Present:
Apologies:
In attendance:
EXECUTIVE COMMITTEE
AGENDA
For the meeting to be held on 11 September 2014
In Room 501
POL00027358
POL00027358
Paula Vennells (Chair), Martin Edwards, Gavin Lambert, Mark Davies, Lesley Sewell, Kevin
Gilliland, Neil Hayward, Nick Kennett, Henk Van Hulle, Martin George, Chris Aujard, David Ryan,
Nick Sambridge (deputising for Chris Day)
Chris Day, Alwen Lyons
Robin Nuttall (McKinsey), Jit Kee (McKinsey), Dave Mason, Michael Brown, Pete Markey, Paul
Brown, Belinda Crowe
Start time: 09.30
End: 17.00
Time Item ExCo Sponsor/Presenter
09:30 - 11.30 FS plan - Pre Board Nick Kennett
11.30 - 11.45 BREAK
11.45 -12.45 Risk update Chris Aujard/Dave Mason
12.45 -13.15 SLT planning session Mark Davies
13.15 - 13.45 LUNCH
13.45 - 14.30 Pre Board:
e Win in Mails including Network Development Martin George/ Kevin
e Digital & SME Gilliland
e Insurance Nick Sambridge
14.30 -15.10 Christmas Plans (verbal) Pete Markey/ Paul Brown
15.10 - 15.25 BREAK
15.25 -15.40 Transformation Committee update Michael Brown
15.40 - 16.00 Commercial Committee update (verbal) Martin George
16.00 - 16.30 Verbal update on Sparrow Belinda Crowe/Chris Aujard
16.30 - 16.45 Verbal Industrial Relations update Neil Hayward
16.45 -17.00 Noting papers for the Board:
e Health and Safety Report
17.00
CLOSE
POL00027358
POL00027358
Suictly Private & Confidential
I DISCUSSION DRAFT - EXCO ONLY
Financial Services strategy
'WORK IN PROGRESS
Discussion document
11 September 2014
©
Post Office®
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Executive summary — Market and FS starting point Money
4 2013/14 Finance analysis
QI
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Executive summary — Vision and revenue plan @& Money
inal text being evaluated
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Executive summary — Building blocks and risks Money
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
Executive summary — TOM and next steps @& Money
©)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
EXCO ONLY
Contents @ Money
* FS starting position and context
* FS vision under current Post Office’s operating
model
* Post Office FS 2020 revenue plan
* Building blocks to achieve 2020 Vision
* Alternative scenarios reflecting TOM cost challenge
* Key milestones and next steps
©)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
WORK IN PROGRESS
I I PRELIMINARY YTD FINANCIALS DISCUSSION DRAFT - EXCO ONLY
FS starting position: In 2013/14, FS delivered £311m in revenue gay M
at a 70% DPC; FY 2014/15 on track at higher margins oney
_I YTD P3 was 74% DPC and
23% EBITDAS margin
1 DPC = Direct Product Contribution
Source: Post Office Finance team
©)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
FS comprises 4 main product categories: Traditional strengths gay M
are in Payments and Travel oney
DPC and revenue for 2013/14
Revenue
£88
Revenue
ea I : £72.6m_
1 DPC = Direct Product Contribution
2 ATMs revenues are based on original strategy plan, but ongoing negotiations are underway regardingPOCA which could adjust these revenues
Source: FS Strategy team (7)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Market: Key insights & Money
Overview of market trends >) Implications for Post Office Money
(@)
LY
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
; WORK IN PROGRESS
Market —- Payments: The UK remains a cash-centric market but ea) M
the importance of cash-based payments is declining oney
Electronic!
Card? fi Cheque MM Cash
Number of payments transactions, billion Value of payments transactions, USD trillion
Traditional FS Payments business in decline given move away from cash
1 Incl. credit transfers and direct debits; 2 Incl. prepaid, debit and paylater card transactions
Source: McKinsey Global Payments Map
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Market — Payments: Post Office-specific payments products ea) M
face challenges given declining demand & new technologies _ oney
Bill Payments
/ * Post Office product constitutes entire market
Be roducts produc! is a secure cash based payments offer
Lower
customer
demand
Reducing
_ Customers use cases
Additional threats to Payments caused by competitors, new technology & regulation re: Smart Meters & Basic Bank accounts
1 Skopos Research 2009
Source: UK Payments Council ‘The Way we Pay’; Smart Metering PrePayment in Britain 2013 report
©)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Market — Partner Banking: FS has opportunity given large
banks are scaling back their physical footprint @ Money
Big 5 are reducing their footprint
[>] Opportunities & challenges
Potential for utility play as Big 5 look to further scale back br: resence; action required to offset competitive threats
Source: British Banking Association database
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT
Market — Travel Money: Modest growth with increasing
competitive pressures @® Money
Market size and Forecast <) Overview of key dynamics
Increasing
I competition
CO ONLY
Increasing
comfort with
using debit
cards
abroad
Rise of all
inclusive
holidays
Pre-paid
019/20 plan for Post Office Money Travel Mone: ‘ket growth; conservative approach sensible givertren:
1
Source: Mintel ‘Travel Money’ report May 2014
nswer to question: 'Which of the following did you use to arrange your foreign currency for your holiday abroad over thedst 12 months?’
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Market — Personal Lines: While Digital increasingly an DISCUSSION DRAFT -ExCO ONLY
important channel for sales, Branch remains key for ea) M
specific products oney
Cx) Absolute change since 2007
Channel of arrangement'!, 2013H
Current strategy to focus on online for Insurance and F2F sales for Current Account & Mortgages in line with market
1 Respondents may give multiple responses; base: All arranging product in last 6 months
2 Not based on GfK but on POL Mortgages Strategy; mail and telephony estimated
Source: GFK Survey 2013
©)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
FS Starting position: Key insights @& Money
Overview of Starting position >) Implications for Post Office Money
(44)
C)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
FS starting position: FS sits at heart of Post Office’s ea) M
strategic vision oney
1
The most convenient Mails & r
parcels retailer ' I ie ices Services
Source: June Board strategy update
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
FS starting position: Within this market, Post Office position @ M
in the value chain poses specific opportunities & challenges oney
Different position in value chain Different economics from a bank
_ Product
design &
pricing
Marketing Under- Treasury Customer Cross-sell
& sales writing &ALM Service /retention ¢—
Trusted brand Different distribution footprint
Source: POL FS management interviews; 2014 Edelman trust barometer— FS industry
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
FS starting position: Post Office has low awareness & FS
credibility @ Money
I FS Measures
1 Respondents may give multiple responses; base: All arranging product in last 6 months
2 Not based on GfK but on POL Mortgages Strategy; mail and telephonyestimated
Source: Customer strategy team data (47)
3 month rolling month average May— Jul-14
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
FS starting position: Income growth masks a mix shift DISCUSSION DRAFT - EXCO ONLY
with declining payments and banking, with a
doubling of personal lines @ Money
Post Office FS income change 2009/10-2013/14 © Key insignts
Source: FS Finance team
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
FS starting position: FS has begun to take steps to enhance its
business model going forward & Money
I Improved
commercial
terms
Upstream I
position in
I value chain
I Improved
customer
journeys
Enhanced
I sales I
capabilities _
Source: FS business team
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
FS Starting Position: The vision set out in 2013 for FS in 2020
remains relevant
5 MILLION
Market- Branch access
Personal FS customers leading within multi-channel
Net Promoter distribution
TOP 10 3.1% c.1% TOP 5 2+ Score in key remains a USP,
UK Share in Share of Personal lines FS products customer delivering complex
Mortgage Savings Current insurance per segments sales and lead-
lender accounts broker customer generation
Investing in our
brand to build
customers’
awareness of
our FS offer and
support
consideration
Using CVPs and
analytics to
understand
customer needs
and drive an
increased share
of wallet
Ensuring our
products are
simple,
transparent
and offer value-
for-money
income in 2020
Providing
unrivalled
access across
the full range of
channels with
simple and easy
customer
journeys
Improving our
sales model to
build customer
relationships
and loyalty,
increasing
average product
holding
Broaden our
reach to cust-
omer segments
through
competitive and
relevant
products and
Services
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
O)
20
POL00027358
POL00027358
EXCO ONLY
Contents @ Money
* FS starting position and context
* FS vision under current Post Office’s operating
model
* Post Office FS 2020 revenue plan
* Building blocks to achieve 2020 Vision
* Alternative scenarios reflecting TOM cost challenge
* Key milestones and next steps
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
In building the Vision, we have drawn upon learnings from ea) M
other challengers, in addition to FS context & market dynamics oney
established players — instead they go in with simple ‘non- —_—_waimart
lationshi ducts’ or target th d
Challengers keep it simple while offering clear points of
difference and innovation vs. market
Many Post Bank and Retail challengers leverage their unique
differentiator — i.e., their branch / store network...
. However, a compelling multi-channel offer is now just
‘table stakes’
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Challenger learnings: In 2012, WalMart launched Bluebird, a nearly @ M
zero fee product and available online or via in-store terminals oney
Overview of Bluebird
The Prepaid Card
That's Right
For Everyone.
Loaded
with benefits.
Not fees.
PROTECTION’
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
Challenger learnings: Postal banking players usually leverage
large postal networks & Money
Post Office only has a limited number of fully dedicated branches
1 Defined as branches with complete offering and dedicated staff (e.g.,FS Branch Managers, Sales Advisors, etc.)
NOTE: Most of the players rely on the wider Post Office network; for example, Postbank leverages ~4,500 Post Offices, JP BanKeverages ~24,000 outlets, etc.
®
SOURCE: Annual Reports
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
FS vision will emphasise access and convenience & M
as differentiating factors oney
The Post Office helps make the What matters most in life
important things in life happen.
Alternative
Post Office Money is the trusted
choice for your finances and doing
more in life, offering unparalleled
convenience and value (to be
refined)! Being ‘close to you’
PO Money will look to differentiate itself from other financial services
providers by providing an easier way for customers to manage their
finances via our multi-channel approach and unrivalled branch network
be agreed (05
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
This vision seeks to capitalise on Post Office Money’s natural gay M
competitive advantages... oney
Trusted brand
Large distribution
joeleey :
Loyal customer
base
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
EXCO ONLY
Contents @ Money
* FS starting position and context
* FS vision under current Post Office’s operating
model
* Post Office FS 2020 revenue plan
* Building blocks to achieve 2020 Vision
* Alternative scenarios reflecting TOM cost challenge
* Key milestones and next steps
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Financial Services has an aggressive income aspiration, which ea) M
has been disaggregated based on risk oney
Overview of Post Office FS income trajectory >), Key observations
Higher risk
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
Revenue plan: 2019/20 product revenues are “owl & Money
stratified by the level of risk to achievement ison.
Summary of changes to plan by product
2019/20 momentum -
_ some execution risk,
particularly in
payments
Binary risk?
Upgrade in capability
_ orbusiness model I
Early concept stage
1 Net of McKinsey and Post Office product team revisions
2 Note that total ‘Binary risk’ is higher on this page due to the fact ~£12m of low risk insurance revenue growth is includedo show a full product view, but is split into
the ‘2019/20 momentum’ bucket for the purposes of the previous page (99 )
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Revenue plan: FS 2020 aspiration has additional strategic @ M
upsides for new products not captured within the plan oney
Pre-paid debit
account
Digital payments
hub ~ digitised
money!
Expansion of
loans for low
income
Acquisitions
_ Bankingservices _
utility play /
1 Potential to expand on significant work already completed on digital postal orders (POGO) 2 Who may prefer not to shardinancial details
Source: ‘Consumer credit and consumers in vulnerable circumstances'FCA April 2014
(30
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
The FS strategy, in particular the development of Titan/ I2'SCUSSION DRAFT - EXCO ONLY
POMS, provides Post Office with a number of choices ea) M
ahead of the expiry of the Bol contract FOR DISCUSSION oney
Near term focus (>) Strategic options available
Keeps strategic options open
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
EXCO ONLY
Contents @ Money
* FS starting position and context
* FS vision under current Post Office’s operating
model
* Post Office FS 2020 revenue plan
* Building blocks to achieve 2020 Vision
* Alternative scenarios reflecting TOM cost challenge
* Key milestones and next steps
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Achieving the vision and delivering the 2020 Vision will require © M
4 building blocks & 8 strategic activities oney
Overview
I Customer
I IProduct
Capabilities,
I dependencies
I and risks
Source: FS business team analysis AE)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Customer: Key insights & Money
Overview of customer needs (>) implications for Post Office Money
Customer
Product
Channel
Capabilities,
dependen-
cles & risks
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
CO ONLY
DISCUSSION DRAFT
Customer: FS tends to do well in less affluent areas e) Money
Personal Lines - insurance
u Payments a@ Banking Services a Travel I. Personal Lines - banking
Volume of products by branch location!
I Urban
Deprived
Inner
_ Deprived ©
1 Includes data on 11536 Branches 2 This is likely to be an underestimate, as it does not take into account income from prevwus 'back book’ sales
Methodology: Income is calculated from volume numbers. The volume in each store is multiplied by a constant dollar value efmate of the value of each transaction
The value of each transaction is assumed to be the same across the different locations; testing suggests this holds to withi ~10% for the three products we tested
(Savings, Travel Insurance and Home Insurance)
Source: MI team (35 )
/
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
Customer — Personal Lines: FS has implemented a customer gay Mone
segmentation that reflects consumers’ financial needs oney
_ Overview of segments
© Green Shoots: Under 25yrs; many single and living with parents;
frequently use ATMs, many have student loans. 3.9 adults.
© Pink Fizz: 25-45, often single people, propensity to London; many
~~ have mortgages, borrow not save, use online banking. 5M adults.
» Golden Boys: Upwardly mobile men aged 25-45, high earners;
majority have mortgages, manage finances remotely. 3.9M adults.
© Red Brick: Well-educated 25-45 year old women; mostly home
" owners with Mortgages and higher than average household
incomes. 4.4M adults
True Blue:45-55 year old couples and families. Incomes are usually
over £75,000. 6.2M adults.
© Grey Days: Single or separated, typically aged 35-55. The incidence
of unemployment, or people unable to work, is three times higher
* Plain Vanilla: 25-55 years, over half have no plans for their
retirement or expect to rely on the state pension. 3.7 M adults.
” Silver Foxes: Over 55, majority are retired. Concentrated in
London and the South East. Households earning over £100,000 is
high. High levels of savings and investments. 5.1M adults
Ruby Wedding: Older married people who have paid off their
mortgage. Household income £20,000 to £30,000. 4.8M adults
© Lavender Scented: Older people often over 65. Often living
alone. Income typically £10,000 pa. 6.9M adults.
©
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Customer — Personal Lines: Strengths in older branch 2SCUSSION DRANT = EXCo ONLY
loving segment but new products have attracted new gay M
segments e.g., Mortgages oney
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
holdings tend to be older and less well off
Customer — Personal Lines: Those with highest cross-product & Money
Product holdings of Post Office Money customers vs. UK adults / (>) Key takeaways
(38
)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
WORK IN PROGRESS I DISCUSSION DRAFT - EXCO ONLY
Product: Key insights & Money
Overview (>) implications for Post Office Money
Customer
Product
Capabilities,
dependen-
cles & risks
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I HIGHLY PR
-IMINARY WORK IN PROGRESS
Product: FS has 4 major product categories @ Money
Payments _ I Banking services I Travel Personal Lines _
Share of FS
income, % I
1 Based on 2014/15 full year budget
Source: Product P&L’s Period 3; team analysis
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
Product: In future, FS will develop product
packages tailored to specific customer needs
DISCUSSION DRAFT
POL00027358
POL00027358
CO ONLY
HIGHLY PRELIMINARY
& Money
Example: Developing an integrated credit card proposi
Matched:
flexibility
Rewards:
Value-add
2int card al
Able to equip people
with optics. They may 9% BT:
not plan to borrow or Smart
spend but it’s cost
reassuring knowing saving
they have a O%there
Enhanced travel Low rate:
product not just focus- simpicity
sed on the spend
abroad. Supple-
mented by rewards
element to drive better
everyday usage
Travellers reward
& clarity
Balance transfer
card
Acard that helps
astute people save
money as well as
giving extra savings
through 0% purchases
Low rate everyday
card
In line with brand
associations, the low
rate product provides
a peace of mind/con-
fidence in a product
that won't bite
indebtedness
Travel
rewards
Source: Credit Cards: Market & Segment Approach 2014-18
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
@)
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Channel: Key insights & Money
Overview (>) Emerging channel strategy
Customer
Product
Capabilities,
dependen-
cles & risks
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Channel: Market data suggests share of online to DISCUSSION DRAFT - EXCO ONLY
rise but branches will continue to have a role, gay Mone
esp for advice & value added services oney
Share of online sales, % 2013 Wl 2017 WM 2020
1 Includes resolving a problem, change account details
Source: McKinsey multichannel survey: regression model
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
} ON ORIGINAL 2019/20 \N REVENUES
Channel: FS is line with where the market is headed; while Ey Mone
share drops, branches remain central to approach Y
® FRES MH Other MM Contactcentre ™ Online Branch -Crown I) Branch - Agent Total branch
(2019/20 only)
Overall distribution change’ Overail distribution change by business area’
Share of income (Em), % Share of inc (Em), %
Banking services Personal lines — insurance Personal lines ~— banking
100% = 89 93 100% = 9 119 100% = 64 132
Sg ee.
100
Travel? Payments 201 3/14 2019/20
100% = 67 93 100% = 83 102 Travel I Online declining due I
alegre 1 1 44m i g insu- I to increasing F2F I
Other o7 fas ° rance I sales for mortgages I
68 93 offsets I and savings, and I
7 branch I higher savings I
: a - depen revenues for branch
2013/14 2019/20 2013/14 2019/20 2013/14 2019/20 dency )\vs. online products
1 Shares calculated through excluding fixed revenue streams- refers only to revenue directly generated through channels
2 Shares based sales splits, total revenue includesFRES; includes travel insurance
Source: Financial Services Template v3b_entire business; updated distribution splits from product teams; POL 2020strat plan; team analysis
@
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
Channel: Insurance increasingly digitising but new Personal ea) M
Lines Banking products require greater F2F capability oney
Split of new sales volume by channel (% volume)!
© Counter’ MM F2F MM Online MM Contact centre Other x #sales (volume)
Product 2013/14 2019/20
Payments
and partner
banking
Travel
I Personal
1 Counter includes branch referred sales completed online/callcenter where FAD code given by customer
2 Front book value
3 2013/14 insurance sales were one off spike for Motor
lines
@)
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
Channel: FS’ channel strategy is evolving with changing ea) M
customer needs while maintaining competitive advantage oney
Channel
Income’ _ From To
Branch _
counters
2014: £225m
2020: £278m
Branch
specialists?
2014:£5m
2020: £33m
Remote /
Telephony
2014: £14m
2020: £26m
Online / —
mobile
2014: £28m
2020: £84m
1 Excludes Other a m Mortgage intermediarie: A
2 Excludes impact of leads generated by FS & MS but executed in order channels
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
Channel: Each channel will play a specific role across the
customer decision journey © Money
lain channel is boided
Current _
I account
I Mortgage
_ Travel
Money
ay
1 Customer Relationship Manager
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Channel: Digital is critical enabler of a consistent cross-
; ) Money
channel experience
Consistency
accounts
_ Credit cards
_ Savings _Personalis-
: : ation
Car insurance —
oo . Cross-sell
_ Life insurance > -
Source: team analysis
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Channel — Branches: Overview of draft Post Office Money ea) M
Hub & spoke model (1/2) oney
Large Mains Other Mains Locals‘ Access Points? Community
Current
number of
branches
Future
Description
Products —
availab!
1 Includes 'Locals' and ‘Locals Light’ 2 Includes 'Basic Mails +’ and Se#Service points
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Money Hub & spoke model (2/2)
Channel — Branches: Overview of draft Post Office & Money
Financial
Specialist
Mortgage
Specialist
(MS)
Customer I
Relationship
Manager _
CRM)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
[Di SCUSSION DRAFT - EXCO ONLY
Channel — Branches: Counter products have different levels of @ M
sales concentration oney
Branches required to deliver, ‘housands
Methodology: For each product, plotted cumulative volume curve and counted the number of branches required to achieve 80%/90%f 2013/14 volume;
Compared with required volume increase to achieve 2019/20 plan
Source: Branch data base
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
DISCUSSION DRAFT - EXCO ONLY
i
Channel —- Branches: A number of personal lines products are @ M
sold across a broad proportion of the network oney
Branches required to deliver, #
225 1,443
Note: Some FS works across more than one branch
Methodology: For each product, plotted cumulative volume curve and counted the number of branches required to achieve 80%/90%f 2013/14 volume;
Compared with required volume increase to achieve 2019/20 plan
Source: Branch data base
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Channel — Branches: Post Office Money will likely [DISCUSSION DRAFT - EXCO ONLY
need to both double number of mortgage specialists @ M
& drive productivity to reach mortgage targets oney
Number of mortgage specialists required to meet.
2019/20 target, based on their monthly productivity?
Break even analysis
1 Average income per product is £1050 calculated at 60bps on average mortgage value of £ 175k
2 calculated for MS with >0 sales only. Assumes 70% of incomplete applications (marked ‘ AppSubmitted’, ‘AppRecieved’ ‘AppReferred’ ‘AppOffered’) convert to completion since Jan 2013
3 Assumes: MS specialist cost to company of £43,480 —- average salary = £27600, Cost to company additional 30%, average rent per sp ecialist £450per month, certification costs £2200 per year
4 Includes 20% uplift given downtime for training, holiday and sick days
Source: Team analysis
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I Discuss! ON DRAFT - EXCO ONLY
Channel —- Branches: Recent external hires achieve a higher gay M
average value & volume than internal hires oney
© Internalhires ——‘ External hires
Tenure comparison between internal
Monthly mortgage applications
(internal v.externalhires)’
“<6 months
6-12 months
>12 months
1 All applications in progress that have not been declined or dropped are included hereAlPs (Agreements in principle) that have been referred are included
2 Assumes: MS specialist cost to company of £43,480: average salary- £27600, cost to company- additional 30%, average rent perspecialist - £450 per month,
certification costs - £2200 per year. Commission on mortgages is 0.6% of value
Source: MI team (sa )
Nar,
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Channel —- Branches: To recover direct costs, FS specialists gay M
need to complete ~9-10 transactions per week oney
Credit Cards %% Current Accounts [ Savings MM Homeinsurance § Loans ~% Motor insurance Life insurance
Break even analysis
I product mix
2019/20
_ product mix
1 Fully Loaded costs include £21k base salary; 30% increase for pension, HR, NI; £1,200 annual sales licence and £450 p/m for realestate
2 Average productivity per week for rolling twelve months
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I Discuss! ON DRAFT - EXCO ONLY
Channel — Branches: Achieving planned revenue
targets in Personal Lines Banking requires an uplift
both in absolute numbers of FS staff & their productivity @ Money
( hurber of FS leneciailste required le meet target,
based on their productivity? /
Required annual FS volume to achieve 2019/20 targets,
thousands
1 Assumes no increase in FS sales from current 72 MS who also sale financial service products in 2019/20
2 Includes 20% uplift given downtime for training, holiday and sick days
@)
Source: Team analysis
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
[Di SCUSSION DRAFT - EXCO ONLY
Channel — Branches: Investing over £4m to improve @ M
productivity in addition to introducing new CRM system oney
_ Performance
management
Staff training
/Academy/Sales
tools -
Customer data
ou
I Increased lead
generation
PostOffice __
Money Brand
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Channel — Online: Substantial opportunities to improve our ea) M
online channels to drive sales oney
I Lead
I generation
Sales I
_ fulfilment
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Channel — Telephony: Contact centres will need to play an ea) Mon
increasingly important role oney
/ Oumoure (2)
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
WORK IN PROGRESS
ies, dependencies and risks: Capabilities deep-dive & Money
Capabi
Overview of capability requirements to deliver plan
* Improve front line data capture in branches of customer information
Data
* Improve data warehousing
Integrate POS and CRM systems to allow a single customer view and enhance lead
New systems
generation
* Launch a more visually distinct PO Money brand
Marketing * Continue annual ATL marketing spend to support growth of new propositions and those we
plan to grow aggressively e.g., SME, insurance
* Introduce incentivisation of counter staff for sales of FS products
Improve sales team productivity to drive personal lines banking products in particular through
training and recruitment support
People
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
Capabi
POL00027358
POL00027358
WORK IN PROGRESS
ies, dependencies and risks: Dependencies deep-dive & Money
Overview of key Group dependencies
* Retain branch network to:
Network / ~ Support sales of complex products through the Hub & Spoke specialist model, targeting
TOM branches with the appropriate footfall/customer mix
dependency ~ Support POL’s largely cash based payments and banking business
* Invest in online offering which will be central to simple sales and customer servicing
Commercial
* Customer Management Roadmap, incl. Single Customer View
Ensure POL °¢ Marketing investment & support, incl. test & learn new approaches
Group * CDP: increased control, improved journeys, single customer sign-on Cross-functional product
provides and marketing initiatives, in support of CVPs
suitable R € the busi
Fie ctare. est of the business
support * Network: capacity and support, for new products in particular
* Finance: product P&Ls
* HR: recruitment support, in particular for Specialist roles
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
@)
POL00027358
POL00027358
ies, dependencies and risks: Risks deep-dive & Money
Capabi
Overview of key risks for POL to manage Mitigation
* Growth in our insurance business, both for sales and * N/A-— binary risk
value chain improvements are heavily dependent on:
tt, of ~ Successful conclusion of Titan (travel insurance
programmes new business model)
~ Hawk (acquisition of Bol’s share of insurance
business)
* thereis a risk that the new sales model cannot * We have already activated plans to
Sales deliver the required sales outcomes. improve the quality of our people and
Capability the tools to support them.
* Financial Services sales are heavily regulated * Together with Bol, Post Office has a
Conduct risk and mis-selling presents a key risk to growth have a coordinated 3 lines of defence
and credibility approach to managing conduct risk.
* There is a risk that Bol’s balance sheet mix, * Negotiations with Bol to consider
capacity and operational capability is insufficient changing income bands by channel so
Partner risk and cannot sustain the growth required Bol’s required balance sheet mix does
* 100% partner banks retained to achieve banking not impact POL planned income
ae services revenues
Capabilities, * CTP & NTP does not limit Travel Money network
& risks Competitor * There is a risk that the activities will provoke a * Monitor key challengers and respond
Risk direct response from our competitors making the accordingly.
jarder.
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
SCUSSION DRAFT - EXCO ONLY
Contents @ Money
* FS starting position and context
* FS vision under current Post Office’s operating
model
* Post Office FS 2020 revenue plan
* Building blocks to achieve 2020 Vision
¢ Alternative scenarios reflecting TOM cost challenge
* Key milestones and next steps
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
Estimated impact of potential TOM outcomes
POL00027358
POL00027358
I HIGHLY F PRELIMINARY ESTIMATES
£xm ° Revenue impact @ Money
Removal of
F2F sales
Change in
branch
footprint.
and #s
Removal of
1 Impacts not cumulative
2 Please note that we are investigating the options of truncating at source through digital capture (which has been announced p BBA)
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
(64
)
POL00027358
POL00027358
obligations
TOM Interdependencies: Overview of existing commitments & & Money
I Contractual
_ obligations
I Govt. relations
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
I DISCUSSION DRAFT - EXCO ONLY
Contents @ Money
* FS starting position and context
* FS vision under current Post Office’s operating
model
* Post Office FS 2020 revenue plan
* Building blocks to achieve 2020 Vision
* Alternative scenarios reflecting TOM cost challenge
* Key milestones and next steps
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Timeline & Money
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Appendix & Money
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Market — Personal Lines Banking: Retail Banking in the UK is
sizeable and is currently experiencing significant innovation Ey M
and some increase in competition oney
icant disruptions offer opportunities for challengers
ket is recovering from crisis Signifi
Customer I
While branches remain key & Big 5 share stable, market increasingly dynamic, given new challengers & business models
Source: McKinsey Global banking pool; expert interviews
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Market — Personal Lines Banking: Several emerging
challengers are seeking to make their mark @ Money
Incumbents
* Big 5: focusing on cost reduction, efficiency and enhancing
customer experience
Ee gh = KERBS @ eanctays HSBC
* Building societies: strengthening market share for mortgages
and savings
Been @¥orkshire
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Market — Personal Lines: Split of channel preference by age gay M
shows preference for branches across the board for 45+ oney
Share of customers preferring branch by activity type, %, 2013
Less than 45 years old More than 45 years old
1 Cash withdrawal/deposit, balance enquiry
2 open simple accounts like savings, current account, credit cards,personal loans
3 Advice on mortgages, investments and life insurance
4 Information concerning general products, complaints, change account details, resolve a problem
Source: Multi-channel survey 013
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Personal Lines — Split of channel preference by income
shows preference for branches, especially for advice and gay M
complex sales oney
Share of customers preferring branch by activity type, %, 2013
Less than £40k ' Greater than £40k /
1 Cash withdrawal/deposit, balance enquiry
2 open simple accounts like savings, current account, credit cards, personal loans
3 Advice on mortgages, investments and life insurance
4 Information concerning general products, complaints, change account details, resolve a problem
Source: Multi-channel survey 2013
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
. . AP — ADD SO WHATS
Market — Personal Lines Insurance: Markets returning to
commoditisation
th but prici ins with threat of ,
grow ut pricing pressure remains Wi reat o & Money
Motor insurance / Home insurance _ / Life insurance
Source: Mintel reports, McKinsey , AA insurance price index
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Delivery model: Looking forward, FS will rely on ea) Mon
8 areas of activity oo Customer ia Product GC Channel Capabilities id ey
More visually
distinct PO Money Moving up the value
brand chain '
Owning the
Clear portfolio of customer Winning proposition
target segments relationship development
Source: Financial Services I business team analysis
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Customer — Travel Money: Overview of customer needs @& Money
_ Travel Money customers are grouped based the segmentation from FRES and their perceptions
_ are monitored in line with their key needs:
More Dash < et Prosperous I Me,Myself I Work Hard
than Cash inKers & &l Play Hard
Discerning
<E250/£500 £250 >£250 >£250 E5O0/£ 1000 >E500/£1000 >£500/£1000
Euros >£500/£1000 >£500/£1000 >£500/£1000 USD+Exotics USD+Exotics USD +Exotics I
Dedicated Euros Euros USD + Exotics TMO/TMC TMO/TMC TMO/TMC
coutners TO TMO TMO/TMC TMC app TMC app TMC app
Flash Sales Flash Sales Dedicated Dedicated Dedicated Dedicated
counters counters counters counters
Proposition
Source: ( FRES) Travel Money Marketing 2015/16 Planning and Insights
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Customer — Payments & Banking Services: Customer needs ea) M
typically relate to access, convenience and speed of service oney
Payments — Banking Service
Customers
Needs
Trends i
disconti-
nuities
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Managing Financial Services Conduct Risk @ Money
Post Office, together with the Bank of Ireland (UK) (“Bol”), has a coordinated, 3 lines of
defence approach to managing our conduct risk, which is focused on helping to prevent
our customers from buying products that do not meet their needs.
Bol Post Office
1st Line * Product Teams (Bol and 3% part +* Product Teams
product providers) * Sales Supervisory structure
* Capability Development * Marketing & PR Teams
Managers * FS Risk
* Financial Promotions
2rd Line * Risk & Compliance * Group Risk
* Financial Promotions Monitoring
3" Line * Audit * Audit
Customers can buy our products in branch, online, via contact centres or by mail,
depending on the product(s) they want. Each channel involves different risks for
misselling.
)
NS
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Key areas of on-going focus and development @ Money
@)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Strictly Confidential
POST OFFICE LTD EXECUTIVE COMMITTEE
Risk Update
1. Purpose
The purpose of this paper is:
11 To present the Executive Summary of the PwC diagnostic review on risk and
change management (20 minutes).
1.2 To present and agree the proposed next steps for developing the risk appetite
statement (10 minutes).
1.3 Note the progress that has been made towards developing a narrative for the
discussions scheduled to take place at the October Board meeting on the Kelly report
(20 minutes).
2. Activities / Updates
2.1 PwC Report: As previously discussed at various ExCo meetings, PwC have now
completed a diagnostic review of both risk and change management (terms of
reference are attached as Appendix - A.1). An early draft report was submitted
late last week (a delay to the original timetable) and we are expecting it to be
finalised over the next 10 days. Pending finalisation, however, we thought it
sensible to distribute the Executive Summary in order to give directional sense of
their findings. This is attached as Appendix - A.2. The report recognises that the
current arrangements are suitable for the stable state, however, given the Post
Office’s change mandate, a number of enhancements will be required including
capability building at all levels. The risk team will present the report and
accompanying action plans once the report has been finalised.
2.2 Risk Appetite: Attached is a short paper presenting a suggested action plan for
determining Post Office’s risk appetite (please refer to Appendix - B). The
reason for bringing this paper to the ExCo at this stage is to confirm ownership
of the risk categories listed in the table on page 1 of Appendix — B. Once agreed,
the Risk team will be in touch to arrange meetings with each of the owners.
2.3 Kelly Report: You will recall that at the Board meeting in July, discussions were
held on the Kelly Report. Subsequent to that meeting it was agreed that the CEO
will provide an assessment of the risks and work undertaken/planned on actions
resulting from the Kelly Report. A narrative is being worked on with Chris Aujard,
Neil Hayward and Gavin Lambert to support CEO’s discussion with the Board
and this will be distributed in the meeting for discussion.
Chris Aujard
11 September 2014
Risk Update — September 2014 Chris Aujard Page 1 of 1
11 September 2014
POL00027358
POL00027358
pwe
2. The services
You have instructed us to provide the servic
Produce a PwC branded report for Chris Aujard, the Chair of the POL Risk and
Compliance Committee, providing an overall assessment of risk at POL with an
emphasis on the following two areas:
« Enterprise-wide Risk Management
- Areview of current and proposed arrangements for managing risk
across POL to ensure these are fit for purpose, implementable in
practice and appropriate for POL’s business strategy, operating
model and culture;
- Anaction plan to address weaknesses and to work towards greater
maturity including specific views on how the Board might best
engage in an exercise to discuss and agree risk appetite.
» Change
- Areview of change capability and capacity against the PwC portfolio
maturity framework and benchmark data to establish a POL
baseline;
- Anaction plan for addres
assurance activity, deep dives
ing weaknesses (through ongoing
ste.)
The output of this work will be based on and in the style of the attached document.
(Post Office — Accelerating Change and risk Management Capability). A covering
letter will also be provided to Chris Aujard in his capacity as the Chair of the Risk and
Compliance Committee including copies to CEO, Paula Vennells and Head of Change
Management, Alison Thompson.
InsertPOLAcceleratin
gchangeandtriskcapat
3. Timetable and duration
We have agreed that this assignment will commence from the 14 July 2014 with early
scoping work and have estimated, based on the outline schedule, that we will
Strictly Confidential
Executive Summary
The Maturity Journey
All organisations evolve and mature over time. POL is a new organisation, having
recently separated from RMG, and to that extent it is still warking to establish a
clear identity and purpose. It is not surprising therefore to find that it is taking time
for POL to develop the appropriate chocks and balances needed to manage risk or
indeed the change lifecycle and assurance gates to ensure the effective management
of more complex change. Historically POL has a good track record of delivering
individual programmes and has managed both ‘run’ the business while ‘changing’
the business.
POL has not been complacent and there is a good level of awareness of the need to.
mature as POL ups its ambitions, with a number of steps already taken to appoint
key personnel, review and strengthen governance structures and processes. This
review is an example of that awareness and intention to build out and mature over
time.
In many ways, in steady state, the current arrangements would broadly suffice —
although we have been able to make a number of, hopefully helpful, suggestions to
target and expedite further improvement. However, given the POL change
mandate, which we have assumed to be fairly radical, the delta between where POL,
is and where it needs to be is even bigger, This report establishes the ‘as is’ baseline
and makes recommendations which POL need to action in order to accelerate the
improvements to risk and change management needed to support business
transformation to deliver the 2020 Strategy and associated transformation plans.
‘The Strategic Areas Where Focus is Required
Based on our assessment there are a number of inter-related areas where POL
needs to apply strategic focus to accelerate is level of maturity.
Risk Update - September 2014
Ba
»
4
POL00027358
POL00027358
APPENDIX - A
Culture and behaviours: If POL is still finding its identity, it is not
surprising to find that POL is still working to establish a clear culture and
norms. There isn't yet a clear ‘POL way’ of doing things. Investment of time,
particularly with the senior leaders in the organisation is needed to work this
through, if they are to provide a strong and consistent narrative throughout the
POL transformation journey.
Governance: Although the Board and commnittee structure is fit for purpose,
there is a lack of clarity around roles and responsibilities which undermines the
ability for the governance structures to effectively operate. For example, we
found little evidence of colleagues holding one another to account.
Working in a complex transformation environment: requires a stable
culture, agreed norms, clear accountabilities and indeed a governance structure
that supports decision making, It also requires senior leaders to do the right
thing, work in a matrix stracture and deliver the strategic agenda over and
above their functional responsibilities. Addressing the two previous points
would reduce the risks posed in relation to business transformation.
Equipped for Business Transformation: POL has the systems and
processes in place to manage small scale change and risk within individual
functions. It needs to equip itself with the vision, culturs, processes, people and
systems to deal with complexity and stress the organisation will undertake as
part of Business Transformation. As part of our recommendations we have
identified the need for POL to:
+ Better define its risk appetite and the common framework as to how it will
manage risk across the organisation
+ Consolidate and simplify its change activity to reduce the number of
moving parts
+ Equip itself with the right tools and processes including a common change
language, the improvement in Management Information and upsbilling of
its ehange capability with the experience of undertaking transformational
change.
Chris Aujard Page 1 of 1
11 September 2014
DEVELOPING RISK APPETITE: NEXT STEPS
1. BACKGROUND:
POL00027358
POL00027358
APPENDIX - B
This paper sets out the next steps required to progress to a Board level statement of risk
appetite for the Post Office. To date, two papers on risk appetite have been discussed by ExCo; a
paper at the ExCo risk session on 8 May 2014 and the risk appetite framework and journey
presentation prepared by PwC and presented on 11 August 2014.
It is generally accepted that setting risk appetite is not a “right first time” exercise. Increased
accuracy over setting appetite is gained iteratively.
2. ACTION PLAN:
The next steps in the process to develop a proposed Risk Appetite Statement for the Audit and
Risk Committee and the Post Office Board are:
¢ Risk and Compliance have identified proposed categories of risk which will be included in the
risk appetite statement. These categories and the business unit owners are:
Category of Risk
Proposed Owner
Customer and community requirements
Martin George
Safety, health and wellbeing
Neil Hayward
Financial Resources
Chris Day
Investment Programmes
David Ryan / Alison Thomson / Lesley Sewell
Government services
Martin George
Financial Services
Nick Kennet
Mails
Martin George
Business operations
Kevin Gilliland / Nick Kennet / Martin George
/ Chris Aujard
Regulatory Compliance
Alwen Lyons / Nick Kennet / Chris Aujard
Strategic initiatives / growth targets
David Ryan / Nick Kennet
Environmental responsibility
Neil Hayward
e — Risk team will hold individual sessions with each of the above Risk Category owners to
identify key risks and potential impacts in their respective areas.
e Agree areas where there is zero appetite for taking risks.
POL00027358
POL00027358
e Risk team will engage with risk category owners and subject matter experts to facilitate a
structured discussion to agree risk appetite statement in areas where there is appetite for
taking risks.
3. The proposed risk appetite statement will be presented to the Audit and Risk Committee on 15
October 2014 (date to be confirmed) and to the Post Office Board at its meeting on 29 October
2014.
4. Following ratification of the proposal by the Board, Risk and Compliance will work with risk
category owners on implementation of the risk appetite statements into business areas. This will
include developing local metrics and tolerance levels for each category of risk.
ACTION REQUESTED:
ExCo are requested to confirm their agreement with the next steps, risk categories above and the
owners allocated.
David Mason
11 September 2014
POL00027358
POL00027358
Confidential
POST OFFICE LTD EXECUTIVE COMMITTEE
SLT event planning — 3 October 2014
Purpose
The purpose of this paper is to:
11 update ExCo on plans for the next SLT event on 3 October.
Background
2.1 The last SLT event was held in early July at King’s Place. Presentations were
delivered on business performance, marketing and business transformation, with a
market stall approach for sessions on mails, financial services, digital and business
transformation. The day was rounded off with a session on leadership and
development.
2.2 The event on 3 October will be held at one of the ETC venues, close to Museum of
London.
2.3 It forms a key element of the communications strategy which is setting out the
compelling case for change, building on earlier events, Team Talk Live, on-going
communications tactics (blogs, Team Talk lite etc...) and provides a key opportunity
to update colleagues and further harness their support.
Proposal
3.1 The proposal for the 3 October meeting is to broadly follow the same format as in
July, with a business update in the morning sessions followed by afternoon sessions
on leading through change. This latter session is aimed at providing SLT with the
opportunity to reflect on the change journey so far and their requirements as leaders
over the coming months.
3.2 It is essential that we use the meeting both to report back on developments since we
last met, with specific reference to the accelerators, but also to keep up the
momentum on the change narrative, emphasising the leadership responsibility of all
on SLT during the months ahead.
3.3 SLT will also have been updated on cost reduction initiatives in a teleconference
early in September.
3.4 The objectives of the 3 October session are therefore:
e To continue the leadership dialogue around the accelerated strategy and in year
performance: ensuring that SLT has the information it needs to update teams,
and understands its role
SLT event planning Mark Davies Page 1 of 2
5 September 2014
POL00027358
POL00027358
Confidential
e To continue the leadership development journey into leading the transformation
of the Post Office: including the opportunity to provide personal development
opportunities
¢ To build on the development journey which began with Hay Group and the SLT
away day sessions earlier this year
3.5. The proposed format is therefore:
Morning Sessions — Transformation Update
(Plenary sessions or SLT cohort groups)
Keynote speech — Paula Vennells
Business Performance Update — Chris Day/Sarah Hall
Transformation update (including Wave 1 staff cost changes) David Ryan/team
Network/Mails strategy update: Martin George/Kevin Gilliland/team
Financial Services strategy: Nick Kennett/team
eoeeee
Afternoon Sessions - Focus on change leadership
(Break out into SLT cohort groups (x3) with Hay facilitators)
Introduction: Neil Hayward/team
The role of leadership through major change
How to lead change whilst dealing with personal transition
The difference between true sponsorship and being a “champion” (sponsorship
is action not position)
e What we know of our collective and personal leadership styles — how will this
help us, how will this hinder us? What are we going to do about it?
4. Recommendations
ExCo is asked to:
41 note the proposals set out above and agree the over-arching format of the event,
subject to further updates.
Mark Davies
5 September 2014
SLT event planning Mark Davies Page 2 of 2
5 September 2014
POL00027358
POL00027358
Strictly Confidential — Draft
POST OFFICE LTD EXECUTIVE COMMITTEE
Winning in Mails and Network Extension Update
1. Purpose
The purpose of this paper is to:
1.1.
Update the Executive Committee (ExCo) on latest developments in Mails and
Network Extension.
2. Background
2.1.
2.2.
2.3.
2.4.
2.5.
2.6.
At the June Board we presented our plans to win in the Mails market and extend our
network by an additional 10,000 to 20,000 Access Points.
The threats we face in the Mails market from the likes of Collect+ and myHermes
continue to grow. Collect+ posted its first year of profit (£1.8 million) for the 52 weeks
ending March 2014, with record full year revenues of £34.1 million on a volume of
13.6 million parcels. Collect+’s parcel volumes have continued to grow in the first
quarter of 2014/15, with an additional 1.2m parcels reported on the same-period last
year. If Collect+ continues to grow at last year’s growth rates for the next three years,
it will have profitable revenue of £240m and handle 74m items per annum.
Year-to-date Mails income is down (at Period 5) by £800k (0.6%) on last year and
down by £10m (7%) on target, this pressure highlights the need to transform the
mails business at pace.
However, some competitors are struggling in this highly competitive market. Local
Letterbox, a parcels collections, returns and sending start-up which was due to open
500 parcelpods across the UK in 2014, has ceased trading.
We believe that this market has significant opportunity for Post Office Ltd (POL). We
hold a significant share of the retail Mails market (>90%) and the parcels, collections
and returns markets are growing.
In the three months since the June Board we have already made good progress with
a number of actions to deliver on our ambition to win in mails and extend our
network. This paper will update you on the key developments.
3. Key Points
3.1.
While we have been engaging closely with Royal Mail Group (RMG) about our plans,
and they have committed resource to help, we have not yet reached strategic
alignment which will ensure that we can deliver our Mails strategy. Failure to reach
alignment with RMG would negate much of the progress that is highlighted in this
paper and the supporting reading. The team is currently working on a detailed set of
timescales and deliverables which highlight the critical path that demonstrates when
these agreements will need to be achieved.
DRAFT
Winning in Mails and Network Development Update I Martin George and Kevin Gilliland
September 2014 I Page 1 of 4
POL00027358
POL00027358
Strictly Confidential — Draft
3.2. We have identified simplified journeys for our key mail products. So far we have
agreed with RMG to waive constraints for Access Point trials, such as not having to
weigh Home Shopping Returns.
3.3. Ivy trials have begun. We are on track to launch 177 pilots by the end of September
involving retailers such as SPAR and OneStop, with two sites already live.
Activities/Current Situation
4.1. In the June Board update we highlighted several areas that are key to winning in
Mails:
Align Relationship with RMG.
Large-scale Network Development.
Product Simplification and Rationalisation.
Capturing Mails eCommerce.
Becoming the Leading SME Service Provider.
Sales Efficiency.
eoeoeceee
Below is a brief update on developments in each of these key areas. More
detail is provided in the supporting slide pack (‘Winning in Mails and Network
Development Update’) to be found in the Reading Room.
4.2. Align Relationship with RMG:
. RMG remains integral to our plans for both Mails and Network
Development, fully aligning our relationship is critical to our success
across all areas.
. A joint plan has been developed with RMG. A joint POL and RMG
Trading Board meets weekly to discuss progress and agree actions to
deliver on this plan.
. Work has been split into five areas: Branch Metrics and Market
Trends; Improving the Customer Journey and Providing the Right
Products; Network Footprint; Pricing Strategy and Commercial
Alignment; and Marketing Levers.
° We have already gained agreement on a new size for Small Parcels
which combines the two current Small Parcel size limits. This is due to
go live 20 October 2014.
. We also have agreement to waive some of RMG’s requirements
(weighing, CRB checks) at trial access points offering Home Shopping
Returns.
. Our main objective for the next few months is to align our commercial
relationship. At the moment there is some mis-alignment of incentives.
For example, overall RMG is incentivised by revenue, whilst we are
incentivised by volume as we receive a per product fixed fee, not a %
of revenue.
. Over the coming few months we will work with RMG to align our
objectives.
4.3. Large-scale Network Development
DRAFT
Winning in Mails and Network Development Update I Martin George and Kevin Gilliland
September 2014 I Page 2 of 4
POL00027358
POL00027358
Strictly Confidential — Draft
. We have made significant progress with our ambition to grow our
network by ~10k — 20k access points.
. We have set-up a cross-functional team (including RMG colleagues)
with a clear mandate to deliver product simplification, retailer
partnerships, engagement with stakeholders and viable technology
solutions that will facilitate the extension of the network on commercial
terms that is required for POL to win in Mails.
. Project Ivy has gathered considerable pace and is being shaped to
test and learn for the broader network development.
. We have two trial sites live and commitment from retailers for a further
177 sites across the UK, by the end of September. These retailers
include One Stop, SPAR and Eurogarages.
. We are in detailed conversations with a number of major national
multiple retailers. We have a sales strategy which prioritises retailers
based on a set of criteria including network size and revenues,
increase in coverage, and potential for cannibalisation. With a view to
launching whole-estate partnerships for future POL access points. For
more specific detail refer to ‘Winning in Mails and Network
Development Update’ to be found in the Reading Room.
. In parallel customer research is underway to ensure the access point
propositions meet the needs of key customer groups, in respect of:
product offering, channel, location, existing missions based on
lifestyles, potential host partners and opening hours. The qualitative
phase is now complete (and validates the initial products for
simplification). The quantitative phase (a nationally representative
survey of 5,000), will be complete in October 2014.
4.4. Product Simplification
. The objective is to simplify product journeys for both the customer and
the operator. This will make our proposition more attractive to the
operator and customer in an increasingly competitive market.
. We have identified the first phase of products for simplification; core
Collections and Returns services (Home Shopping Returns and Click
and Collect), alongside core sending services (1°' and 2" Class labels,
Signed For and Special Delivery by 1pm, bought online via Click &
Drop).
. We are working with RMG to develop a prototype to showcase these
new customer and operator journeys on the latest low-cost, portable,
minimal footprint hardware.
. The prototype will not only show the new product journeys but will also
link into back-end systems e.g. financial reconciliation and RMG’s
track and trace.
° This prototype will be available at the end of September 2014, but will
require technical and user testing before it can be deployed in a live
environment.
° The next stage will be to work with RMG to radically simplify customer
and operator journeys. This depends upon RMG removing significant
long-standing requirements, such as weighing items.
DRAFT
Winning in Mails and Network Development Update I Martin George and Kevin Gilliland
September 2014 I Page 3 of 4
POL00027358
POL00027358
Strictly Confidential — Draft
4.5. Capturing Mails eCommerce
. We have launched a Returns service with eBay which is expected to
generate ~£7.6m in income this financial year and will launch a Click &
Collect service with Amazon in September.
. Our ambition is to become the one-stop shop for e-commerce buyers
and sellers, along each stage of the journey — from ordering, fulfilment,
payment, financial services, collections and returns.
. We have commenced integration with Metapack to allow for more
rapid engagement with RMG and collaboration in the Click & Collect
market.
4.6. Becoming the leading SME service provider
. Please refer to ‘SME Proposition Strategy Update’ paper, in the
Reading Room.
4.7. Sales Efficiency
. We have launched an unprecedented training and engagement
programme with our frontline that has seen Mails income increase by
T%.
. It involves up-skilling our agents and Crown managers in Mails sales
coaching capability. This began in July 2014 and so far we have
engaged over 500 branches. On the back of this success there is a
plan in place to speed-up the roll out.
5. Conclusion
5.1. Many of the actions we have outlined (such as Network Development and product
simplification) are medium-term plays that will help to grow and safeguard business
through the current plan period. As such we would not expect to feel the benefit of
these changes in the current year.
5.2. The NPV on Network Development is positive (£2-3m). Beyond the direct benefits
associated with capturing an additional £86m in revenue, Network Development will
enable faster roll out of Product Simplification and shift to lower cost Locals Light
Channel (benefits estimated to exceed £100m)
6. Recommendations
The ExCo is asked to:
6.1. Note the update and actions set out above.
Martin George and Kevin Gilliland
02 September 2014
DRAFT
Winning in Mails and Network Development Update I Martin George and Kevin Gilliland
September 2014 I Page 4 of 4
POL00027358
POL00027358
Strictly Private & Confidential
Winning in the Mails market
(incl. Network Development)
ExCo update
Presentation - DRAFT
11" September 2014
Post Office® a
At the Board meeting in June we set out our strategy to win in
Mails
DIN JU
POL00027358
POL00027358
14 BO,
1) Align relationship
with Royal Mail
2)
Large-scale Network
Development
A Post Office access
point in the local
convenience shop, the
supermarket, the
garage, the coffee shop
[See Network
Development section]
Product
rationalisation
In June we highlighted the 7 key areas of activity to win in Mails:
Il Areas that we are drilling into today
Deepen and align our relationship with Royal Mail in order to facilitate the delivery of our accelerated Mails
strategy
ts)
Product simplification
Simpler and quicker
transactions for
customers and agents,
resulting in cost
reduction
4)
Capturing Mails
eCommerce
The one-stop shop for
e-commerce buyers and
sellers, along each
stage of the journey —
from ordering,
fulfillment, payment,
financial services,
collections, returns
6
Becoming the leading
SME service provider
Drive sales by
developing Drop & Go
through prospecting and
offering collections to
local SMEs
[See SME section for
additional detail]
is)
Sales efficiency
Prospecting,
communication,
conformance,
penetration, cross-sell
and up-sell, tiered
selling effort
Evaluate the scope to rationalise the breadth of our product offering to improve overall profitability and reduce
complexity
aa
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
. 4
Sane
POL00027358
POL00027358
We have made significant progress against our September
targets...
By Sept 2014 Progress made
* Agree approach with RMG to Network * Established ongoing collaboration with RMG, with agreement for trials
Development and product simplification * Launched large scale frontline training and engagement programme spanning 4,000
* Drive Sales Efficiency branches, up-skilling agents and Crown managers, with 500 branches already
* Focus on winning big returns contracts covered
a (eBay) * Launched Returns service with eBay, expected to generate ~£7.6m in income this
Meus * Build on Click & Collect financial year
* Launch online Mails * Completed online Mails prototype
* Develop alternative Click & Collect * Commenced integration with Metapack which may catalyse RMG collaboration in the
proposition if required (Metapack) Click & Collect market
. Detailed economic impact analysis on * Assessed profitability of a access s points and high level economics of Network
Network existing branches and agents Development
Developm Develop engagement process and * Engaged with NFSP, with support for trials
ent narrative for key stakeholders (e.g., * Developed engagement strategy for key retail partners (independents and multiples)
Government and NFSP) and initiated conversations with [XX] multiples and [XX] independents
* C. 135 pilots of new branches * Ontrack to launch 177 pilots by end September, with 2 sites already live
* Launch digital Mails online service * On track to launch online Mails in September
Digital Post Office WiFi, range of * Post Office Wifi launched in x stores (TBC)
complementary services
* Pilot SME proposition to test concept of * Segmented SME market and identified target customers (microbusiness, <10
packaged products employees)
* Develop business case for SME loyalty * Prioritised opportunities: initial focus on core mails offering
SME programme * Commenced deep dive on the opportunity areas (mails and FS), validating them from
* Secure partnerships with key a customer and commercial perspective
organisations such as Federation of
Small Businesses (FSB), British
Chambers of Commerce (BCC), eBay f 2
aa
nee
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
... and we are continuing to monitor competitor activity to ensure
we are addressing corresponding challenges
Competitors continue to grow, with Collect+ _ .. while other players have been hit by the
posting its first profit this year... increasing competitiveness of the market
2C
5600 stores with volumes of 13.5866 (Returns)
collect# Rev: £34.1m, and 1° profit during 5 years of
existence (£1.8m for Financial Year 2013/14)
Local Letterbox, a parcels collections, returns and
sending start-up which was due to open 500
parcelpods across the UK in 2014, has ceased
trading
“Our longer term aspiration is to achieve 12,000 stores
and become a more convenient and accessible
alternative to the Post Office in terms of opening hours
and locations” — Neil Ashworth, Collect+ CEO
1,400 delivery offices and 40 mail
centres with parcel volumes of 1,068m
Rev: £7,787m
Customers of John Lewis will now be able to collect
their purchases from 5,500 local newsagents,
convenience stores, petrol stations and supermarkets i
connected to CollectPlus’ network ~ Retail Week, . .
August 2014 " i Royal Mail has warned that price changes and
competition from rivals have hit its parcels business.
Parcels revenue was down 1% in the three months to
29 June compared with the same period last year —
~emyHermes 5k ParcelShops and 250 Lockerboxes, with / BBC News, July 2014
“ “volumes of 3,6m (2012) I
Royal Mail is leading the FTSE 100 fallers on
We are partnering with Payzone~ myHermes website I concerns about the future outlook for its business —
i the Guardian, August 2014
Source: Company websites, Press search
i
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
Align relationship with Royal Mail:
We are starting to create a far closer relationship with
Royal Mail, although this will take time to build
POL00027358
POL00027358
What we need to achieve
Align commercial objectives with RMG and agree the value share for RMG and POL
Full collaboration to simplify customer journeys and extend the Post Office network
What have we already achieved
Established and held regular meetings at the
most senior level
Held multiple working group and weekly
Trading meetings
Identified high priority commercial issues to
be resolved jointly as well as operational
changes required for Network Development
Obtained agreement to waive constraints for
access point trials e.g.,
-~ Weighing of Home Shopping Returns
not required
~ CRB checks not required
Obtained agreement on reduced pricing
offers to customers on small parcels
Established priority programmes for 5
workstreams (separate slide)
What will we achieve in the next 3 months
Align commercial interests both in short term
(2014/15) and beyond.
Obtain provisional agreement on top product
priority issues (collections, segregation costs,
barcodes)
Agree and deploy a joined up customer
experience across our on-line channels
Deploy Network Development pilot sites with
simplified products
Ensure a great Christmas campaignto drive
sales
Share improved market and financial data to
inform current and future decisions.
Deploy pricing changes for our customers.
d of 20 ie
Agree and put in place new commercial
arrangement
Commence rollout of Network Development
access points
Commence preparation for price changes at
the beginning of April 2015
Stakeholder risk: Fundamental misalignment of interests between RMGand POL, and / or lack of engagement at the right levels, result in failure/delays to
securing key agreements for Network Development. Rbk is inadequately controlled and high level engagenent has been initiated around this topic
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
ALIGN RELATIONSHIP WITH ROYAL MAIL
Royal Mail remains integral to our plans for both Mails and
Network Development
Areas for collaboration I Examples of collaboration required
* Simplify and digitise the customer journey for selected mails products
to reduce cost and complexity
Product and customer
journey simplification
¢ Agree on an integrated digital agenda, incl. who owns the online
Digital agenda / online customer
mails * Agree on and align our customer journeys for online parcels purchases
9 pay p
Network Development enable Network Development
SME proposition
* Explore potential for pricing innovation, e.g., revenue sharing
Programme of pr
sic licialein ol Se nea agreements to replace rate cards
pricing innovation
Annual ongoing
marketing agenda
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
ALIGN RELATIONSHIP WITH ROYAL MAIL DRAFT
To resolve these issues we set up a POL & RMG working group to oe August 204
meet weekly to discuss progress and deliver on this plan
Joint Governing Group: Emily Pang, Mike Newnham, Sue Whalley, Toby Farrance, Martin George, Kevin Gillland, Paul Brown, Kim Lindsay, lan Kennedy
Improving the Customer Journey and Pricing Strategy and .
Branch Metrics and Market Trends. Providing the Right Products Network Footprint Commercial Alignment Marketing Levers
Anna Malley, Shelley Merrick ‘Charle Herbert, Kim Lindsay. Anna Malley, lan Kennedy Apna Malley, Paul Brown Pete Markey, Luisa Fulci
T=
oc x .
Legend “cote sat ] ewcanapotieas f
.
Programme Management Principles
Strictly confidential Royal Mail Group & 6
POL00027358
POL00027358
Large scale Network Development:
We have made material progress towards extending the
network
What we need to achieve
* Expand our network by 10k to 20k access points to meet customer needs and counter competitive threats
What have we already achieved What will we achieve in the next 3 a cl 5 do
months 014/15
* Set up a comprehensive programme to drive delivery, » Launch access point trials and * Achieve a network of 12,000
resourced with cross functional teams monitor performance locations (of which 400 access
« Developed 5 new operating models for access points + Conduct quantitative customer points)
and modelled future size and shape of entire network research » Secure contracts with 2-5 priority
« Developed detailed access point and network + Refine operating models retailers, to meet FY15/16 rollout
economics according to trials and customer aspirations
» Identified priority retailers, developed messaging, and research + Putin place detailed operational
held over [10] conversations, with [x] indicating high + Reach agreement with NFSP on plan to roll out c. 5000 access
interest (TCG, Morrisons, Waitrose, McColls, SPAR,...) their position towards full Network points in FY15/16
* On track to launch 177 access point trials on 22™ of Development
September, with 2 sites already live
* Conducted qualitative customer research to ensure
access points meet customer needs
« Engaged with NFSP and obtained support for 177 trials
Risks (further detail on page 12)
* Royal Mail (stakeholder risk): Misalignment with, or lack of engagement lead to failure / delays to key agreement, e.g., pay, costs, operational simplificty
* Commercial viability (market and operations risk): Unfavorable market movements and lack of operational excellence lead tolower than expected volumes
* Stakeholder engagement (stakeholder and legal risk): Insufficient engagement with NFSP, agents, MPs, and SHEX/ BIS lead to opposition of Network
Development
* Retailer agreements (market and technology risk): Insufficiently attradive propositions result in lower than expected number of retailers hosts for access points
MOOT PE THOT TES POISE MTT RET TIN. COM PETOTS TEACT TESS VEY TO MESS PONT ONO TESTI TTS OT COST TTS ISE! ae
7
7 >
A
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE —
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT
Our vision for Network Development is to support the Mails Strateg
by capturing physical convenience through omnipresence
@ Post Office access point collect#® Collect+ Location FR PayPoint Location
Vision for PO!
(Manchester
re network with large scale Network Development
* Additional 15-20,000 access points
* Deliver Network Development through a simple, low cost operating model:
- Hosted by a high footfall, viable retailer or location, e.g.:
2 &
<n hag
- Offering a selected product set:
* Mandatory parcels: 15! & 2" class, Special Delivery, Collections &
Returns, International parcels
* Optional additions (depending on retailer): bill pay, E-top-up, Travel
I * Trials to inform technology, economic model, retail partners, and product
range prior to large scale roll-out
- Using existing technologies for initial pilots:
* Horizon terminals
« Post & Go machines
+ Paystation
° A flexible range of operating models
* Conveniently located within 10 mins
of where customers live and work
* Omni-present (25 to 30k total
outlets) to capture physical
convenience, exceeding competitor
networks in key geographies
- Testing new technologies capitalising on CDP capability
~ Wewill evaluate the role of and impact on our existing agents
I
I
I
I
I
I
i
i
I
I
I
I
money & cashback (using retailer cash)
i
i
i
I
I
I
I
I
I
I
I
I
I
I
i
\
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: PROGRAMME
®
We have set up a comprehensive programme , grouped into 7
delivery focused units
Includes
aga ag gr
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
LARGE S'
We have developed a robust implementation plan, which allows us
to deploy at pace, learning and enhancing the solution as we go
ALE NETWORK DEVELOPMENT: PROGRAMME
POL00027358
POL00027358
Phase 1 — Prototype
and planning
Phase 2 — Live roll out
and refinement
Phase 3 —Extend
functionality and pope men ad
extend to core
Phase 4 - Completing
Phase 5 - Complete
roll out and finalise Phose 2 Embed ang
refine
acceleration network network changes
Timeline July — October 2014 } November 2014 — : April — July 2015 : August — November : December 2015 — April : May — August 2016
: March 2015 i ; 2015 2016
} i i
Haccess 180 + 400 * 2000 H 4500 : 6000 : 8500 (increases to 12000
: : ; by end 2017/18)
points ‘ a wee
Retsliers [Sales Pipeline Plan ; : At least five Strategic Partners Signed Up incRoll Out i At least 10 Strategic Partners Signed Up inc
and {) One Strategic Partner Signed Up ing Plan : Roll Out Plan
Roll Out Plan A At least 100 Independents sites signed up i At least 500 Independent sites signed up
partners [Sign Up 60 Independent : :
ign Up independents
() Agree on >135 pilots : i
Product v1 Tablet solution Build and Test, H (V2 Tablet Build and Test (Bill Pay , BJjmpVioneygam?) : V3 Tablet Build and Test
design and including basic mails products : (- Camelot Services developed to tablet : Deploy PIN Pad & PCI Strategy
digital Strategic Live Support Option Agreed [© Strategic Live SupportHigh Level Design : Strategic Live SupportBuild , Test and Go Live
Back End Reconciliation + (. Customer / Retailer Journey Security ; Decommission BAUactical Support
Bill Pay High Level Design } - Develop Fully Self Service High Level Design an@ae © Prototype FF& one store
EPOS High Level Design :( Tactical Tablet Support by the Programme for thé silots Deploy PIN Pad & PCI Strategy
Network Solution (Wifi) agreed * I Design and Develop ‘Integrate with existing Epé&C@de
designed
: © SMSto Customer enhanced with Branch Finder & Refede
i Design, Build Test PIN Pad & PCI Strategy
Implem- Implementation Process for v1 5 i v1 Tablet ‘Deployed: tto 400 ‘Access Points i v2 Tablet Deployed400 to 2000, Access I Points
entation Designed and Tested (Marketing, Coms, Implementation Process for V1 Designed and Tested * Deploy Five Strategic Partners
and Training etc) (Marketing, Coms, Training etcPreate PO Box V2
support Standardise Retailer Contractkegal I a Deploy One Strategic Partner :
Retailer Operational Design for Tablet! Replace Pay Stations with Tablet Access Points
400 } > Retailer Operational Design for Tablet 400 plus sn
Procurement Plan and Model 10
eel
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: PROGRAMME
POST
We have also put in place robust governance to ensure sufficient (@f-=fe=
oversight
FN Accountable Executive Group
Programme Leadership Team
Mernbers
Programme Mar
Weekly sponsor
update
Theeph ilos
I
eatery Product Design Authority Delivery Authority
Chair: Head of Digital - Ch e
Giles Dun
Delivery Team
ay Cor mere Legal, Procurement, Marketing, Comms
Finance, Legal, [.7.
Project Project Project Project
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
LARGE
While we have made material progress, we are aware of a number
of key risks that could jeopardise the programme
SCALE NETWORK DEVELOPMEN
POL00027358
POL00027358
PROGRAMME
*J¢ Dependent on Royal Mail
Key risks
Royal Mail
(Stakeholder risk)
Commercial viability
Descri
Unfavourable external factors (e.g., market changes, product pricing) lead to lower than expected [
ion
Categorisation
Fundamental misalignment of commercial interests between RMG and POL, and Jor lack of
engagement at the right levels, result in failure/delays to securing key agreements for Network
Development, impacting viability of access point business case. Key agreements include:
Expected pay rates from RMG to POL for products in access points
Waiver of key operational costs, e.g., collection costs, cost of scales
-~ Enablers of operational simplicity, incl. IT integration, e.g., no need for parcel segregation, no
need for ‘multiple labels, product journey simplification integration of track and trace ete.
I Inadequately
controlled
transaction volumes, driving down profitability
Lack of operational excellence and planning (e.g., location of access points, operational simplicity,
eae and pe aio etc.) lead to lower than expected transaction volumes or higher cost, driving down profitability
{Note that RMG collaboration is a key enabler of operational simplicity (see RMG stakeholder risk
be
insufficient engagement wi isruptions to existing ‘ontrolle
Stakeholder programmes (NT)
engagement I Perceived threat of Network Development leads to lack of acceptance by agents and MPs, I Inadequately
(Stakeholder and resulting in industrial action, reputational damage and negative publicity controlled
regulatory risk) I Lack of timely engagement with SHEX and BIS result in delays to approval to deviate from 2020
plan, resulting i in disruptions to plan timelines I Controlled
{- Insufficiently attractive propositions (either due to commercial terms or r complexity of operational {- Controlled ke
Retailer agreements requirements), result in insufficient buy-in from retailers willing to partner with Post Office, hence
(Market and delaying the programme © Imad tel
technology risk {" Operational simplicity dependent on timely completion of product simplification solution build, and nadequately
agreement with I Royal Mail controlled
Market risk that. competitors I react to Network Development by moving 1 more 7e aggressively to {- Controlled
Competitor response .
: secure position (e.g., by lowering prices, filing anti-competitive challenges against POL), resulting
(Market risk) . .
in delays and or cost increases to programme co
12 }
“None
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
LARGE SCALE NETWORK DEVELOPMENT: OPERATING MODELS
POL00027358
POL00027358
To deliver on Network Development, we have developed a range
of new access point operating models
6
BASIC MAILS +
o
ASSISTED SELF-SERVICE
RETURNS ON 8
A PAYSTATION (IVY ONLY)
Accept only :
‘Quick roliout for project IVY Large-scale rollout for Network
Development with product offering
at least as good as competitors
Supports extension in high .
volume locations with limited staff
capacity (e.g. convenience stores
ith high staff cost
Click and collect * Click and collect .
+ 1st/2nd with signed for * — 1st/2nd with signed for .
* Tracked (exact product tbe) * Tracked (exact product tbe) .
+ Billpay + Billpay
+ eTop-up * eTop-up
This access point operating
model used for first pass
overall economics
Online shoppers and parcels .
senders seeking quick drop off in
convenience locations with
Convenience purchases at a :
more accessible location with
extended opening hours
“Online shoppers seeking quick *
drop off in convenience
locations with extended opening
hours extended opening hours
* Customers who want to do billpay
and eTop-up
Paystation and barcode scanner * — Low cost, simple, portable <°" Seif-service tablet with integrated" “*
Weighing scales? hardware with easy to update barcode scanner, weighing scales -
software and printer -
+ ePOS integration possible‘
1 A version of this operating model will be ready in September on a tablet with a limited range of the products using the unsimplified existing customer journeys
2Not exhaustive 3 Currently required by RMG - engaging with RMG to ascertain feasibility of waiving re venue protection requirement
4 ePOS integration is being examined as it is a key retailer requirement but costs are not yet confirm ed. Assumption is higher development cost is balan ced by lower per site hardware cost
h)
SELF-SERVICE
Supports extension in high
volume locations with no staff
requirement (e.g. large
kets wit
th
Click and collect
1st/2nd with signed for
Tracked (exact product tbc)
Convenience purchases at a
more accessible location with
extended opening hours
Options include: ©
Self-service lockerbox
Customer-facing tablet, with
intelligent drop box
SSK, with intelligent dropbox
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
o
13 >
aed
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: OPERATING MODELS
Basic Mails Plus is the primary operating model that will support
Network Development
DESCRIPTION
+ Acceptance only model for sending and collection of parcels, alongside bill pay and eTop-up
+ Customer processes mails transaction online before dropping parcel(s) off at access point
+ Access point simply scans the barcode, issues CoP and stores parcel for RMG collection
+ Bill pay and eTop-up allow significant scope for market share growth and allow retailers to consider
moving to Post Office from competitors
PRODUCTS KEY ELEMENTS KEY OPERATIONAL CONSIDERATIONS
A saree
+ Acceptance only for mails: * Technological solution + Collections
— 18/2"4 class (with signed — Simple and low cost (one-off and on-going) — RMG to collect
for add-on) — Low training requirement — Most likely new access points will already
— Home Shopping Returns — Small in-store footprint; could be ePOS integrated be on existing collection routes
— Click and collect — Easy to update software and open source + Segregation
— Tracked product (possibly — Minimum infrastructure requirements — No segregation at point of acceptance
special delivery but may — Label printed in store (preliminary customer research — Segregation performed by RMG post-
not need time element suggests this could be a USP) collection
with fixed pick-up time) — Low operational requirements + Revenue protection
— International (Airmail) — Retailer cash with direct reconciliation — No weighing or sizing performed at access
— ePOS integration available for suitable major partners point
* Essential non-mails services: + Agent pay — RMG to perform spot checks at mail plants
bill pay and eTop-up — Fully variable * Cash
— Fair market rate — No cash required for mails as payment is
— Simple blended flat rate taken online
— POL should keep a higher percentage of retained margin — Retailer cash for eTop-up and bill pay
relative to locals
+ Product set to be competitive
* Short in-store counter transaction time
a
14 >
nee
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
LARGE SCALE NETWORK DEV!
Emerging insights from customer research validates the
imperative for new operating models and ND...
LOPMENT: OPERATING MODELS
POL00027358
POL00027358
The ‘competitor moment’:
1 the
competitor
moment
occurred in
all
consumer
groups
5. And
almost
everyone
else wants a
piece of it...
now
2
2, Someone
tells a story
about a
competitor
experience
4 Words,
expressions
and body
language all
in syne
Competitors are more convenient and the basic functionality /
services offered resonates with consumers and SMEs
Convenience
Tracking
Insurance
o
Competitors are seen as a more convenient
alternative to Post Office, providing quick drop off,
longer opening hours and online payment
For those using competitors — now not seen as an
additional benefit (almost expected)
Likely to become a basic requirement for most
Expectation that tracking sophistication will increase
overtime (e.g. apps, real-time) and become
commoditised
Although not used by all, for those sending parcels of
value provides re-assurance
Offered as standard by some competitors
Royal Mail/Post Office prices seen as prohibitive for
anything outside of a small, light parcel vs. the
competition
Competitors seen as cheaper than PO for higher
weight steps (and sizes), with straightforward pricing
(especially among SMEs)
tt
%
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
(45 \
197
Sane
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: OPERATING MODELS
... and suggest customers will support new operating
models and ND
Interest sparked by access propositions (particularly among those not currently using
competitors). A competitive offer, bringing Post Office in line with the rest of the market
Perceived to be a quick, convenient and easy way to send/receive parcels. Enables
‘mission’ to be combined
Additional interest after discovering service is by Post Office. High regard and high trust
for Post Office and Royal Mail
Post Office,
brand, must be —
present as has strong.
equity in parcels and
the Access _
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE —
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: OPERATING MODELS ;
However, delivery of these operating models requires RMG
collaboration
USTIVE
* Commercial alignment is required for RMG and POL to work * Work with RMG at the highest level to agree on shared strategic benefits of rolling out
together at pace to deliver Network Development Network Development, and creating the right incentves for both organisations to work
together at pace to deliver ND
to begin mails journeys. RM and POL must agree on which online
solution (RM or POL) i is right for customers:
* Weighing and sizing items complicates and elongates the process * RM have agreed to remove the weighing requirement 6r Returns (for trial only).
for customers and operators. It also increases hardware / equipment * Use trials as a test bed for not weighing (monitorimpact on RM revenue) to build case for
removing this requirement longer term..
* Investigate other methods e.g. revenue protection dsewhere (e.g. at hubs or by RM) and
adopting a sampling approach
* RM fee structures paid to POL do not drive the same behaviours. * Renegotiate fee structures with Royal Mail Group.
Fees paid to POL do not support shared objectives.Per transaction
fees incentive POL to increase volume and RM to ingease revenues
per item
* Collecting parcels from new Post Office access points may incur * Map new locations against current RM collection ponts e.g. pillar boxes, business
additional costs for RM who will look to pass theseon to POL collections
* Allow sub-postmasters to collect from access points(hub and spoke model)
* Track and Trace and labelling. Track and trace connectivity and * Work with RMG to connect CDP to RM track and tracesystems and enable barcode
barcode generation capabilities will need to be egablished to a generation
specification that meets both businesses requiremerts. This will * For Home Shopping Returns, track RM roadmap to ensue all these items include an
allow RM to reduce stock label costs and give cusbmers and embedded barcode
operators a simpler quicker transaction
° Remove /simplify back office processes. Back office processes * Work with RM to understand underlying requirementsand provide easier, lower cost, and .
e.g. printing paper despatch reports for secure mal handover is time- less labour intensive solutions which meet underlyhg requirements
consuming for operators and may incur additional hadware costs.
. Segregating parcels takes up space and takes ‘additional time fo * Segregation of parcels is performed post collectionby Royal Mail or at Post Office hub.
retailer om
cs
7
ad
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: FUTURE NETWORK SIZE AND SHAPE
®
With these new operating models, initial network gravity modeling
suggests that we could have a 2020 network of 27.5k branches
Access Points
Total
3,200 11,800
3,500 27,500
-24 128
23%
-55%
Economics focused on access points I
* Local light model being developed, with current economics based on I
assumptions that Locals Light are simpler and hence cheaper than Locals a
1 Contribution = Income - Agent Fees
2 Net Margin = Contribution — Direct operating costs, branch losses, branch churn costs, POL central support costs
NOTE: Does not include cost reduction in existing qverating models - therefore margin comparisons for existing models and future models are not an
exact comparison. Granular understanding of end stde profitability for existing models will be develq¢ped next quarter o
Source: Network Development economics; Post Office Channel P&L 18
é
eel
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: FUTURE NETWORK SIZE AND SHAPE
Over time, the network will shift away from Crowns and Mains
towards the new, lower cost models
Average income per access point
Community IB Locals
Number of Post Office stores and access points
Access Points [if Mains
© Locals Light u Crowns
7 600 Observations sn
° Product simplification, and
the shift of volumes towards
lower cost channels (Access
Points, Local Light) enables a
reduction in the number of
Crowns and Mains
3,500
* The pace of Locals Light and
Access Point rollout is
determined by operational
feasibility, slightly lagging the
pace of expected revenue
growth initially before
exceeding it in later years,
indicating that by 2019/20 we
have potential for increased
2,900 2,700 0 numbers of access points
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Source: Network Development economics aa
19
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE —
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: PARTNERSHIPS
To deliver the extended network, we have prioritised retailers that
would deliver customer convenience according to a set of criteria
{___2 Top 10 prioritised partners
Strategic priority Likelihood of reaching an agreement pg negotiations pro-
criteria: — Retailer interest in partnership gress, we will gain a
= Network size! ~ Technology fit better understanding
Attractiveness ~ Product fit @-——- Of the likelihood of
of locations? — Commercial fit reaching an
WV = Existing relationship
: > agreement with each
per ~*-Contractual constraints
ea M ae v potential partner
S MORRISONS: Ages ~~
f TESCO Sainsburys
} \ mane o Z
oe
MORRISONS
é , egos
B® Hern CD CF
ID Sch
Likely to reach
_ hes Southern Co-operative agreement but
not top 20
Potential partners Top 20 priority strategic partners Priority strategic partners that
for evaluation based on strategic criteria are likely to reach an agreement
(list is fixed) (list may change over time)
1 Calculated from store numbers and footfall 2 Calculated from potential for cannibalisation, and increase in network coverage 0
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE —
LARGE SCALE NETWORK DEVELOPMENT: PARTNERSHIPS
By the end of the month, we will trial 177 sites, offering a reduced
mails product set supported by Paystations
POL00027358
POL00027358
Product set
Home shopping —
Potential number
of pilots
Additional information
* Small forecourts player for
returns * 79 testing out of new formats
* Home shopping ° 66 * Large multiple with scale
returns
Home shopping * 10 * Committed to convenience
* Home shopping ° 6 ° Spar branded estates
a ae
# Home shopping * 3 * Spar branded estates
[Pmer ” i * Home shopping . 43 * Typically convenience store
independents... returns formats
Total 177
As additional products
become simplified, we will
increase the product range in
these stores
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
LARGE SCALE NETWORK DEVELOPMENT: PARTNERSHIPS
We are developing branding, marketing and communications
materials that will help us share these changes with our partners
POL00027358
POL00027358
«Simplified c Pa «Access to
range of Simplified Ey ~~ / services
mails products ‘Z without
products ‘ 4 assistance
(returns, from retail
send, i Branding of “mini staff
collect) I Post Office” is
_ work in progress
Ln
POST I
* Customers. fii iiiiiland wig OFFICE Better
able to start. I customer
journey proposition
online than
competitors
Improved
customer
* satisfaction
ong so
_
22
4
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Product Simplification:
Product simplification is a critical enabler for access points
What we need to achieve
* Simplification of key product journeys to increaseboth customer and operator convenience, allowing PQ. to offer a compelling customer and operator experience
compared to other parcel providers.
What have we already achieved What will we achieve in the next 3 months
* Build and complete tablet prototype, offering * Further simplification of selected mails
* Prioritised a list of products for
simplification, which will be delivered a limited range of mails products: journeys — a radical simplification for
through low cost, portable hardware e.g. customer and operator in collaboration with
tablet using the Common Digital Platform. Royal Mail e.g. removal of weighing in
* Home Shopping Returns
* Click and Collect access points.
+ Mapped product journeys — meeting current
constraints and ideal end-state —and + 18tand 2™4 Class with/without « Develop online journey to rival competitors’.
developed wireframes. Signed For (purchased using Click
* Simplify the bill pay and e-top up product
& Drop) .
journeys for customers and operators (thos:
+ Special Delivery by 1pm (purchase products to be included in access points).
using Click & Drop)
* Started developing tablet solution
* Android and Windows tablet with
connected peripherals e.g. scales,
scanner, printer. + Technical and user testing of tablet.
+ Resolved some key design issues (e.g. + Begin live roll out of tablet solution as a trial
solution for postage label printing). (end October 2014).
Technology risk: requirement to integrate CDP and Track & Trace leads to delays implementation of product journeys beyord 1st and 2nd class postage,
impacting commercial viability of tablet solution h phase 1. This risk is controlled
+ Stakeholder risk: fundamental misalignment of RMG and POL commercial interests, and / or lack of engagement leads to ddays in radical simplification of mails
products (e.g. remove obligations to weigh and sizeitems in access points), resulting in delays to cbsing deals with retailers and lower than expected aistomer
demand, with a knock on impact on ND roll out and pofitability. This risk has inadequate control
+ Stakeholder risk: lack of RMG and POL agreement on ownership of the font end customer journey leads to lack of agreemert on POL’s Click & Drop as the
online customer channel for POL, resulting in the need to redesign processes built in phase 1 of prodtct simplification (these currently assume Click & Drop as the
channel for purchasing 1st, 2nd Class and Special cblivery), and hence, delays in the programme. The isk is inadequately controlled
(23 \
nee
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
PRODUCT SIMPLIFICATION
We are making good progress delivering simpler and quicker
transactions for our operators and customers
The new customer journey
Priority products for
simplification At home At access point
f
I
i
I
I — Home Shopping
I Returns
I ~ Click and Collect
I Purchased via
I Click & Drop:
I
I
I
I
L
* 18t and 2nd I . *
Class with / I * Customer chooses their
pinout Signed I postage online using Click &
- Special I Drop (for sending products) * Customer takes their parcel to the
Delivery by 7 * Customer is given a unique retail partner new access point
‘pm I code per basket (not item) * Retail partner takes code, checks
es * Customer is emailed payment weight and size, prints label and CoP
receipt triggered by drop off
4
Sane
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Beyond Network Development, we have also made significant °
steps towards capturing Mails eCommerce, improving SME
services, and improving sales effectiveness
What have we already achieved ee We eer eet Ce =
months
Launched a Returns service with eBay * Launch a Click & Collect service with Become the one-stop shop for e-
expected to generate ~£7.6m in income Amazon in September. commerce buyers and sellers, along
Capturing this financial year each stage of the journey —from
eCommerce Commenced integration with Metapack ordering, fulfilment, payment, financial
which may catalyse RMG collaboration services, collections and returns. I
Sales efficiency
SME service
provision
in the Click & Collect market
Launched unprecedented frontline
training and engagement programme,
increasing Mails income by 7%
Up-skilled agents and Crown managers
in sales coaching capability, beginning
from July 2014 and spanning over 500
branches
Put in place plan to speed up roll out
Segmented SME market and identified
target customers (microbusiness, <10
employees)
Prioritised opportunities: initial focus on
core mails offering
Commenced deep dive on the
opportunity areas (mails and FS),
validating them from a customer and
commercial perspective
Speed-up the roll out of training and
engagement programme to reach 4,000
branches
Design the proposition features and
benefits, define the customer
experience and build a business case
for prioritised opportunities
Bbuild a more detailed prototype to
validate with customers, produce a
detailed go to market plan and detailed
5 year business case outlining
investment requirements
Roll out prototype across existing POL
network
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
Appendix — Network Development commercials
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: CON
=RCIALS
Based on current estimates, access points will deliver c. £64m in
income and £21m in net profit by 2020
over time, reaching
£64m income and
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
1 Contribution = income minus agent pay
2 Net profit= income minus agent pay, minus direct operating costs (single site direct operating costs , branch losses), minus support operating costs (10 % churn cost, POL central support)
Source: Network Development economics
aa
27 >
A
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE —
LARGE SCALE NETWORK DEVELOPMENT: COMMERCIALS
The access point network will have a positive NPV of £3m, witha
payback period of 4 to 5 years
POL00027358
POL00027358
EBITDA / Cashflow for new access points (excl. Locals Light)
EBITDA, Cashflow — = EBITDA ; ; :
gm Cashflow Profit margin - new access points
25
20 ee —_———
15 y a —
140 Z NPV1: £3m
7 ’ IRR: 15%
5 ” ile
=~
ee mn
5
-10
-15
-20
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Year
1 NPV calculation assumes 12% discount rate, no terminal value, on 2014/15 to 2019/20 cashflows
Source: Network Development economics
Observations
°
Access points are
profitable on a run-rate
basis, but there are
significant investment
costs in capex, software
development, programme
delivery, etc
Payback period is
therefore 4 to 5 years,
which is longer than
typical POL payback
period of 1 to 2 years
However, some of the
incurred costs will also
benefit the core network
(e.g., by positioning POL
as most convenient
postal service provider
revenues to existing
network increase)
a
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
28
aed
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: COMMERCIALS
Access Point Network P&L: Network support costs total nearly
£1m per year, and churn costs amount to ~£2.5m
£
2013/14 = 2014/15 2015/16 = 2016/17 2017/18 + 2018/19 2019/20 += Comments.
. 059 084 34.84 SAAT 50.54 63.60 12,500 access points by 2020 generating £5k each, with 6 month ramp up for branch
: : se
— " = (030) (5.04) (17.83) (27.89) (3051) (22.68) _S1%of POL income from RM pad to agen, relative fo 61% in Locals & 76% in I
ont) 14) 628). 5S) (6.85)(6.58) £524 per branch, including hardware replacement (£1 76), online transaction costs, I
- 0.21 (3.14) (6.29) (6.55) (6.55) 6.55)
PETE ERA an ; (O21) BH) 629) 88) (655) (655) oftware security, consumables (see single branch P &L)
EEN: = (0.00) 01) (0.02) (0.02) (0.02) (0.02) _ Allowance for losses in branch, matching branch los ses to income ratio of Locals in
2013/14
- 0.08 164 10.71 20.01 22.46 (24.36 /
: : 10% churn of branches at £1,969 per branch, includi ng sales team cosis (£781);
Hees (1-18) (2:36) (2-46) _(2.46) (2-46) branch setup investment (£1,167); equipment recover y from clo I
(091) (091) (Q.91)_ FTE costrequired for support from contracts manage ment (1 F
POL Support - (0.25) (0.65)_-—(0.91)
Access Profit op. profit : (0.17) (0.18) 7.44 16.64 19.09
£1,167 per branch ine. upfront hardware costs (C606), signage (£295), localmkting I
Branch Setup investment 7 oar) (6.53) 7.00) (0.88) : ~ (£200); off-site commissioning (£66) (see single branch P&L)
Program implementation - (409) (1.67) (1.57) (01) (0.01)
Team —— ect implementaton I
Program Control (4.18) (0.25) - - - FTE resources required to support program management office I
Sais team (mmuttipies) =A) (00) (020) (020) . . 40% a acoess points in matiples (4,900 by 2020), 5 dedicated sales FTE until March
Network modelling (0.05) (0.10) (0.10) (0.05) - - 2 FTE resources required to support network modelling during roll-out
Customer research - (0.25) - - - - - Customer research costs only, other marketing costs for in single branch P&L
= (9.88) (18.27) (14.88) (1.06) (0.01)_——(0.01)
: (8.7) (48.5) (7.4) 15.6 19.08 20.97 _
= 7g
1 Assumed to match current NT excluding scoping, no business pian, no interview, no ergonomic or disab ility requirements, no physical deployment engageme nt and no CF involvement <A
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE ~
Source: Network Development economics
LARGE SCALE NETWORK DEVELOPMENT: COMMERCIALS
POL00027358
POL00027358
Single Access Point P&L: Access points generate £5k per annum,
with profit of £2k
2,255
815
231
1,074”
90
48
349
302
4 th.
POL product revenues ee _ “te Post Office oR
Mails _ : oe 4,039
° A. Home Shopping Returns 1,060
* B. Collections 356
* C. 1st/2nd Class Labels 2,296
* D. Special Delivery 178
* E. International 150
Financial Services 1,049
* A. Billpay 984
° B. eTop up 66
Total Revenue 5,089 con
POL product agent fees
* Mails 2,255
* Financial Services
Total fe
* Labour
~ Retailer Wages
-- Ongoing Retailer Training .
° Hardware Maintenance/Support
* Ongoing Operational Costs
Total Operating Costs
POL PRODUCT PROFIT (LOSS)
Retailer revenue uplift from footfall
Retailer Product Costs
* Hardware
~ Upfront cost
* Tablet + secure docking station
+ Scanner & card reader
+ Label printer .
— Access point commissioning (delivery)
i Operati ~~
Total upfront investment
~625
-150
-276
“4,051
4,552
6,228
Retailer
Assumptions
* Assumes current MDA rates for Mails products,
existing supplier rates for Billpay & e-top up
+ Transaction volumes modeled from Network
Gravity model accounting for 2020 Strategic Plan
income
. Assumes 35p flat rate per parcel, POL Locals
rates for billpay and etopup
20s per standard mails transaction; 60s per
special delivery transaction; 1.5 hrstraining for 10
staff each year; £10/hr staff cost
“+ Assumes 2 yr lifetime for tablet (£100), 4 year
lifetime otherwise .
* £28 0n consumables, £276 online transaction
costs, £25 asset management costs, £18 user
charging; POL broadband cost (for retailer)
* 64% of customers are new to store, 50% make an
in-store purchase; £3 average basket size; 25%
gross profit margin for retail (assumptions in line
with Collect+ public data on revenue uplift
+ £200 for tablet, £100 for docking station
* £48 for scanner, £31 for card reader
+All hardware costs benchmarked to EUC
+ Off-site commissioning costs
+. Signage (£295), leaflets (£200).
Post Office® Does not include project cost , delivery team, shared services, central costs
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: COMMERCIALS
Given high levels of uncertainty, we have also assessed the
commercial impact of major risks, as well as additional upside
. Most likely scenario, based on * As in previous pages
evidence today
Major risks
Other levers
from other levers <> Unchanged from base C_ Lower than base <> Higher than base
‘Singte
Access Point
Description Scenario assumptions 2020 EBITDA NPV Profit Margin
* Income: Downside in RMG payment ° For the access point network to breakeven on NPV,
I
to POL for access point products, POL can at most a 6% reduction in RMGincome
I : gus to rebalancing of payments * For the single site access point to break even, POLcan
I Royal Mail P 7 tolerate at most a 49% reduction in RMGincome
I * Costs: Lack of collaboration by * Additional £1,485 operating costs and £325investment
I RMG could increase costs costs per branch to be borne by POL and retaile?
* Variance in transaction volumes due * 76% decrease in transaction volumes on base case!
Transaction to market movements, operation _. —_ I ae
excellence, etc f
Volumes * 41% increase in transaction volumes on base case!
* Product development costs shared ° £10m of product development capexallocated to core
joecass across POL, as benefit accrues to POL
ce SMITE MONWOT ee ee nn ne nn ne en
“Start-up” * Further reduce all operating, * Reduction of 14% operating cost, 27% upfront cost
Operating investment and program costs to a from: No costs for consumables; branch
model minimum, as if this were a start-up commissioning; branch user charges; tablet
business management; network modeling; customer research;
50% reduction in cost for marketing
ePOS * Development of ePOS integration * ePOS integration in place for 50% of multiple partnes.
i integration eliminates need for hardware capex (20% of access point network); at £925k development
I and maintenance costs costs ( £370 per branch), replacing £1,167 of
investment and £176 of operating costper branch
Low cost sales * Radical change infield team model ° 50% reduction in independents sales force costs
force to support roll-out to independents,
e.g., online only support
1 See backup on transaction volumes for detailed sc enario assumptions; 2 See backup on Royal Mail costs for detailed scenario assumptions
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
Source: Source
LARGE SCALE ‘Ourba DEVELOPMENT: COMMERCIALS.
Royal Mail:
agents to remain competitive
ur base case assumes that POL will receive the full
“sale and accept” income from RMG, and pay market rates to
POL00027358
POL00027358
£ per transaction
Post Office “Sale &
Accept” Income from
Royal Mail
PO Locals Agent Fee
Collect+/PayPoint
Agent Fee (estimate)
Access Point Agent
Fee
7 Sale & Accept f Accept only
TIT ll
—————————
Source: Post Office income factors, Post Office esimates of agent fees based on public data and feedtack from retailers and clients
emer 6 ce
0.6% of transaction
value
4% of transaction
value
0.16
0.35
0.5% of transaction
value up to 13p
0.5% of transaction —
value up to 25p
4% - 5.5% of
transaction value!
0.35
0.35
0.35
0.35
0.35
0.35
0.6% of transaction
value
0.08
4% of transaction
value
0.08
We estimate market
rates to be around 35p
per parcel, and
therefore agent fees
will match that; this is
lower than the ~44p
weighted average per
parcel POL pays to
existing Locals
However, profitability
depends on POL
receiving the full “sale
and accept” income
from RMG, as we
assume that customers
will use our online
platform
Should POL income
decline as part of
overall pricing
renegotiation with
RMG, agents pay and
profitability will be
affected
a
32
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
aed
POL00027358
POL00027358
LARGE SCALE NETWORK DEVELOPMENT: COMMERCIALS ; ;
Royal Mail: Lack of collaboration by Royal Mail could increase
operating costs by £1,485 and investment costs by £325 per access
point, to be borne by both POL and the retailer
ncludes costs borne by the retailer e.g., staff time I
Base case
1,575
operating costs Base case upfront 1.167
investment costs ,
Parcel Collection’ 600
Parcel Weighing? 318 Scales 300
Parcel Segregation? 146
CRB Checks? 130 Scales delivery 25
Additional Barcodes® 291
Potential increased 1.492
Increased 3,060 investment costs :
operating cost i 2
—p— Costs borne by retailer, e.g., ap
_ in increased staff costs due
I to longer transaction time
1 If the number of additional collection locations exceeds 10% of current as permitted through MDA (i.e., over~1000 new collection points), Royal Mail
may charge up to £600 per new collection point;
2 Weighing introduces scales (£173 maintenance & ongoing replacement cost on top of investment;) and ~5s additional transaction time (~£146p.a.
assuming base case transactions)
3 Adds ~5s transaction time (~£146 p.a.); 4 £26 per CRB check, ~5 staff per year; 5 Adds ~10s transaction time (~£291 p.a.) _
Source: Single Access Points Economics Model 33
é
aed
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
LARGE SCALE NETWORK DEVELOPMENT: d low cases
Transaction volumes: High an
volumes were developed based on public data on
ow cases for transaction
PayPoint/CollectPlus volumes, and Post Office data on Locals
POL00027358
POL00027358
Pe
300 Billpay and
etopup transactions
per week based on
Paypoint website (8m
reported customer
visits for 26,700
paypoint outlets”)
Based on sample
transaction volumes
from 24 post office
locals in June 2014
Volumes include
~ Billpay, etopup,
~ Selected mails (1st
and 2nd class
labels accept only,
HSR, Click and
Collect, Airmail)
Assumes mails
volumes equal to
Collect+
Assumes no Billpay
or etopup (e.g., if host
retailers already
providing this service)
°
Sensi
Assumes mails
volumes based on
latest network gravity
model
Assumes Billpay and
etopup market share
is unchanged but
distributed over
greater number of
branches and access
points (25k is 2020
size of network)
°
.
Assumes mails
volumes based on
latest network gravity
model
Assumes POL
regains market share
in Billpay and etopup
and grows revenues
to £50m in 2020
Source: Paypoint website; Annual reports; Sample of 29 news agents
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
_
34
4
LARGE SCALE NETWORK EXTENSION: COMM
RCIALS
Transaction volumes: Even if transaction volumes fall by 50%,
access point profitability will be better than Locals today
POL!
POL00027358
00027358
Profit
°
3,500
3,000
2,500
2,000
1,500 I
1,000 .
500
ee
-500
~« Mails products only —~
500 1000
Low transaction
volumes scenariot
Trans. Volume: 49 p.w.
2000 ©2500
3000
. Billpay & .
e-Top up
3500
40 5500
6000
2 Transaction volume scenarios
6500 7000 7500
Profi gin:
Trans. Volume:
— Mails: 126 pw.
~ Billpay/etop: 79 p.w.
fo
High transaction
volumes scenario®
Profit margin: 44%
Trans. Volume: 296 p.w.
Profit margin: 23%
Trans. Volume: 54 p.w.
Trans. Volume: 126 p.w.
Profit margi
Trans. Volume:
Mails: 181 p.w.
Billpay/etop: 148 p.w.
1 76% decrease in transaction volumes on base case, assumes only HSR, Collections, 1st/2nd Labels; 2 As sumes full Basic Mails+ product set; 3 44% increase in transaction volumes on base case
Source: Single Access Points Economics Model
es
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
35 }
aed
LARGE SCALE NETWORK DEVELOPMENT: COMMERCIALS . a
Relative to the “do-nothing” scenario, network extension will improve
EBITDAS by £26m in direct benefit, with additional upside of £112m
from extending product simplification through the network
POL00027358
POL00027358
incremental direct benefit, 2020
£m Description
Mails income defended 51 * Direct Mails income through 12,500 new Basic Mails+ Access Points
in Access Points
Additional Mails income 35 * — Mails income through existing network (Mains, Locals, Locals Lights,
due to "Network Effect" Community) as a result of Mails income
Malle incoine defended : * £86m income recovery enabled by Network Development (£4m from
‘i b He d I fC collections, £16m from returns, £52m from postage, £14m from reducing failed
(Sune Bostyy deliveries)
Additional upside from 43 * — Direct Billpay & e-Top up income through 12,500 new Basic Mails+ Access
Billpay income in Access Points
Access Point network costs 43
Existing network costs 30
Net direct beneft
Indirect benefit / benefit partially attributable to Network Development, 2020
£m
Points
Opex cost of new Basic Mails+ Access Points
Weighted opex cost of existing network to deliver £35m additional Mails
income due to “Network effect’
Description
Channel shift benefit 14
Product simplification benefit 98
indirect benefit partly 412
attributable to ND
Source: Network Development economics; team analysis
£113m of revenue shifts from existing branches (Mains, Locals, Community)
with weighted average opex of 88% to new branches (Local Light) with
weighted average opex of 75% (exc. Income due to “Network effect”)
Assumes a 20% saving on agent fees in Mains, Locals , Community, and Local
Lights
pe
36
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
ed
bal
Confidential
POST OFFICE LTD BOARD
Digital update - September 2014
. Purpose
14
initiatives shared at the June board meeting.
. Summary
24
on track.
2.2
2.3
2.4
programmes.
. Activities completed
Design Lab at Southbank University opened.
Update on key initiatives completed.
POL00027358
POL00027358
The purpose of this paper is to give a brief update on progress against the digital
Common Digital Platform: All activities aligned to ebusiness/RMG separation
Digital trials in support of branch of the future concepts mobilising Sept/Oct.
Digital strategy work being scoped to align with key business transformation
Initiative Status Next steps
CDP Release 2 — Integration of I Completed in July. N/A
new content management
system. Delivery of core
architecture. CDP elements of
mails online.
CDP Release 3 - Full, Completed in August. N/A
production ready platform
released.
Southbank University Design
Lab
Opened in July and hosting
stakeholders from board,
exec, stakeholders,
business teams.
Fully operationalise Design
Lab to act as working
prototype branch of the
future.
Activities/Current Situation
Update on key initiatives in progress.
Initiative
Status
Next steps
Mails Online / Click and Drop
Final changes being made
from further customer
testing.
Soft launch to model office
Sept 15. Live to customers
Oct 6. NB still subject to
Royal Mail approval.
CDP Release 3.1 - Separation
of Rod Fishing Licences.
On track for go live
08/10/2014.
Completion of testing and
business readiness steps.
Digital update - Sept 2014
Martin George
Page 1 of 2
1 Sept '14
Confidential
POL00027358
POL00027358
CDP Release 4 - Use of
www.postoffice.co.uk on the
Accenture platform before final
separation date from Royal
Mail.
Agreed with Royal Mail and
on track for delivery as part
of CDP Release 4 at end
October.
Joint management by Post
Office/Royal Mail
Separation team to engage
Capgemini and Accenture
to implement.
CDP Release 4 -
redevelopment and rehosting
of Post Office content and
standalone website tools on
CDP.
Content migration on track.
Completion of development
ready for testing.
Completion of business
readiness plan ready for go
live.
CDP Release 4 —
redevelopment and rehosting
of Branch Finder on Accenture
platform.
Development on track.
Some challenges re. fixing
issues with existing
implementation.
Assessment of underlying
data structures to ensure
accurate opening hours can
be displayed.
Wi-fi in branches
Installation of Wi-Fi
capability completed across
17 branches. Not yet live to
customers.
Customer facing Wi-Fi live
by early October.
Agree additional 8 locations
(including Supply Chain).
In branch Queue management
Trail to be limited to Hitchin
branch in first instance.
Implement into Hitchin by
mid-October.
Network Development
Prototyping under way to
support extension and new
access points.
Working prototype due end
September.
New Initiatives
Status
Next steps
Completion of digital/omni-
channel strategy
Replanning to ensure
alignment with Business
Transformation and
Network development work
streams and mobilise late
September.
Align with Business
Transformation and
Network development work
streams and mobilise late
September.
Website and product
application optimisation
Proposals being put
together to improve
conversion rates of online
application forms
Target to begin work mid-
late September to drive in
year benefit.
Queue Sensing in-branch (2
suppliers)
Proposals currently being
agreed
Install into 20 branches by
end of October
5. Next steps
4.1 No approvals needed.
4.2
Digital update - Sept 2014
A full update will be given at November board
Martin George
Page 2 of 2
Martin George
01 Sept 2014
1 Sept '14
POL00027358
POL00027358
Confidential
POST OFFICE LTD BOARD
SME Proposition Strategy Update
1. Purpose
The purpose of this paper is to:
11 Update the Board on progress since June.
1.2 Provide timelines for delivery and content for November Board.
2. Background
2.1 Post Office has an estimated 2 million (40% of total market) SME’s visiting the
branch network on a weekly basis and this customer group contributes 15% of
total revenue.
2.2 SME revenue is primarily driven through mails services, though limited customer
data is held due to a limited number of these customers registering for Drop &
Go.
2.3 Other products and services are available for SME’s but have not historically
been launched based on customer/market need. As a result, Post Office does
not have a cohesive and relevant proposition for this market and are is not
currently seen as a credible business services provider.
24 Given the size of opportunity and scope that Post Office has to win in this
market, a project was started in May consisting of four phases and follows a
proven and highly iterative framework to confidently deliver a proposition set;
firmly based on customer need, market opportunity, internal/partner capability
and commercial value.
2.5 In June we presented to the Board a hypothesis for our SME strategy based on
early stage insight along with the forecast commercial value for this segment
from 2014 - 2020.
3. Activities/Current Situation
3.1 The process we are following is highly iterative, keeping the customer at the
heart of our development. Below is a summary of the four phases of the project,
associated timings and what has been completed to date -
3.2 Phase 1 (complete) — the aim of this phase is to segment the SME market and
understand who our target market is, gather customer and market insight and
identify prioritised opportunities for the Post Office. Outputs of this phase are
detailed below and within the attached executive summary deck:
« We will be targeting micro businesses (<10 employees)
e Specifically focus on start-up, lifestyle and growth segments, with a
particular focus on the e-commerce vertical
SME Strategy Update Martin George September 2014 Page 1 of 3
POL00027358
POL00027358
Confidential
e High level insight told us that SME’s do not see the Post Office as a
credible business service provider and that we must focus on getting our
core mails offering fit for purpose before being considered for wider
products and services, meaning that pricing, engagement, acquisition
and servicing in mails must be the focus for 2014/15
e This will give us the platform and portfolio of customers to credibly deliver
a Financial Services proposition to the market
e Based on depth interviews with SME’s, market opportunity and internal
ideation, Mails and Financial Services were the areas prioritised
3.3 Phase 2 — The aim of this phase is to deep dive on the opportunity areas (mails
and FS), validating them from a customer and commercial perspective and
identifying concepts that can be tested with customers. Components of this
phase are detailed below:
Deep dive customer research on mails and FS with over 30 SME’s
Proposition co-creation sessions with over 20 SME’s
Identify commercial opportunity for each area
Generate ideas and testing with customers to inform proposition design
Completion date - 12"" September
3.4 Phase 3 — this phase will explore the concepts identified further, to design the
proposition features and benefits, define the customer experience and build a
business case. Outputs of this phase are detailed below:
e Stretch and build initial concepts and convert them to a detailed
proposition set in collaboration with Bank of Ireland and Royal Mail
e Bring the proposition to life through customer experience design
e Deliver a working prototype of the propositions using a combination of
visual storyboards, clickable wireframes and collateral mock ups to test
with customers
e Identify commercial implications and capability gaps (internally and
partners)
e Build a business case and identify cost drivers
¢ Completion date - 3 October
4.5 Phase 4 — this phase will build a more detailed prototype to validate with
customers, produce a detailed go to market plan and detailed business case
outlining investment requirements. Outputs of this phase are detailed below:
Identification of minimal viable proposition and detailed roll out plan
Go to market plan and implementation roadmap
Defined customer marketing, channel and distribution strategies
Fully functioning prototypes for the user experience and user interface
which will be fully tested and enhanced through multiple rounds of
customer testing in collaboration with Bank of Ireland and Royal Mail
e 5year commercial case, including investment requirements
e Project completion date — 31° October
ooee
SME Strategy Update Martin George September 2014 Page 2 of 3
POL00027358
POL00027358
Confidential
Commercial Impact/Costs
5.1 £95,600 already spent for delivery of first phase.
5.2 A contribution of £95,600 from Eagle funding (Bank of Ireland) has been
approved and budgeted for.
5.3 A further £222,800 is required to complete this project.
5.4 The proposition framework used for this project will be embedded into the Post
Office, removing the need to work with an external consultancy firm on future
proposition development and any associated costs.
5.5 Detailed commercial impact and development costs will be determined through
the process and will form part of the final output.
Key Risks/Mitigation
6.1 To be determined through the process and detailed in final output.
Recommendations & Next Steps
7.1 The SME proposition strategy work will be presented at the November Board
session for final approval.
7.2 The presentation in November will clearly articulate the SME proposition
strategy, the 5 year commercial impact, risks and dependencies, go to market
plan, delivery roadmap and fully functioning prototypes to bring the propositions
to life.
Martin George
3" September 2014
SME Strategy Update Martin George September 2014 Page 3 of 3
POL00027358
POL00027358
Strictly Confidential
POST OFFICE LTD BOARD
Corporate Insurance Programme 2014/15
1. Purpose
The purpose of this paper is to:
1.1. Share the output of a review of the insurance position and recommend the basis
for insurance renewal for the period 1 October 2014 to 30 September 2015; and
1.2. Update on the appointment of an in-house insurance and risk management
professional to manage the insurance programme, in light of the current cost
reduction programme.
2. Background
2.1. This is the third anniversary of the PO stand-alone Insurance Programme
following the split from the RMG insurance programme in September 2012.
2.2 PO has worked with insurers on the largest risks (Crime, General Liability and
Motor) in order to keep Insurance costs to a minimum whilst enjoying appropriate
cover to meet our risks.
2.3 An insurance review has been commissioned to ensure that key risks are insured
and to identify whether any enhancements to cover or premium savings can be
achieved now we have improved risk and claims information.
2.4. PO has had no major claims in the last 24 months. This has enabled us to be
more proactive with Insurers over pricing and coverage.
2.5 PO has built up discrete claims data over the past two years. Historically this
was an issue because it was not possible to separate PO from RM’s data.
3. Key Insurance policies
3.1. The key corporate insurances currently in place are (more detail at Annex 3):
« Crime
e Directors and Officers Liability
e Property Damage/Increased Cost of Working
° Terrorism
«¢ Employers Liability
e Public Liability
«¢ Motor Fleet (Commercial and Private)
e Cyber Liability (specific Government Contracts only)
e Professional Indemnity (Government Contracts only)
« Personal Accident/Travel
e Special Contingency
4. Claims
4.1 This has been the second strong year for PO with regards to claims, with far
fewer claims notified than envisaged in the last 12 months.
Corporate Insurance Chris Day Page 1 of 8
Programme September 2014
POL00027358
POL00027358
Strictly Confidential
4.2 It should be noted that PO now has clear claims procedures in place, with QBE
handling all liability and motor claims. This has led to a substantial drop in
amounts paid out in claims since RMG managed the process. Full details are
attached in Annex 2.
5. Summary of Insurance Review
5.1 A review has been undertaken of all the major risks and relevant insurance
policies. Full details are contained in Appendix 1, however in summary, the main
findings of the review are:
Our insurances are fit for purpose
Some policies will not be renewed (Contractors All Risks)
Looking at reducing deductibles where there is no impact on premium
Leveraging our risk and claims data to reduce premium where possible
We are obtaining quotations for Professional Indemnity Insurance across POL
eee ee
5.2 The review will be updated to reflect the findings of the PWC report.
6. “In-House” Insurance Resource
6.1 As our risk profile changes and as we execute our strategy, it is important that,
where possible, our insurances are aligned to our risks. Whilst our Insurance
advisers and insurers provide support to us with our day to day requirements,
consideration has been given to investing in a full time “in house” Risk and
Insurance manager.
6.2 This post would enable us to constantly review our insurable and non-insurable
exposures and also manage our external insurance partner relationships.
Alongside this, we would be able to align our risk financing strategy to our
internal risk register (where given the confidential and sensitive nature of the
detail, this should remain internal) together with meeting our corporate
governance responsibilities.
6.3 This role is in line with comparable companies of PO size and complexity. A
strong candidate has been identified but as the cost would be c.£100k pa it is
recommended that this decision is incorporated within Business Transformation.
7. Recommendation
The Board is asked to agree:
7.1 Renewal of insurance policies as set out in Annex 1.
7.2 Future renewal authority is delegated to Chris Day.
7.3 That the decision of recruiting dedicated insurance resource is incorporated
within Business Transformation.
Chris Day
September 2014
Corporate Insurance Chris Day Page 2 of 8
Programme September 2014
Strictly Confidential
POST OFFICE LTD - INSURANCE REVIEW - AUGUST 2014
POL00027358
POL00027358
APPENDIX 1
RISK (currently insurer/
insured) Premium Covering sductible Additional Comments/Recommendations Recommendation
PROPERTY DAMAGE [ZURICH fall oss or physical danage to POL [GBPim each and Jrroperty risks nave been strongly managed historically with no claisJRenewal negotiations with holding Insurer Zurich continue
1e134,620 properties as declared including —_layery loss [recorded. POL have worked with Insurers to upgrade Swindon's risk and we anticipate a 6 X reduction in prenium on expiring
Buildings and machinery, stock and lprotection to help mitigate risk and bring into Line with market [terms (circa 15% reduction against original 213 premium).
contents and Increase cost of working standards. The coverage is essentially now catastrophe cover for Recommendation is to continue at Lowest premium.
(acow) JPoL's larger locations. Continuing with this insurance should be setI
lagainst POL"s risk appetite to meet a total loss of a large location]
(e.g. Swindon) .
TERRORISM POOL RE [This provides the “buy back” coverage [GBPIm each and [POL could have ® legitimate exposure through its parcel handling in Iihe preniun for Terrorism is based on @ pure formula oF our
152,821 It loss or damage to POL properties adevery loss loranch, as well as being seen as a Government/high profile target. Isum insured (values). We are obtaining an alternative
a result of terrorism. (This is consideration should be given as to whether this coverage is require{quotation from Lloyds which enables us to select the
Jexcluded under the standard property lacross the POL insured estate (Crown offices). properties we wish to insure for Terrorisn. Recommendation
policies) is to only insure our Locations above GBPSm in value (Large
loffices and Cash centres). We are anticipating that we coul
lachteve at Least a 10¥ reduction in premium against 2613
lpremiun.
[CONTRACTORS ALL [ZURICH Tt is debatable whether POL need this coverage, which is historic, [Recommendation 1s to NOT renew the policy this year:
RISKS 66,478 Typically when refurbishnent or construction work is carried out, th
Contractor would purchase the coverage on behalf of the Employer (inI
this case POL).
EMPLOYERS Org ability to enployees for Injury oF IOBPI5OK each Iihis 1s a statutory requirenent, There Iss GPS million Limit of [PO are entering year two oF a two year “Long Term Agreenent]
Jdisease arising out of, or in the Hindennity lwith insurer Q8E. whilst this would typically mean that the
LIABILITY £251,750 course of, their employment jand every loss rates would remain unchanged, we have persuaded QBE to
reconsider. Reconmendation is to continue at Lovest
premium.
PUBLIC/PRODUCTS [OBE egal Liability (loss injury oF aaP25OK Gach [This policy has @ GHPSO million limit of Indennity. whilst there hawas above
LIABILITY included Idamage) to Third Parties arising out Jang every loss [been few clains, it is important that coverage 1s maintained as it 3I
sbove fof business activities lfelt that POL do have an exposure (and there 4s a requirement in a
lnunber of existing contracts that POL has this insurance).
MOTOR FLEET BE Tegal liability for loss, damage, GaPa50k each [this is a statutory Insurance, Current policy is “Third Party™ [As above
£484,632 injury or death to third parties land every loss [coverage only.
CRIME LLOYDS [infidelity oF Employees, all Property IGBPim each and [This is POL"s Iargest Insurance spend and one that is managed lwe have reviewed our Insurance requireneats with Supply
1e808,780 I(as An financial instruments) of POL levery loss lcarefully. This is a bespoke insurance that provides both First part{chain, who have agreed that a reduction in limit to G8P400m
jor any Third Party whilst in any POL (POL loss) and Third party Insurance for all cash and financial is acceptable and meets our risk exposure. Given the nature
jprenises or in transit. Forgery and instruments. The Bank of England treat POL in a unique way in that fof the insurance, this reduction does not provide an
alteration, counterfeit currency, Po are required to purchase insurance to the FULL VALUE of the banklequivalent saving on the premium. Tt 4s anticipated that we
Idamage to cash carrying vehicles, Inotes in circulation. Reduction in Limit to GBP4@@m (from GBP6@@m) ijwould achieve a 5% reduction in premium spend for reducing
loffices and contents, forged lappropriate for renewal 2014. lthe Limit and recommendation is to renew at that premium
securities and interest receivable an
Jor payable
DIRECTORS AND [de [covers the cost of compensation claim Hhis is a key risk and one that has been in place as a stand alone [We anticipate that renewal will be flat in terns of premium
OFFICERS [£68,900 _Inade against POL’s directors and key Jcoverage since 2013 (previously with RNG) lLast year we had no retroactive coverage, however this year
Inanagers (officers) for alleged lwe have one year, meaning that this “tail” will negate a
LIABILITY lwrongful acts. Jdiscount. We continue to negotiate with insurers however it
should be noted that any discount would be below 5%.
lReconmendation is to renew at that premium
Corporate Insurance
Programme
Chris Day
September 2014
Page 3 of 8
POL00027358
POL00027358
Strictly Confidential
RISK (currently Insurer/
insured) Premium — covering Deductible Additional Comments/Recommendations Recommendation
DIRECTORS AND [OBE Covers the cost of compensation clains Finis as a key risk and one that has been in place as a stand alone Jie anticipate that renewal will be Flat in terms of premium,
OFFICERS £68,900 rade against POL’s directors and key coverage since 2013 (previously with RNG) Last year we had no retroactive coverage, however this year
lnanagers (officers) for alleged lve have one year, meaning that this “tail” will negate 2
LIABILITY lwrongful acts. ldiscount. We continue to negotiate with insurers however it
should be noted that any discount would be below 5k.
Recommendation is to renew at that premium
PROFESSIONAL tg Feast Uisbinity arising oof oF ay Iaprasak each Fo Ge reviewed ogalnst 9 POL wide policy. This Is # contractual ffegotintions with insurers continue. We are seeking Between
£36,362 negligent act error or omission in theland every loss Ireduirenent. was NOT purchased under RNS. 5-10% premium reductions where possible as there have been
INDEMNITY (GOV lcourse of business activities. this y Jno claims. It should be noted that this coverage would be
CONTRACTS) linsurance provides cover for included within any POL Wide policy and would be cancelled
GOVERNMENT CONTRACTS ONLY should we take up the wider option. Recommendation is to
renew at that premium initialty, include POMS when
lappropriate and rest of PO if premium is sufficently
lattractive.
PERSONAL [cuuse I his policy provides Personal Accident] [This is standard coverage but has an extension that provides @ this is @ small coverage within the portfolio and are
64,038 and Business Travelcover, and extends payment to Sub Postnasters if they are injured or permanently Janticipating a flat renewal. This is a minimal insurance
JACCIDENT/TRAVEL lto include sub postmasters and their Jdisabled as a result of a hold up spend against the benefit that is provided. Recommendation
lsubstitutes and those who work under I jis to renew at current premium.
lrranchise contract
CYBER LIABILITY [LIBERTY cyber Tiability Insurance covers both Finis coverage 1s purchased exclusively for the DVLA and Border Hhis coverage does not renew until April 2015,
Jé95, 409 [POL and contract partners against loss lcontrot. Government contracts
? jor damage caused by hackers, viruses
land data theft. This insurance
lprovides cover for the DVLA and Border]
control contracts only
SPECIAL TEBERTY —[eidnap and ransom Finis is @ historic insurance, confidential in its nature but It 1 Jue are reviewing the possibility oF including this coverage
11,872 considered that POL has a great enough risk to warrant the purchase. Iwithin the CRIME policy as well as looking at alternative
ICONTINGENCY stand alone quotations. Discussions are ongoing. Unlikely
lto be any premium reductions on this separate policy as we
Jare at minimum premium level for the risk.
Corporate Insurance Chris Day Page 4 of 8
Programme September 2014
RISK (not
currently
insured)
Covering
Strictly Confidential
Additional Conments/Recommendations
POL00027358
POL00027358
Recommendation
lpolicy would include: wrongful
ltermination, discrimination, sexual
harassment, and retaliation)
BUSINESS Business interruption insurance covers we do not believe that POL have an exposure at this tine, hovever [Recommendation 1s risk retained by PO.
lthe loss of income that a business recommend that this be tested (Major loss scenario test) to identify
INTERRUPTION lsuffers after a major Property loss lif there any gaps/exposures.
PROFESSIONAL legal Liability arising out oF any Jas PO's structure and business model changes, this coverage becones ue have had preliminary discussions with the Market who have
INDEMNITY - POL negligent act error or omission in the lnore relevant, both conmercially and contractually. With the arrival indicated that @ G8P 1@ million policy with a G8Pin
- lcourse of business activities. lof POUS and replacement of BOI, there will be a perceived increase in Ideductible each and every loss would cost between GBP250-
WIDE risk around the financial products. seek (However, PO would save GBP35K premium by “rolling in”
lthe existing PI coverage within this). Recomrendation is
Irisk retained by PO.
EMPLOYMENT fimploynent practices Liability Finis coverage should be considered if there are any major staf? or [uhilst we have not approached the Market for a formal
linsurance covers wrongful acts arising structural changes identified in the future as part of your long term quotation, as a guide, we are advised that a G3P 5 million
PRACTICES lfrom the employment process (e.g. lsstrategy. Whilst there may not be a risk at this time, it is one to policy with a GaP15ek deducible each and every loss would
LIABILITY ltypical claims covered under an EPL keep on the radar. This risk would not be picked up under any other cost circa GBP75k. Recommendation is risk retained by PO.
Po insurance programme.
CYBER LIABILITY -I
POL WIDE
lGyber Tiability insurance covers both
JPOL and contract partners against loss
lor damage caused by hackers, viruses
land data theft
lue believe that Data security and Data integrity is a key risk for
Po. Whilst there are robust internal controls to manage this risk,
serious consideration should be given to purchasing some level of
linsurance protection in the event of a major data breach or “cyber”
related incident.
Jue are Seeking an “indication” from PO's existing Goer
linsurers for a POL wide policy. Initially, we are looking at
Ja quotation for a minimum GBP1@n limit of indemnity. The
premium should be balanced against the risk PO have within
ithe business. Recommendation to insure if premium not
Jnaterially higher than existing cover
PROPERTY DAMAGE
(assets below
IGBP1m)
JAI loss or physical damage to POL
Jproperties including Buildings and
Jnachinery, stock and contents and
Jadditional cost of working (ACOW)
[losses of any PO property below GBPim not perceived to be business
lcritical with enough capacity within the network to use alternative
lsites in the event of a loss. However, the aforementioned major loss
scenario test would identify the robust nature of this strategy
Reconmendation is risk retained by PO.
Corporate Insurance
Programme
Chris Day
September 2014
Page 5 of 8
Strictly Confidential
POL00027358
POL00027358
APPENDIX 2
Claims recorded under the POL insurance programme are as follows: All other policies are claims free
Motor Fleet -
Claims Summa:
Grand Total
Employers/Public
Liability Claims
Summary
: Po ber 0 . os
9 eco . :
7 £8,200 £0 £46,146 £46,146
£33,961 £0 £140,539 £140,539
Employers’
Liability I 2 £360 £0 £20,394 £20,394
. 10 I £10,352 £0 £43,252 £43,252
Corporate Insurance
Programme
I £10,7
Chris Day
September 2014
Page 6 of 8
POL00027358
POL00027358
Strictly Confidential
APPENDIX 3
Brief synopsis of Insurance cover
1. Crime Insurance
1.1. PO historically has one of the largest stand-alone Crime policies in the UK
insurance market, insuring to a limit of GBP600 million, and is a requirement for
membership of the Bank of England’s Note Circulation Scheme. The policy
covers all risk of crime including theft by employees. The policy carries a
GBP1million excess and is insured by QBE and others. This is PO's largest
external premium spend. Following a review with Supply Chain, we are able to
reduce this limit to GBP400million for the forthcoming year saving a potential 5%
of premium.
2. Property Damage/Increased Cost of Working/Terrorism.
2.1 PO has a Property Damage policy, insuring the full value of properties valued at
above GBP1m. There is a GBP10 million increased cost of working limit. There
have been no claims.
2.2 Zurich is the insurer and there is a GBP1million excess on the policy. Pool Re
insures the Terrorism which mirrors the Property Damage policy.
2.3. We have obtained alternative quotations from several Insurers, the most
proactive being Travelers who spent a day at PO Swindon and subsequently
offered wider coverage, a training programme for PO staff at our insured sites
and a saving of 15% over the original 2013 premium. Our existing insurers
Zurich have subsequently offered a 11% rebate to reflect the risk improvement
activity at Swindon to close the premium gap. We are anticipating a further 6%
reduction at renewal. We are also looking at whether we are able to reduce the
GBP1m deductible without cost and introduce an aggregate limit to cap PO
exposure.
3. Combined Liability Insurance (Employers/Public Liability)
3.1. PO has a combined Liability programme from QBE, providing GBP50m of
coverage on both Employers Liability and Public Liability. This carries a
GBP250k excess. QBE handle the claims below the excess and is reimbursed by
PO on a quarterly basis. This is a relationship that works well.
4. Motor Fleet Insurance
4.1. PO has two motor fleets (Commercial vehicles and Private Cars) both insured via
QBE.
4.2 The policy is placed in the same way as the Combined liability (namely, with a
GBP250k excess with claims below the excess paid by QBE and reimbursed by
PO on a quarterly basis).
Corporate Insurance Chris Day Page 7 of 8
Programme September 2014
POL00027358
POL00027358
Strictly Confidential
5. Directors and Officers Liability
5.1 This policy provides full cover for PO directors and officers where they are sued
as a result of a wrongful act, resulting from something that they are alleged to
have done while acting as a manager of PO.
5.2 In addition, the policy will respond if there is an investigation into an act that they
are alleged to have committed.
5.3 The policy currently has a limit of GBP60m. The insurance review looked at
whether reducing this limit to GBP40m (saving approx. GBP20,000 in premium)
was viable. As a large organisation, it is felt that the current limit of GBP60m is
the minimum level that PO should have and therefore should be retained.
6. Professional Indemnity
6.1 This policy was purchased to meet the Government Service Contracts
contractual requirements. The policy has a GBP10m limit and covers a breach of
professional duty by PO resulting in a third party loss. The policy covers Civil
liability, defence costs and expenses, libel and slander (committed by PO or any
person employed by PO). The policy has a GBP250k excess. QBE are the lead
insurer.
6.2 Our strategy, particularly in relation to our Fl products, and the increased risks
this brings to the organisation, means that we should consider purchasing
Professional Indemnity insurance for the whole organisation. The review is
underway and insurers have spent some time with PO assessing the exposures.
7. Cyber Liability
7.1 This insurance is purchased as a specific requirement for the DVLA and Border
Agency contracts and is a broad cover, extending to breach of privacy, extortion,
network security, as well as breach of data. This policy renews in April 2015
7.2 One of our key strategic risks relates to data protection and data integrity. The
Insurance review has identified that consideration should be given to purchasing
Cyber Liability across PO which would offer us a level of protection in the event
of a significant loss.
Corporate Insurance Chris Day Page 8 of 8
Programme September 2014
September Transformation Committee — Summary
RAG, cost and benefits based on full programme life
RAG in brackets indicates programmes view
Draft ~ subject to ExCo review
POL00027358
POL00027358
®
Programme Time I Cost Benefit
Quality
Comment / Areas for Discussion
Network
Transformation
Contracts signed, openings and current quality measures ahead of target, though model profitability KPI to be agreed via revised business
case which is now due for completion in September. Guided Leavers pilot underway with no significant negative stakeholder rea ction, with
continued roll out of next stages agreed at programme Steering Group. Key action for the programme is to define clearly, discuss and
agree the ‘cliff, aligning to business strategies being presented to Board in September
Crown
Transformation
The programme continues to deliver in line with targets across branch transformations, training, staff cost reductions, SSK rollout, mergers
and relocations - though P&L run rate £1M adverse at end of Q1 (due to income and business wide cost savings behind plan). Therefore
an over achievement in last 3 quarters is needed to achieve target. More focused income call to action required at Trading Board to
address Crown income shortfall. Customer satisfaction (queue times and transformed branches) both behind target but at P5 variance
from target improving. 16 of the 70 Franchise branches are at risk with the programme investigating options for alternative ways to
franchise or find further savings to cover the shortfall
Programme to produce a series of options, for October Transformation Committee, to achieve Crown break even run rate by March 2015
{including close alignment with Network Development)
Branch Support
Programme continuing, rather than pause or integrate into Business Transformation to allow early savings to be realised and improve
efficiency of existing operation. This will create a more stable platform for any TOM changes to be made. The programme is investigating
accelerating activity to bring forward benefits from 2015-16 into this year (potential additional £500K benefits). Specific questions within
Agent engagement index are proposed to measure Quality of the programme output.
Separation
Core Finance System implementation and cut over successfully achieved to plan.
Extension side letter due to be agreed at the next MSA Board on the 24" Sept and includes incentives to separation dates for the
remaining IT workstreams. The CSC contract supporting the separation of HR and Supply Chain (hosting and service elements) due to be
signed in late September.
IT
Transformation
Alignment between IT Transformation and Business Transformation programmes continues.
Revised business case produced but not yet submitted to Finance Committee, benefits and 2014-15 cost profile remain on track, though
there is a risk to the programme costs beyond 2014/15.
IT Enablers
Network Development has significant dependencies on Common Digital Platform and Branch Counter Refresh with appropriate ATOS and
Accenture resource working within the Network Development programme. As a result of pausing the POL SAP upgrade a risk has risen
regarding Fujitsu's willingness to continue supporting POL SAP on the existing infrastructure until March 2016 — discussions have started
with Fujitsu. Transformation Committee agreed alternative governance reporting for IT Enablers portfolio.
Business
Transformation
TOM recommendations discussed at ExCo in preparation for Post Office Board meeting on 25" September. A review of the impact of the
TOM on existing programmes to be undertaken prior to Board meeting. Programme co -ordinating all cost reduction activities (both
operational efficiency and existing cost reduction actions) and reporting to ExCo on weekly basis. An assessment of 2014/15 change plan
has been completed with recommendations being implemented (e.g. pausing certain projects and aligning others).
Benefits red as route to achieving savings not yet agreed.
Network
Development
Programme fully operational with focus on recommendations for September Post Office Board, a compelling commercial proposition to
inform the full programme business case and Ivy pilots (that are under development). A major risk for the programme is being able to
Post Office®
develop a commercially viable business case.
Dependencies exist with Business Transformation for 2020 product lists and CDP to enable separation from legacy one
WO
Network design underway and will need to consider impacts on other programmes particularly Network Transformation
CONFIDENTIAL
POL00027358
POL00027358
Confidential
POST OFFICE LTD EXECUTIVE COMMITTEE
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 All safety KPIs for 2013/14 were met or exceeded for the fifth year running.
Performance during the first four months of 2014/15 indicates that at this early stage
of the year and despite the slight adverse performance in absence accidents and
days lost there is no current cause for concern that further reductions by year end
are achievable and in line with the 5% year on year reduction target.
Table 1 All
300
280
9 2) —o— 2013/14 Al
2014/15 Alt
5 450 te 2014/15 Al
3 2013/14 Absence
2 400 2014/15 Absence
50
(eS
Pi P2 P3 P4 PS PE PT PB PS PIO P11 P12
Period
2.3 Personal injury compensation claims are falling in line with the reduction in
accidents that result in sick absence. 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 higher.
2.4 The number of days lost due to accidents is marginally adverse against target
however it is anticipated that the year on year reduction target of 5% will be
achieved. (Table 2 below refers)
Health and Safety Neil Hayward Page 1 of 5
September 2014
POL00027358
POL00027358
Confidential
Table 2 Days lost resulting from injury accidents (Cumulative)
2013/14
tt DOGS
z 2%
200
100
0 po . oo
Pi P2 P3 P4 PS PB P7 PB PO PID Pit P12
Period
2.5 The total number of road traffic collisions (RTCs) for the first 4 months is up 19
on last year. While this is of concern it is believed that there continues to be a
more robust approach to the reporting of incidents, irrespective of severity, and
what appears to be an increase in minor damage incidents e.g. broken mirrors
and minor scrapes The number of incidents where the Post Office driver is ‘at
fault’ is also up compared to last year. (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 are currently a cause for concern and will be
the subject of additional attention. 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.
Table 3 Road Traffic Collisions (cumulative)
250
200
& csetsunsmnsnnnntnsnnsnnenn
" )
Eso 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
Health and Safety Neil Hayward Page 2 of 5
September 2014
2.6
27
POL00027358
POL00027358
Confidential
Robberies on Post Office Cash and Valuables in Transit (CViT) crews are down
one on last year from 14 to 13 for the past 4 months. Physical injuries during
robberies, of which there have been 4, 2 more than last year for the same
period, remain relatively minor in severity. The level of use of firearms remains
consistent with last year with 2 of the 13 robberies enabled by the presence
and/or threat of use of fire arms and on no occasions were the firearms
discharged. 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, for the first four
months, are the same as last year — 29 — just over 62% were successful.
Injuries sustained during robberies are down from 5 to 1. Robberies take place
predominantly at sub post offices leaving Crown branches largely unaffected.
Supporting activities have been introduced to continue to mitigate this risk and
are identified at 3.2. (Appendix 1 — Significant Incidents refers).
3. Activities
3.1
3.2
.
.
.
.
Road Risk
Current activities to mitigate road risk are:
Road risk forum in place to scope and develop road risk reduction initiatives
and activities with guidance from insurer's risk management division.
Review of policy and guidance for non-operational drivers e.g. business car
drivers to ensure transparent reporting of accidents and driving behaviours
interventions
Analysis and deployment of interventions for reversing incidents to mitigate the
increased incidence rates
Technical accident reduction interventions on new vehicles e.g. Reversing aids
to reduce accidents
Analysis and evaluation of data (e.g. risk profiles) to determine further accident
reduction interventions
Safe driver of the year award to encourage responsible driving
Weekly case conferences to ensure consistent approach to accident
investigation, follow up activity and sharing of best practice
Robbery/Burglary Risk
Current activities to mitigate robbery and burglary risk are:
Active liaison activities with the police and increased police support activity
Liaison with Met. Police on the increase in gun enabled robberies
Introduction of new deterrent technologies e.g. 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
Significant reduction in opportunities for duress type robberies linked to the
introduction of single person vehicles
Increased security support visits to Post Offices in ‘hotspot’ areas
Increased use of crime alert communication techniques to Post Offices
Piloting new point of transfer arrangements to reduce exposure
Fogging technology
Safe time locks
Increased use of surveillance vehicles
Health and Safety Neil Hayward Page 3 of 5
September 2014
POL00027358
POL00027358
Confidential
e Athree month ‘Crime stopper’ campaign in the West Midlands is in place,
aimed at reducing cash in transit robberies
3.3 Health and Wellbeing
Current activities to enhance wellbeing
e Second phase of visits to all Post Office sites to offer and encourage the use of
health check equipment that provides a wide range of indicators on physical
wellbeing. First phase of programme delivered 3681 health checks (Crowns
2486, Admin. 553 and Supply Chain 662). The anonymised data will be used to
develop future health and wellbeing campaigns.
Health and wellbeing ‘Team Talk’ modules
Health and wellbeing poster themed campaigns
Online wellbeing monitoring tool to support health check initiative
Roll out of mental health awareness programme
3.4 Safety
The Post Office occupational health and safety management system (OHSMS)
is certified by external auditors to the standards required by British Standard
OHSAS 18001.
3.5 Asbestos Management
Transfer of the ownership of asbestos management following separation has
led to a programme of actions to ensure that up-to-date surveys are available,
defined responsibilities post-split are clear and that an asbestos management
‘action plan’ is in place to ensure that these issues can be managed effectively
and in line with legislation. Legal Services have been engaged to advise on
responsibilities, particularly in relation to the agency network, and to ensure
arrangements for on-going management of asbestos are robust and risks
mitigated.
4. Residual Risks
44 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 ExCo 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
September 2014
Health and Safety Neil Hayward Page 4 of 5
September 2014
Confidential
POL00027358
POL00027358
Appendix 1
Significant Incidents (Period 4)
Crowns and Network
Location Loss Circumstances Physical Injuries I Any further details
Filton SPSO, 2-3 £4,605 Thu 17/7/2014 12:20 Two men armed with a knife None No previous incidents
Church View, Filton, and large sticks entered the PO and forced all 4 staff
BS34 7BT. into the fortress area, using large knives the flip top
till drawers were forced open, all staff ok.
Lower Broughton £5,390 Fri 18/7/2014 10:00. Five men broke in to the rear of There have been four previous
MSPO, 21 Mocha the building, the branch was open and the counter incidents. 1 burglary September
Parade, Manchester, assistant who was working alone was punched and 2011. 3 attempted robberies, CViT
M7 1QE icked and required medical attentio! 7 August 2008, April 2011, branch
Working cash was taken from the counter April 2012.
drawer.
Bloomfield SPSO, £396 Fri 18/07/2014, 20:54. Two males, one armed with a_ I None Three previous incidents, other
323 Beersbridge gun came in and threatened the clerk. She was burglary in March 2006, PO
Road, Belfast, BT5 forced to hand over cash which was a mixture of PO attempted robbery in April 2010
5DY and shop money. It is believed there could have been and a retail armed robbery in April
a possible 3rd male outside the branch and they fled 2014.
on bikes.
Supply Chain
Belle Vale SPSO, £25,000 Fri 04/07/2014. Crew member was in the PO when 2
125 Belle Vale male assailants jumped over a wall and ran in to the
Road, Liverpool L25 PO. The Crew member was pushed to the floor and
2PE the cross pavement protection box snatched. Crew
member! « ‘by the fall.
Health and Safety
Neil Hayward
September 2014
5 of 5