/01/2015 I Action 4 Agenda item for May GE to look at the forward plan for future funding. ME / AC GE on 7" May
20/01/2015 I Action 7 Include scorecard in February ET Performance Meeting for discussion before AC / NH 17° February
circulation to the Board and tabling at the RemCo meeting
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SLT Event
20/01/2015
Action 1
Timetable and agenda for SLT Events for the next year to be discussed at GE
On Agenda for 12" Feb GE
NH
GE on 12" Feb
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POST OFFICE LTD GROUP EXECUTIVE
Health & Safety Report
1. Purpose
The purpose of this paper is to:
1 Provide an update on safety performance.
1.2 Outline risk reduction activities.
2. Current Situation
2.1 The majority of accidents fall into three main categories lifting and handling,
stepping and striking and outdoor falls. These are higher frequency events with, in
the majority, relatively low severity. The lower frequency types of incident can carry
the potential for very high impact, for example, assaults and road traffic collisions.
2.2 Performance up to and including P9 for 2014/15 indicates that ‘all accidents’ are
tracking on target and are forecast to outturn on the 5% reduction target. Absence
accidents are tracking adverse to target and as a result of two relatively weak
periods are now unlikely to achieve target reduction at year end. However severity
of the accidents, measured by ‘days lost’, is currently well ahead of target and
forecast to outturn ahead of the 5% reduction target.
300
250
on 2013/14 Alt
= 2044s
§ 150 a 2014/15 AR
3 2013/14 Absence
2 400 2014/18 Absence
So
0 i
P1 P2 P3 P4 P5 PG P7 PB PG PIO P11 Pi2
Period
2.3 Personal injury compensation claims remain at a low level having reduced
significantly from previous years and in line with the low number of accidents
that result in sick absence. Claims involving members of the public have also
reduced. Comparison with a similar retail organisation indicates that the Post
Office claim rate is significantly lower in both public and employer's liability and
of those claims the ‘denial’ or ‘defence’ rate is significantly more successful.
The insurance year runs from October to September.
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2.4 The number of days lost due to accidents is currently well ahead of target and
forecast to outturn ahead of the 5% reduction target. (Table 2 below refers)
lost resulting from
jury accidents (Cumulative)
2013/14 I
we 2014/18
P1 P2 P3 P4 P5 PG& PT PS PO PIO PIT P12
Period
25 The total number of road traffic collisions (RTCs) up to and including P9 is 208,
up 24 on last year. The number of incidents where the Post Office driver is ‘at
fault’ is showing an increase of 26 compared to last year and accounts for
53.8% of incidents. (Table 3 refers) Road risk reduction opportunities continue
to be the subject of analysis at the Road Risk Forum with a view to identifying
improvement activities in addition to those already in place. (3.1 below)
Reversing incidents remain a cause for concern and have been the subject of
specific improvement interventions. Injuries as a result of road traffic collisions
are extremely infrequent. Road traffic collisions account for less than 3% of the
overall number of injury accidents, however they have the potential for high
impact in terms of injury and loss. Currently the majority of incidents involve low
speed — less than 25mph — and relatively low levels of damage.
Table 3 Road Traffic Collisions (cumulative)
250 4
200
& pocsneennsnnntannsnsnnnn
" )
E450 2013/18 All I
$ it~ 2014/15 All I
i 2019/14 atfauit I
‘3 00 2018/18 ‘at fault
2 50
0
PI P2 P3 P4 P5 PGE P? P& PO PIO Pit Piz
Period
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February 2015
2.6
2.7
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Robberies on Post Office Cash and Valuables in Transit (CViT) crews are down
five on last year from 32 to 27 for the past 9 months, 8 of which were
unsuccessful. Physical injuries during robberies - of which there have been 8, 1
less than last year for the same year to date period - remain relatively minor in
severity. The level of use of firearms is similar to last year with 5 of the 27
robberies enabled by the presence and/or threat of use of fire arms. On one
occasion the firearm was discharged (into the ceiling). Support for those
affected by robberies is provided by trained trauma supporters and professional
support resources available through the occupational health service provision.
Risk reduction activities are identified at 3.2. (Appendix 1 — Significant Incidents
refers)
Robberies and attempted robberies on the Post Office network, up to and
including P9, are up 6 on last year to 85 of which 58% were successful. Injuries
sustained during robberies are down from 15 to 11. Robberies take place
predominantly at sub post offices leaving Crown branches largely unaffected.
Supporting activities have been introduced to continue to mitigate the robbery
risk and are identified at 3.2. (Appendix 1 — Significant Incidents refers).
3. Activities
3.1
3.2
Road Risk
Current longer term activities to mitigate road risk are:
Road risk forum in place to scope and develop road risk reduction initiatives
and activities supported by the risk management division of our insurers
Analysis and deployment of interventions for reversing incidents to mitigate the
increased incidence rates, including yard assessments and technical accident
reduction interventions on new vehicles e.g. Reversing aids to reduce accidents
Analysis and evaluation of data including risk profiling to identify drivers who
need additional support and to determine further generic accident reduction
interventions
Safe driver of the year award to encourage and reward responsible driving
Weekly case conferences to ensure consistent approach to accident
investigation, follow up activity and sharing of good practice
Programme of driving and road risk communications to raise awareness of
current and emerging risks
On site coaching to improve slow manoeuvring skills e.g. reversing
Robbery/Burglary Risk
Current activities to mitigate robbery and burglary risk are:
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 e.g.
DNA taggant — a solution that contains a unique identifier that is released
automatically in the event of a robbery, spraying those involved and enabling
identification of the individuals involved in the robberies
Trialling new point of transfer arrangements to reduce exposure at Post Office
counters - the majority of robberies take place at the point of transfer which in
Post Office’s is the counter where there is ready public access. The new
arrangements allow for the cross pavement protection box to be emptied / filled
in a secure location.
Significant reduction in opportunities for duress type robberies linked to the
introduction of single person vehicles — single person vehicles eliminate the
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opportunities for Supply Chain employee duress type incidents which
historically have been the most violent and likely to involve injury.
3.3 Health and Wellbeing
Healthcare interventions:
e Second programme of visits to Crown branches, Supply Chain units and Admin
offices to offer health checks using equipment that provides a wide range of
indicators on physical wellbeing. The anonymised data is used to develop
future health and wellbeing campaigns and target interventions.
e The programme of visits is supported by an online ‘Wellbeing Zone’ health
check tool as a ‘self- help’ option
e Ongoing campaign of communications to promote a range of different wellbeing
issues
e Wellbeing events to promote general health, exercise and dietary initiatives
e Mental health awareness workshops — absence occurrences related to mental
health conditions as a percentage of all absence occurrences at P9 are down
from a high in P5 of 18.62% to 13.18% in P9. Mental health conditions remain
as the single most common cause of sick absence days as a percentage of all
sick absence days at 30.65%.
e Attendance levels are at 96.5% which compares very favourably with the public
sector and relatively favourably with the private sector
3.4 Safety
The Post Office occupational health and safety management system (OHSMS)
is certified by external auditors to the standards required by British Standard
OHSAS 18001.
Corporate Manslaughter
On 13 November 2014, the Sentencing Council opened its 14 week public
consultation on draft guidelines for corporate manslaughter and health
and safety offences. If implemented, the guidelines will mean that large
organisations convicted of corporate manslaughter may face increased fines of
up to £20 million with those convicted of fatal health and safety offences facing
fines of up to £10 million. Updates will follow in due course.
4. Residual Risks
4.1 Driving activities have the potential for high impact/loss and therefore remain as
a significant residual risk. However, the actions identified in 3.1 above are
aimed at mitigating that risk and improving performance.
5. Recommendation
The Group Executive is asked to:
5.1 Note the overall safety performance
5.2 Note the risk reduction activities.
5.3 Note the residual risks
Neil Hayward
February 2015
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Appendix 1
Significant Incidents (Period 9)
Crowns and Network
Location Loss Circumstances Any further details
Elton SPSO, Ince £120,000 Wed 3/1/2014 Staff opened the door to a male Previous incidents Burglary July
Lane, Elton, CH2 dressed as a Postman. SPMR was hit in the face H 2010. Four attempted burglaries.
4LX. and her head was hit against the safe door. The i Oct 2007, Mar 2009, Apr 2009,
male demanded that staff empty contents of the
ATM into a mail sack.
May 2013.
South Norwood £90,000 Sat 06/12/2014. One male armed with a handgun Previous robbery June 2014
CFPO.243-245 confronted staff; he forced the staff into the safe,
Selhurst Road, cash and stamps taken. He locked the staff in the G RO
London. SE25 6XR safe and left. Police were contacted and forced i I
entrance and opened the safe. Hi
Brabazon Road £80,000 Mon 08/12/2014 Two males entered the branch, i Two previous incidents robberies
SPSO, 146, both were carrying knives. The Spmr's i Jan 2011, October 2013.
Brabazon Road, grabbed and a knife was held to I
Hounslow. TW5 struggle
9LP. access to the secure area and took cash fromthe =
safe. ——
Supply Chain
Location Loss Circumstances Any further details
Bulwell SPSO, 36 - £26,000 Tues 16/12/2014 at 11:30, Crew member was
48 Main Street, returning from the Post Office he was punched in
Nottingham, NG6 the back and the i-Box was taken.
8EW.
13:34 Rectory Road, I £16,000 Wed 17/12/2014, Crew member went into the PO Box tracked by Grapevine, males
SPSO, Pitsea, (Recovered) I and was attacked from behind by unknown male in Police custody.
Basildon, Essex, offender, who was carrying a gun. The PO staff
$S13 2AJ. had just picked up the box and the offender
demanded box and the fobs, staff refused. The
offender fired a shot into the ceiling, before exiting
the PO.
Health and Safety Neil Hayward
February 2015
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