Agenda
Group Executive Agenda @
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[Date: I Wednesday 11 September 2019 I Time: I (09.30 — 15.30 hrs I tecation: I 1.19 Wakefield
Present:
Alisdair Cameron (Chair) Mo Kang
* Mark Davies © Debbie Smith
Shikha Hornsey Owen Woodley
Apologies were received from Ben Foat, General Counsel
Other Attendees:
© David Parry (Senior Assistant Company Secretary) (AM)
Veronica Branton (Company Secretary) (PM)
Kathryn Sherratt (Finance Director)
Other attendees, as shown against agenda items
mediation issues)
1 RM Negotiations* Approval for Board Debbie Smith/ Mark I 09.30 - 09.45 hrs
Siviter
2. Group Litigation Order (including Approval for Board Rod Williams 09.45 - 10.15 hrs
3. Starling (Employment rights case) Approval for Board Sherrill Taggart/
Laurence O'Neill
10.15 - 10.45 hrs
4. FST&l and Retail Quarterly Reports Approval for Board Owen Woodley/
Colin Stuart/ Emma
Springham/ Ed
Dutton/ Chrysanthy
Pispinis
Debbie Smith/
Charlotte Bedwell
10.45 — 11.30 hrs
Barry Morse
Break 11.30 - 11.45 hrs
5. Network Approval for Board Debbie Smith/Tracy I 11.45-12.15 hrs,
i) Services of General Economic Marshall
Interest (SGEI) Compliance
ii) Network Report
6. Health and Safety Report, including Approval for Board Mo Kang/ Martin 12.15 = 12.45 hrs
violence and robberies report Hopcroft
7. Legal Enterprise Optimisation (Articles of I Approval for Board Sherrill Taggart 12.45 — 13.15 hrs
Association and Framework Agreement)
Lunch 13.15 - 13.45 hrs
8. SME across the Post Office Discussion Owen Woodley/ 13.45 — 14.15 hrs
? Financial performance and the quarterly change report will be considered at the GE meeting on Monday 16"
September 2019.
Strictly Confidential
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9. Transactional Banking Discussion Owen Woodley/ 14.15 - 14.45 hrs
Chrysanthy Pispinis
10. Preparation for delivering the British Gas I Discussion Debbie Smith/ 14.45 - 15.15 hrs
Contract Andrew Goddard
1. Disaster Recovery test: Discussion Shikha Hornsey/Ben I 15.15 - 15.25 hrs
Cooke
12. Contract for employee travel services Approval for Board
(contract over £5m)
13. Review of GE Action Points and Updates Approval Veronica Branton 15.25 — 15.30 hrs
14. Items for Noting Noting All
14.1 Forward Agenda
15. Any other Business Noting All
16. Date of next meeting: 16 October 2019 Noting
Strictly Confidential
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1 Royal Mail Negotiations
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POST OFFICE LTD PAGE 1 OF 5
PROPOSED BOARD PAPER (FOR GE) DECISION PAPER
Royal Mail (RM) MDA Negotiations
Author: Mark Siviter Sponsor: Debbie Smith Meeting Date: 11 September 2019
Executive Summary
Context
Questions addressed in this report
1. What has changed since the last update on progress?
2. What is the available shape of a possible deal?
3. What are our recommended next steps?
Conclusion
over. ‘the current MDA broadly / IRRELEVANT
Input Sought Input Received
Board approval to negotiate detailed terms 1. Mails Strategy SteerCo
within the defined parameters, 2. Group Executive
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Tab 1 Royal Mail Negotiations
POST OFFICE PAGE 2 OF 5
The Report
1. What has changed since the last update on progress?
. rom RM, _
but also the aspiration for the
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POST OFFICE PAGE 3 OF 5
2. What is the available shape of a possible deal?
The available shape of deal set out below we believe delivers on the minimum
requirements of a deal set out in the May Board Paper;
n Click and Collect and returns
vm [IRRELEVANT
Online Right to sell RM products online on Post Office website
Agents’ pay Increased transparency / alignment
Ways of Something new required (tbc, including streamlining of
working change control process)
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Tab 1 Royal Mail Negotiations
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POST OFFICE
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PAGE 4 OF 5
3. What are our recommended next steps?
(1) To deliver
aspirations;
(2) Negotiate within the limits of our stated minimum requirements for a deal, set out in
May Board paper which in turn supports our Mails strategy;
Minimum requirements (May
Board)
In Support of Mails Strategy
Collect and returns
e Deliver on “better together” with RM strategy
e Meet Board aspirations to secure;
deal
feceant and/or change to RM a
e The right to sell RM products
online on PO website
¢ Provide customer choice
¢ Avoid the identified online customer
disintermediation threat
« Any new agreement to
contain a level of
. Maintaining a level oft IRRELEVANT. H
products and services
Protect Post Office {___
thereby maintai in ning
GE PAPER September 2019
IRRELEVANT I fo deliver on the short term aspiration of building our online channel.
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Tab 1 Royal Mail Negotiations
POST OFFICE PAGE 5 OF 5
Appendix 1. Risks and Mitigations
RISKS MITIGATIONS
Reaching a deal within the
renegotiation window. set out in the.
‘IRRELEVANT
MDA before then. IRRELEVANT
Unintended consequences of signing
some mitigations are already in place,
potential risks exist: j however for certain risks outside of our
examples including structural decline in control it is difficult at this time to be clear
letters, changes to postal regulation, about the potential implications e.g. Brexit
increased competition, uncertainty over or to be able to offer mitigations for those
future funding of Post Office, Brexit, anda I risks.
change of Government.
However in support of any proposed deal
that we take to the Board for ratification
we will provide a detailed supporting paper
that will set out in detail all the risks and
available mitigations associated with
signing up to a} IRRELEVANT I together
with clear explanatiot h
still recommending a
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Tab 2 Group Litigation Order (including mediation issues)
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Group Litigation Update
Author: Ben Foat/Rodric Williams Sponsor: Ben Foat Meeting date: 24 September 2019
Executive Summary
Context
We are currently awaiting the High Court’s judgment on the Horizon Issues Trial. We
expect to receive this any time between mid-September and late October 2019.
There will be a hearing in the Court of Appeal on 9 October 2019 to determine Post
Office’s application for permission to appeal the Common Issues Judgment. The Court
of Appeal’s judgment on this will follow shortly after the hearing.
Assuming these judgments are received within this timeframe, mediation to explore
settlement with the Claimant Group is likely to take place in mid-November 2019.
In accordance with the legal strategy set out in the July Board paper, this report sets
out the potential financial ranges of a settlement and the approvals which may be
required, so that Post Office’s representatives have delegated authority to settle in
accordance with the Board's instructions.
Questions addressed in this report
1. What is the update on the contingency planning?
2. What are the preparations for settlement and mediation?
a. What are the potential financial ranges of settlement?
b. What level of authority should Post Office have for mediation?
c. What formal approvals will be required?
d. What is the proposed strategy for mediation and do we have the right resource
to manage the mediation?
e. If the litigation is settled, how could Post Office treat claims from postmasters
who are not claimants?
3. What are the next steps?
NOTE: This paper is based on the privileged and confidential legal advice prepared for
Post Office Limited by Herbert Smith Freehills LLP (HSF) (attached in full at Appendix
5). That advice will be updated following receipt of the Horizon Issues and appeal
decisions given the material impact they could have on Post Office's position.
Conclusion
As matters currently stand:
1. A detailed Contingency Plan is now in place with a Rapid Response Team stood up
to manage the execution of this plan. The ‘detection’ and ‘response’ processes which
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Tab 2 Group Litigation Order (including mediation issues)
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the plan is reliant upon are now being finalised, baselined and stress tested to
understand what level of uplift against baseline levels these processes and the
business can withstand.
2. A reasonable outcome would be to settle with the Claimant Group (excluding those
who have been criminally convicted) within a range of £45m - £65m.
3. For strategic reasons, Post Office should enter mediation with settlement authority
of £40m - £45m, with a process for obtaining authority above that range during
mediation if that would facilitate settlement at an acceptable level.
4. There is a real prospect that settlement will not be available at an acceptable level
at the first mediation. Unrealistic expectations from the Claimant Group can
however be managed strategically to help achieve a deal further down the line.
5. There is merit in developing an alternative approach for dealing with the 61 convicted
Claimants. They have therefore been removed from the settlement calculations.
6. A reactive rather than proactive remediation-style approach can be taken to claims
from non-Claimant SPMs.
7. In addition to preparing for mediation, the 9 October 2019 Court of Appeal hearing
on the Common Issues Judgment, and for receipt of the Horizon Issues judgment,
and we are continuing pre-trial preparations for the third, “Further Issues” trial
scheduled to commence in March 2020 to address the legal basis for the Claimants’
claims for financial compensation.
Input Sought Input Received
1. The Board is asked to approve the 2. Our internal and external (HSF) legal
approach outlined in this paper. teams have approved this paper.
The Board will be asked to consider
(and if appropriate approve) final
settlement numbers by way of an
updated paper closer to the
mediation date.
The Board is asked to exercise caution when communicating about potential levels of
settlement. The Court of Appeal recently held that written communications (emails)
between Board members concerning settlement of a dispute were not privileged from
disclosure (West Ham v E20 Stadium LLP [2018] EWCA Civ 2652. Post Office would be
materially disadvantaged if settlement numbers or strategy were to be disclosed to the
Claimant Group. Communications about settlement should therefore only be
held orally, but if that is not possible, advice should be sought from Post
Office’s lawyers.
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Contingency Planning
Since May we have been working with the risk advisory arm of Deloitte, which has
relevant experience in crisis preparedness and response work, to prepare an effective
immediate and short-term response to the judgment on the Horizon Issues trial. For
planning purposes, we assumed the judgment would be delivered on 16 September
2019 (“Day One”) and that irrespective of the case presented at trial, it will be as
harmful to Post Office as the Common Issues Judgment handed down in March 2019.
Through a series of workshops we identified the operational, commercial and
reputational risks which could crystallise on an adverse judgment.’ A response plan
was then built around a core response playbook which includes the key messaging,
materials and briefings to be used ahead of and in response to the judgment.
Where possible, mitigation actions are taking place ahead of Day One, e.g. through the
identification of high risk branches and removal of excess cash in the network. The
response plan also addresses anticipated actions from Day One, e.g. surge resourcing
our call centres and the creation of new processes to monitor and manage branch
closures, re-distribute cash and stock accordingly, and respond to any reducing levels
of compliance by agents.
A Rapid Response Team (RRT) has been established to execute and manage Post Office
and stakeholder response to the judgment. It will act as the central hub of information
and is charged with coordinating business impact data and relaying this to the
organisation, by the hour, with escalation points into the GE as / if required.
Ultimately, the response from Day One will be determined by what the Judgment
actually says, and how our stakeholders (government, corporate clients, retail partners,
customers, postmasters, employees etc) react to it. Central to this will be ‘isolating’ the
findings to the issues actually tried and ruled upon.
The focus now therefore, in addition to tracking discharge of actions by the business, is
establishing the MI required to determine and respond at pace to the impacts / risks
which actually crystallise and to ‘stress test’ both the established and new processes to
understand what uplift in calls, lack of compliance or refusals to open branches we can
sustain, and over what period of time.
Mediation and Settlement
Potential Settlement Range
HSF's settlement range of £45m - £65m has been derived from a qualitative and
uantitative analysis of the Claimant Group's claims, and reflects:
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The key figures underpinning HSF’s analysis are set out in the table at Appendix 1.
The factors behind the analysis are summarised below.
Total claim value
There are currently 555 Claimants. The Claimants’ quantified claims as stated in the
“Statements of Information” filed in the litigation now total £205.6m,
Three categories of Claimant can however be excluded
Legal Privilege
Potential Quantum / Recoverabilit
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The Claimant Group's settlement expectations are unlikely to be driven by strict legal
analysis. We anticipate they will want their full funding costs (typically calculated as a
multiple of costs invested), and for each Claimant to receive a meaningful recovery.
Legal Privilege
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Settlement authority for mediation
Under its current Articles of Association,? Post Office requires shareholder approval to
enter into a transaction which involves making a payment or incurring a liability in
excess of £50m, or borrowing in excess of £75m. Extracts from the relevant sections
of the Articles are set out in Appendix 3.
Shareholder approval is required to approve the terms of any settlement which involves
a commitment to pay over £50m, irrespective of how the settlement is financed. The
shareholder advises us that it will in turn require approval from HM Treasury for any
such settlement.
Whether Post Office would need shareholder approval to fund a settlement (at any level)
will depend on whether Post Office can do so without incurring new borrowings:
e If Post Office could fund a settlement by utilising its existing facilities,
principally the headroom under Post Office's £950m working capital facility,
no borrowing approval would be required. (There is also a £50m short-term
committed facility provided by BEIS - presently undrawn - which could
potentially be used to bridge into other financing but use of this facility for the
purpose of funding a settlement would need to be explored further.)
e Whether Post Office can access sufficient funding from its existing facilities
will need to be judged at the time. In its budgeted figures, Post Office
projected the security headroom under its working capital facility (the true
constraining factor) to be £149m at the end of P7. This improves slightly
through to the end of the year but does not go above £200m.
e If Post Office needs new borrowings to fund a settlement (at any level),
shareholder approval would be required under Article 11.1(S)(a)(iii). Any
such borrowings would likely take the form of a market-rate loan from
BEIS. As such, in addition to the approval required under the Articles, time
would need to be factored in for putting any such facility in place.
The formal approvals process prescribed by the Articles requires the hand delivery of a
written notice containing sufficient information for the shareholder to evaluate the
matter being proposed (Article 11.2). That process can be streamlined if the special
shareholder gives written consent.
We therefore propose agreeing with the shareholder a process by which (a) the
shareholder would be briefed on potential settlement ranges to enable it to give any
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necessary approvals in short order; and (b) to allow approvals in connection with
settlement to be sought and given less formally via email.
SF advise [i
HSF therefore recommend
Given that the Claimants’ are likely to have an inflated view of the claim, the settlement
negotiations must be approached strategically. Post Office will need to take a firm but
highly credible position in the early stages if it is not to be driven to negotiate at
unmanageable levels. Key to this will be the following:
The parties agreed in late January 2019 that Charles Flint QC will act as mediator. He
was selected from a short list of recognised top-tier commercial mediators, having
regard to the technical skills, energy and assertiveness likely to be required to resolve
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this complex dispute.* Our recommendations for who should attend mediation on
behalf of Post Office, and why, will be discussed with the Board sub-committee prior to
the Board’s October 2019 meeting.
In view of the anticipated size of the Claimant Group's funding commitments and the
levels of success they have enjoyed to date, there is a very real prospect that settlement
at an acceptable level will not be possible at the November mediation.
If the November mediation is unsuccessful:
* we expect the mediator to continue liaising with the parties to try to achieve a
settlement further down the line. Post Office's litigation strategy should
PD
Strategy for Convicted Claimants
A potential stumbling block at mediation will be the convicted Claimants. Given the
sensitivity surrounding this cohort, seeking to "exclude" them, even on valid legal
grounds, is bound to attract criticism and could frustrate the mediation process.
A better approach would entail convicted Claimants first pursuing their criminal law
remedies to overturn their convictions (through the Criminal Cases Review Commission
and/or criminal appeals courts) before they can enter the civil compensation process,
while still enabling Post Office to offer "something" in the context of a mediation.
Depending on the content of the Horizon Issues judgment and subject to specialist
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HSF nevertheless recommend Eee
HSF recommend that
ia
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Next Steps
An overview of the main court and settlement-related activity in Group Litigation
through to October 2020 in set out in the “Group Litigation Timetable” at Appendix 4.
In addition to continuing to prepare for mediation and receiving and responding to the
courts’ decisions on the Horizon Issues, between now and the end of October 2020 we
are preparing to:
e attend the Court of Appeal hearing on 9 October 2019 on permission to appeal
the Common Issues Judgment;
e go through the court’s costs budgeting process;
e receive the Claimants’ formal articulation of their claim for the third trial; and
e identify criteria to select “test claimants” who can represent the wider
Claimant Group in the as yet unscheduled trials on breach (i.e. whether Post
Office acted wrongly), causation (i.e. did that breach caused the harm for
which the Claimant seeks compensation), and limitation (i.e. is a Claimant’s
claim time-barred).
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Appendices
1. Potential Settlement Range Table
Value -lowerend Value - upper end of —_Per Claimant value
of range range
Quantified Claim Value
Recoverability ~ notice period only
Recoverability ~ 12 months post termination losses
Recoverability - 2 years post termination losses
Recoverability - 3 years’ post termination losses
Funding Analysis as at November 2019 (plus
10k/claimant)
Pay the Claim Analysis (Quantified Claim Value)
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2. Funding Costs Table
Freeth's costs
CFA uplift (100%)
ATE insurance premium,
Funding uplift ~ total range
(2) Funding uplift - 3x multiplier
(b) Funding uplift ~ 3.5x multiplier
(©) Funding uplift - 4x multiplier
Subtotal
Less £5m costs paid
Add individual Claimant recovery
Scenario 1 - £10k/daimant
Scenario 2 - £15k/daimant
‘Scenario 3 - £20k/daimant
Scenario 4 - £25k/daimant
Scenario 5 - £50k/daimant
TOTAL
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Tab 2 Group Litig
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n Order (including mediation issues)
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3. Extracts from Post Office Limited’s Articles of Association
11. VARIATION OF SPECIAL SHARE RIGHTS
11.1
Matters requiring consent
Notwithstanding any provision in these articles to the contrary (save for article 116 to
which this article 11 shall be subject), each of the following shall be deemed to be a
variation of the rights attaching to the Special Share and accordingly shall occur and
be effective only with the prior written consent of the Special Shareholder:
(0)
(s)
the entry into or implementation of a relevant transaction by any member of
the group which involves or is likely to involve (either individually or when
taken together with all other related relevant transactions (other than any
related relevant transaction previously approved under this article11.1(0)
entered into or implemented in the previous 12 months))the incurrence of a
commitment or liability, or the payment of a sum, by any member of the group
which is an amount in excess of £50,000,000;
(a) the incurring of (or entry into of any commitment to incur) any borrowing
by any member of the group in circumstances where the borrowing:
(i)
(ii)
(iii)
(1) _ individually; or
(2) taken together with the aggregate principal amount in
respect of borrowings already incurred in the same
accounting period without approval under this
article11.1(S); or
(3) _ if part of any series of related borrowings to finance a single
investment, then taken together with the aggregate
principal amount incurred in respect of such related
borrowings
exceeds £75,000,000; or
is to be provided from any source other than another member of
the Enlarged Group, the National Loans Fund or the Crown, save in
respect of borrowings which are due from the Secretary of State,
the Bank of England and (other) Monetary Financial Institutions, a
Local Authority or a Public Corporation; or
if taken together with the aggregate principal amount outstanding
of all money borrowed by the group from any source (excluding
amounts borrowed by any member of the group from any other
member of the Enlarged Group, other than amounts to be taken
into account under article11.1(S)(b)(v) below) exceeds an amount
equal to the lesser of £2,000,000,000 and 2.5 times the aggregate
of:
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(1)
(2)
the amount paid up on the issued share capital of the
company; and
the total of the capital and revenue reserves of the group,
including any share premium account, capital redemption
reserve and credit balance on the profit and loss account,
but excluding sums set aside for taxation and amounts
attributable to outside shareholders in subsidiary
undertakings of the company and deducting any debit
balance on the profit and loss account, all as shown in the
then latest audited consolidated balance sheet and profit
and loss account of the group(or if consolidated financial
statements are not prepared, as would have been shown in
such consolidated financial statements had they been
prepared), but adjusted as may be necessary in respect of
any variation in the paid up share capital or share premium
account or capital redemption reserve of the company since
the date of that balance sheet and further adjusted as may
be necessary to reflect any change since that date in the
companies comprising the group;
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61/60/1 L-6L0z sequiaidas 11 AIUIUOW 39
4. Group Litigation Timetable
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Tab 2 Group Litigation Order (including mediation issues)
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5.HSF report entitled "Advice on Settlement" dated [2
September 2019]
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The Report
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Tab 4 FST&l and Retail Quarterly Report
POST OFFICE PAGE 10F6
FST&I Quarterly Report -
September 2019
Author: Owen Woodley Meeting Date: 11th September 2019
Executive Summary
Context
This report provides an update to the Board on the current performance of the products
across FS&T, Identity, PO Insurance, Group Marketing and Group Digital & Innovation as
well as an update on our strategy.
Questions this paper addresses
1. How are our products, digital and marketing functions performing?
2. How are the key elements of the FST&I strategy evolving?
Conclusion
Gross income is £(6.7)m adverse to budget P4 YTD and direct contribution is £(1.1)m
behind budget YTD. The primary driver is the significant exchange rate-led disruption in
the travel and international payments markets pre-Brexit. This has led to continuing
underperformance in Travel Money and MoneyGram, partially offset by £2.4m across
Telecoms & Marketing from IFRS 15 accounting changes implemented but not budgeted.
Gross Income (£m)
Profit Contribution (£m)
FS&T
PO Insurance
Identity
IFRS15 Telecoms Impact
Other Income
Digital & Innovation
Central Marketing
IFRS15 Marketing Impact
Total
The Travel market remains very challenging as a result of wider uncertainties and the
resultant significant reduction in package holiday bookings. The Telecoms business is
continuing to face a highly aggressive competitive market with heavy discounting which is
impacting budget in Call Packages and Out of Bundle calls. Banking products have
benefitted short term fro i
savings balances drive
H albeit the delay has resulted in:
‘FRES.
Input Sought
The Board is requested to review and note the report.
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The Report
How is our Balance Sheet product set performing?
1. The Market
Competitive pressures in retail banking remain with Brexit driving declines in swap rates
and squeezing lending and savings margins. The continuing low rate environment, ring-
fencing and the BoE funding schemes have put major pressure on mortgage margins and
savings rates. There is an expected savings maturity spike coming in the market from
October, releasing a lot of excess liquidity at a time of economic uncertainty and this will
only bring about further compression in mortgage margins in what is already a highly
competitive pricing environment at the moment, reflected in our own frequent price
adjustments.
2. Product P&L P4 YTD
Gross
PO Money Commissions
Credit Cards
Balance Sheet Products, L
3. Review of Performance
Under the new deal with Bol, the budget for mortgages, savings & loans is being
amalgamated to form “PO Money Commissions”. The process for accruing income and
allocating actuals remains on the existing commission schedule for now, with the new deal
expected to come into effect in P7. Our new credit card offering in partnership with Capital
is due to launch i and until P5, we will continue to recognise revenue of
per month as from Bol.
4. Customers
There are three key customer projects underway in Post Office Money:
« Customer Advocacy Programme - identifying areas within the customer journey to make
improvements. NPS (net promoter score) continues to track upwards.
« External Benchmarking Survey - highlights areas for improvement. This has progressed
to field work stage for savings, ISAs, mortgages and personal loans; results are due in
late October/early November.
« Customer Research Panel - established to support new product development &
innovation is now live.
How is our Transactional product set performing?
5. The Market
Research conducted by KPMG shows that one third of British adults have tightened their
belts because of Brexit concerns. 9% said they have missed out on overseas holidays with
young families being the hardest hit with 15% sacrificing foreign holidays. Figures
published by Visit England indicates a record 8.6m planning an August 2019 Bank Holiday
‘staycation’ (up from 7.3m in 2018). In August 2019 the Pound against the EUR hit a ten
year low at 1.065 due to Brexit fears, which has affected the way holidaymakers go about
spending during their visits abroad and also influences the type of trips and destinations
they choose.
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6. Product P&L P4 YTD
Gross Income (£m) Profit Contribution (£m)
Travel Money (incl App) Hi
FRES Profit Share i
MoneyGram :
Postal Orders i
Western Union
Transactional Products
7. Review of Performance
MoneyGram transaction volumes continue to be under pressure and MoneyGram have
confirmed that this performance is mirrored across its agent network. We launched a
new incentive scheme in August for our top 276 branches in the Midlands and London
regions, which if successful is estimated to produce a 2% uplift in performance across
those branches. We are also working with MoneyGram on a Winback campaign
(contacting lapsed customers with promotions to re-transact) and are currently
discussing the development of a Rewards programme for repeat transactions. Postal
Orders are maintaining their expected forecasted numbers in line with the anticipated
decline and we still await any MOJ update in regards to them removing the service.
8. Customers
FRES recently commissioned a short piece of research to understand how consumer
behaviour has changed over the last year. This showed that of those who took an overseas
holiday last summer, two thirds have already taken an overseas holiday this year (to July
2019), 13% have already booked, 5% intending to book an overseas holiday between now
and September; leaving 17% who went away last year but have not so far this year and
stated no intention to do so.
How is our Telecoms business performing?
9. The Market
The industry continues to focus on Fibre with BT Openreach now actively incentivising
further uptake of this product, enabling a long term strategy to retire the Broadband
(ADSL) network. Our core product (ADSL) accounts for only 20% of the total new
Broadband subscriptions sold in the market, and this year we have started to transition
our customer base to Fibre. ADSL pricing has remained stable and the Post Office in Q1
has achieved its ‘price leadership’ objective. For Fibre products, market pricing continues
to decline and competition is increasing from Vodafone.
10. Product P&L P4 YTD
Telecoms IRRELEVANT
11. Review of Performance
YTD net revenue is behind budget due to a lower customer base and lower ARPU, driven
mainly by Out of Bundle calls. In P4 we have introduced an accounting change to align to
IFRS 15, backdated to P1. Underlying Telecoms gross revenue before the accounting
change is £(1.8)m adverse and DPC underlying is £(0.9)m adverse. Mitigating actions to
close the gap to budget have been identified including a price rise in Q3.
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Q1 Trading Summary:
¢ Orders 36.6k vs 39.8k (91% of target). Performance is up 60% YoY driven by
improved marketing distribution, new website & improvements in contact centre
performance.
e Adds 27.4k vs 32.6k (84% of target). Performance is up 32% YoY however this is
lower than expected due to lower Q4 order volumes which impacted Q1 adds.
e Churn 24.3k vs 18.5k (31% over target). Performance has improved by 11% YoY
increasing demand in the retention space (up 16% YoY) due to increased competition
and market migration to Fibre.
12. Customers
Our “Customer First” programme has now fully rolled out across our contact centres,
placing the customer at the heart of conversations and ensuring we strike the right balance
between commercial performance and customer experience. We continue to see record
Customer Satisfaction (CSAT) scores at 83%. Ofcom complaints continue to perform below
the target of 10 and consistently below the industry average. We have launched two new
contact channels in Telecoms - Online Virtual Assistant and Live Chat - which allow
customers to interact with us digitally rather than calling the contact centre.
How is our Insurance business performing?
13. The Market
The latest view is that the Travel Insurance market is c.10-12% down YoY, mainly due to
exchange rate depression leading to increased cost of travel abroad and the wider
continued uncertainty around Brexit. POI is performing ahead of market trends and
delivering YoY growth with a focus on digital channels and impaired customers. But we
are not immune to the market conditions. The Home Insurance market is expected to fall
by 2% p.a. over the next three years but POI’s new business model is still expected to
enable us to grow our market share. The Car Insurance market is expected to grow by
1% p.a. to 2020. Our current market share is 0.4% but we anticipate growth whilst we
consider our long terms strategy here. The Protection market is stable and marginal
growth is expected over the next year. The acceleration of our channel diversification
towards direct will continue to drive growth in direct-to-consumer Life Insurance and Over
50s products.
14. POI P&L P4 YTD
PO Insurance
Period 4 P4YTD FY
£m Act. Bud. Var. PY. Var. Act. Bud. Var. PY. Var. Bud.
Gross Revenue 38.63. (25) 48 (10) 185 22.3 (3.8) 480 05 724
Cost of Sales
Net Revenue
Agents' Pay I i
Staff Costs i I
Non-Staff Costs i i
Total Expenditure
Direct Contribution
Direct Profit Margin u — —- —— paneer
15. Review of Performance
In P4 we have implemented two accounting changes (deferral of acquisition costs under
IFRS 15, and BGL accounting), backdated to the start of the year. Prior year figures have
been re-stated but the budget has not. The BGL accounting change has no impact on
trading contribution and the IFRS 15 has benefitted the bottom line by £0.1m YTD.
Underlying trading is therefore broadly in line with plan. Travel net income is up 11%
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(through pricing and channel optimisation) and Protection net income is down 9% (largely
around phasing of activity).
Total sales and renewals of 151k in P4 were 13% down YoY, primarily as a result of the
reduction in underlying demand in the travel market. We are on track to go live with the
Home Re-engineering launch from 1%t October and the team is heavily focused on UAT and
pre-go live actions.
How is our Identity business performing?
16. Review of Performance
Identity is performing slightly ahead of budget YTD, delivering a Trading Profit upside of
£0.1m.
Gross Income Profit Conti
ution (Em)
Passports & UKVI
=~. IRRELEVANT
Environment Agency
Digital Identity
Identity H
We have seen a 7% decl
applications in Q1, driven by Brexit and the pull forward of applications in early 2019.
However, PO has maintained a 24% market share YTD. Offsetting this is strong
performance in UKVI BRP and Secure Collect and our ongoing negotiations with the Home
Office have secured a short term extension to the UKVI contract and a 1 year contract
extension for Secure Collect. DVLA is performing favourably against budget, primarily
driven by International Driving Permits again driven by Brexit uncertainty. Verify is also
showing strong performance against budget due to an upward trend of Universal Credit
applicants (albeit this appears to have stabilised in P4). We remain the market leader with
a share of 54%. Strong performance in our Document Checking Service is driven by higher
volumes for DBS checks. The new service and network expansion for Document Checking
launched at the end of P2 and has since resulted in a 7% volume increase YoY.
How is Digital performing?
The formation of Digital and Innovation as a group centre of excellence has continued by
bringing new skills to PO to lead on digital proposition development and in-market
optimisation. The recruitment of new skills such as User Experience, Analytics, Search
Engine Optimisation and Conversion Rate Optimisation are reducing our dependency on
suppliers such as Accenture and increasing our efficiency. Key features/projects which
have been delivered in the last quarter include: Branch Discoverability (each branch now
having its own bespoke URL), the digital summer travel campaign, the launch of gadget
insurance, enhancements to the International Driving Permit country search functionality
and new features in the Travel App (PIN Reveal, Freeze Card).
How is Marketing performing?
The newly formed Group Marketing function has started to move away from product silos
towards proposition-based campaigns, including the latest Travel Campaign promoted as
“Travel Essentials” (TI, TMC, Travel Money, Passports), optimising spend across the four
product areas. Marketing has started to extend the mix from depending solely upon
digital channels such as Affiliates, Aggregators and Paid Search to include higher impact
channels such as DRTV, Radio, Press, Email and Social Media. New tools have also been
launched to support Postmasters with branded assets to publish on their local social
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media channels. We now have a segmentation of the PO customer database underway to
enable much more effective prospecting, propensity modelling and lookalike targeting.
Work is also underway to drive a more consistent brand look and feel across the branch
network and for the first time, we have done some dual branding with Royal Mail to
reduce customer confusion.
How are the key elements of the FST&I strategy evolving?
POI is continuing to make good progress in re-engineered the core product set (Travel,
Home and Protection) and the first campaign to promote a new Impaired Travel product
has recently launched. October and November are key months for the delivery of the new
Home Insurance product and platform together with the new data, analytics and pricing
platform which will offer significant optimisation opportunities. A review of the
organisational design in POI is underway and following the POL Board discussion in July,
work has started to look at funding and structuring options to deliver a much more
aggressive growth trajectory. Proposals will be brought back to both the POI and the POL
boards later in the year.
Following discussions with GE and Board, the Identity team has now been reached
agreement with the Cabinet Office to extend the Verify contract beyond next March on
current terms. (Digidentity are the only other provider staying in the framework with
others dropping out). As a result, we now expect our market share to increase from 54%
to at least 75%, taking the total customer base to over 5 million by 2021. Clearly, this will
provide us with some significant wider opportunities. Discussions are continuing with
Digidentity on a new partnership agreement and we are also now examining a number of
potential alternative business models for this part of our business. An update will be
presented to GE and the Board in October 2019. DVLA has confirmed a 3 year extension
of the contract for vehicle tax and driver licence services to March 2023.
Also at the July POL Board sessions, the Telco business presented a comprehensive
overview of the RFP activity as we look for much more cost effective supplier arrangements
versus the current structure with Fujitsu Telecom. We also presented an initial valuation
of the business based on desktop activity by PJT Partners. Both phases of work have since
progressed well: the RFP process is running to plan and “Best and Final Offers” have been
received. The team is also looking to appoint sell-side advisors to commence the auction
process, working alongside PJT. An update to the Board on both the RFP and sale process
is due in October 2019.
The Travel Money team presented a strategy to the July board on how to optimise the
cash business and develop a non-cash strategy for FX. On optimising the cash business,
PO is driving forward a number of cost reduction opportunities and synergies with FRES
which will be considered by the FRES board later in September. We are also exploring
potential FX opportunities in the Payzone business. On the non-cash strategy, proposals
on a broader “transactional banking” capability across PO, with FX as a priority use case,
are going to the GE in September followed by a funding request which will cover details of
“soft/informal” market engagement, high level proposition development and indicative
financials.
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GE
PERFORMANCE UPDATE
Retail CE’s Report - Sept 2019
Author: Cathy Mayor Sponsor: Debbie Smith Meeting date: 11 Sept 2019
Executive Summary
Context
The Period 5 Retail Commercial Performance Report for the Board.
Questions this paper addresses
1.
2.
a
How are our sales and revenues performing against our targets and prior year?
What's happening in the relevant markets?
How are we progressing around delivery of strategy and plans?
Conclusion
1.
Retail income is +1.5% year on year, ahead of income budget by +£1.6m and ahead
of profit budget by +£2.8m adjusting for GLO activity centrally budgeted and agents
pay double count.
Network customer sessions YTD are +1% up year on year, averaging 10.1m sessions
per week, better than the BRC reported footfall quarterly decline of -4%.
Mails volume YoY growth continues to come from Home Shopping Returns (+3.3m
items vs LY), supported by Click and Collect (+0.5m). Label volumes for UK and
International are both above plan and LY. As forecasted stamps continue to decline
YOY -8% however 1% better than budget.
In Banking, volume growth trends continue to improve with withdrawals +8% and
deposits +35% year to date driven by media coverage of the Post Offices key role in
access to cash and greater Postmaster engagement through recent announcement of
increased remuneration
In Bill payments income is -£1m against budget due to lower than anticipated
volumes. The recent win of a 5 year exclusive contract with British Gas (subject to
contract) which will increase our market share by 14% pts, enable us to win whole
estate deals with retailers and offset the YTD variance to bring as back on budget by
FY.
Delivery of our retail strategy and plan is on track. Agent Remuneration work has
progressed in modelling the hypotheses and gaining further insights from Postmasters
to validate our thinking. The new Field Structure is starting to embed and Postmaster
reaction to enhanced support is positive. Phase II of our ‘Hothousing’ programme is
complete with the next roll-out phase starting in September.
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Input Sought Input Received
For the GE to review and note. RLT
The report
Overview of Financial performance
Period 5 YTD FULL YEAR
Gross Income (ém) Bud PY YoY%
Mails Trading
Mails Non-Trading
Banking Services I
ATMs i
POCA I
Payzone
Payment Services
SSK Commercial Terms
Retail & Lottery
Retail Total
Retail DPC (£m)
Mails
Cash and Banking Services
Payrnent Services
Payzone
Retail & Lottery
SSK Commercial Terms
Retail Total DPC
AJ
A
Mm
-
<
>
=
—I
Fixed Agents Pay
Retalll Director
Retail Programme Costs
Retail Central Costs
Retail Profit
GLO Activities
Agents Pay Double Count
Underlying Profit exc GLO
1. Retail has grown year on year YTD income +1.5% and exceeded Income budget by
+£1.6m driven predominantly by Mails and Banking. In banking both deposit and
withdrawal year on year growth has increased over the summer period with Year on
year growth of +8% for deposits and +35% for withdrawals YTD. Successful media
campaigns together with collaborative bank marketing teams has increased awareness
of the Post Offices role in access to cash and this, together with the recent
renumeration rate increases, appears to be driving both consumer awareness and
Postmasters engagement and thus volume increases above the trend at year end.
2. Retail profit is adversely impacted by GLO costs that were centrally budgeted including
Suspended Postmaster Agents Rem (£0.5m YTD), Paying the banking rate increases
early and increasing fixed renumeration for community branches (£1.1m YTD) and
investing in increased training for Postmasters (£0.1m YTD). Adjusting for these,
which are not adversely impacting the total PO performance, the underlying Retail
contribution is +£4.8m vs budget. This is driven by a budgeting double count in
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agents pay (£2m YTD), timing of project costs that will be incurred later in the year
(£1.2m) and trading upside £1.6m.
3. Full year we are anticipating underlying upside of c£7m driven by the Agents Rem
double count (c£5m, total PO £6m) and commercial upsides c£2m.
Market Update
4. Retail sales flattened in August with the 12 month average dropping to a new low of
+0.4% on previous year. Like for like sales in August were down -0.5% YoY. Online
sales outperformed the high street, but with growth as low as +2.2% YoY it is clear
that even this channel has slowed down dramatically. Food and grocery sales moved
back into positive territory with LFL growth of +0.5% YoY over last 3 months
predominantly due to Bank Holiday heatwave whilst non-food LFL growth over the last
3 months is -3% YoY. (BRC Sept 3" 2019)
5. Convenience retail sales continue to outperform overall grocery market The Institute
of Grocery Distribution (IGD) issued its annual convenience market review in July,
predicting that the sector will continue to perform strongly with forecast sales growth
of 2.6% for 2019 and cumulative market growth of £6.9bn to 2024. The Co Op
societies are forecast to be the fastest growing sector with estimated growth of 5.6%
in year, whilst Independents are forecast to be the slowest growing sector, albeit still
growing at 1.6%.
6. Royal Mail quarterly trading results were in line with expectations but share price
remains suppressed. The recent announcement of potential Industrial Action by CWU
members is seen as a warning shot to Rico Back over planned changes. The threat of
action prior to Christmas peak follows the same pattern used with Moya Greene to
extract productivity and pension concessions. RM have also created Parcelforce as a
wholly owned subsidiary, still subject to MDA provisions, and may offer opportunities
around industrial action contingency and possible future business separation.
7. The pick-up and drop-off (PUDO) market has been a major focus of competitor
development. Amazon launched its own click and collect network ‘Amazon Counter’
and Paypoint announced deals with Amazon and DHL Parcel. The deal with Amazon
sees Amazon deploying its own technology into Paypoint outlets and a decrease in
agent rates. Both developments highlight the increasing competition with the same
risk of over-capacity and margin squeeze seen in wider e-commerce parcels
Customers
8. Network customer sessions have averaged 10.1m per week for the year to date, +1%
year on year, significantly better than BRC reported 3 month average High Street footfall
decline of -4%.same as front page .Network performance has been mixed, overall +1%
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vs target with sector wide challenges facing travel products offsetting strong
performance in mails and banking, particularly pleasing in the context of significant
organisational change as well as responding to Postmasters reaction to the GLO
judgement.
9. Customer Experience KPIs show a steady improvement month on month although are
behind last year due to the lower scores achieved in DMBs that have been franchised
into WHS (Ease scores i.e.how easy the PO is to do business with, are 67.2% WHS vs
89.1% DMB’s) At a recent meeting with Carl Cowling, the new WHS CEO, was
surprised by their relative performance and is keen to address it. The Ease score for
P5 was 81.1% and is 81.1% YTD, slightly below target of 82%. 93.2% of customers
YTD thought their wait time was acceptable and customers’ rating of counter teams
demonstrating behaviours - Friendly, Professional, Knowledgeable, having
understanding, acting efficiently and meeting expectations - was 85.9% in P5 and
85.5% YTD)
Mails performance
10. Trading income growth of +£1.4m (+1.2%) vs budget is largely due to better than
expected performance in Labels (+£1.3m) and Stamps (+£0.4m) helping to offset
weaker than expected growth in Home Shopping Returns (-£0.5m).
11. Home shopping returns continue to show good growth of +21% vs prior year, however
this is lower than budgeted growth of +29% reflecting the overall slowing of online
UK retail growth as mentioned in para 4. The effect of recent retailer attempts to
reduce free returns is not yet clear. Labels-to-Go continues to account for ~10% of
total return volumes through organic customer adoption. Local Collect saw continued
strong growth of +25% supported by the two Amazon Prime Days in July.
Cash & Banking performance
12. Overall, nationwide cash withdrawals through all ATMs continue to reduce at a
compounding 7-10% (according to LINK). PO ATM Performance has been a reduction
of c.6% year to date, temporarily bucking this trend, driven by a focus on ATM
availability which is now routinely above 94%. Our work with the Bank of Ireland to
remove ATMs that are either out of licence, outdated insecure hardware, or
commercially unsustainable has seen 35 removed so far, with a further 97 planned for
removal in the coming months. Specific arrangements have been agreed to ensure
truly remote ATMs (Kinlochleven in Scotland being an example) are protected for the
next year, and a support package has been agreed for Postmasters while we work
with them to migrate transactions to their counters as their ATM is withdrawn. Notice
is expected to be served on a further 300-400 devices by the end of the year. The
future ATM strategy to replace the Bank of Ireland estate is being refined and will be
presented to GE/Board in October.
13. Counter deposit volumes through the Banking Framework continue to grow strongly
following product changes over the last year, +35% YTD compared to last
year. Increasing media coverage of the Post Offices role in access to cash and
remuneration rate increases, appear to be driving both consumer and Postmasters
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awareness and thus volume increases above the trend at year end. As a knock on
effect of these changes, withdrawal volumes have also seen an increase YOY of +8%
YTD.
14. Banking Framework 2 pricing and contractual changes have been accepted by all
banks. Barclays has served notice of their intent to cease allowing their customer to
make Cash Withdrawals in Post Offices. This will become public knowledge in early
October when the interested parties including Government, NFSP and the Daily Mail
respond to our announcement that ‘all banks have re-confirmed their commitment,
but we are disappointed to note Barclays position’. We believe a number of other
significant voices will also express deep concern and scepticism about this decision.
15. POca customer volumes continue to decline but at a significantly slower rate than
budgeted despite DWP now sending c.25k letters to customers per week. Take-up and
conversion (of customers) has not yet materialised, so we continue to support cl.1m
customers UK wide. DWP have stated they will not extend the POca contract beyond
2021 and will go out to tender in 2019 for a POca replacement, which we intend to bid
for. Our main strategy and direction is to ensure POL remains the channel for all
customers (who have migrated to bank accounts or any new service, whether provided
by us or not) to ensure existing footfall remains in branch and to support our social
purpose. Following the appointment of Therese Coffey as Secretary of State for DWP
we are looking to lobby again to seek an alternative approach.
Payment Services performance
16. The success of winning a 5 year exclusive agreement with British Gas, the largest bill
payment client is hugely significant. This will add 78m more transaction volumes with
immediate effect on 1/1/20, increasing market share by +14pts (to c39%), and bring
c2.5m customers and £9m of gross income into both networks. A £3.5m transition
investment program is in place to deliver the technical, customer and agent
communication, retail readiness, and operational activities in time for Go Live on New
Year's Day.
17. The British Gas win has resulted in significant interest from other key clients (E.On,
NPower, B.Telecom). PayPoint share price has reduced by 12%, and they have
reacted by issuing legal letters seeking to desist our attempts to persuade independent
retailers to switch to Payzone. We have countered these letters arguing that there is
no legitimacy to their claims and we continue to respond positively to retailers seeking
to end their PayPoint contract and convert to Payzone.
18. Similar positive engagement with major retail groups continues. We are in
negotiations with Coop and SPAR for whole estate deals as a direct consequence of
winning British Gas. Critical to enabling this is the delivery of HIH and rPos integration
that continues at pace for readiness by July 2020.
19. Significant progress has been made with the stabilisation and security of the Payzone
business, notably;
a. Separation of the Payzone business will be complete by end October.
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b. Completion of all IT security remediation and business continuity activity from the
results of vulnerability testing
c. Completion of outstanding internal audit tasks, including a lessons learned
document, master services agreement, and formulation of a network agreement to
facilitate the transaction processing to enable bill payment clients to operate across
both networks
Retail Strategy delivery
20. We continue to actively engage with our Postmasters and are testing the effectiveness
of different channels. In addition to the evening listening groups, in August each of
the Regional Managers hosted a conference call which 500 Postmasters joined to hear
updates on Agent Remuneration, improvements to Branch Support Centre and
business performance. 20 informal regional ‘drop in’ sessions are running in
August/September to give Postmasters the opportunity to ask questions, raise
concerns or simply just network and in mid-September we will be trialling a Postmaster
Facebook group in the London region. All the issues raised from the curry nights,
drop-in sessions and one website comments will be themed and developed into a ‘you
said, we did’ strong narrative to show we are listening and responding.
21. On Agents remuneration we are modelling a range of hypotheses as updated at the
board meeting in July. The ‘quick wins’ of increased Fixed Pay for Community
branches and bringing forward the banking rate increases have been very well
received. The next update to Board is due in October.
22. Phase II of the hot housing programme has just completed in 230 branches, with 26
Area Managers across 3 regions. The approach is to develop the capability of the Area
Managers to build relationships using a ‘trust’ model; identify opportunities through
using diagnostic tools and develop simple coaching techniques. Postmasters benefit
from improved Management Information, increasing their knowledge of business
finances, strengthening their retail capability and improving their skills in selling Post
office products and services. A survey of Postmaster feedback shows 87% would
recommend hot housing to other Postmasters, 47% believe it has improved their
business profitability already and 78% say it has improved their relationship with the
Post Office. Next steps are to roll out to a further 3 regions September to November.
23. We are overhauling the Postmaster application and training experience. We have
increased our dedicated classroom trainers from 12 to 18 to be able to offer an
enhanced programme of classroom refresher training for Postmasters and their
teams. We have increased the number of onsite trainers from 30 to 40 and increased
the number of Business Support Managers by 12 to 20 to offer early days support to
Postmasters in their first 6 months. The ‘run a post office’ website for new applicants
is being improved to make it more user friendly and mobile platform enabled whilst
the business plan process is being simplified. These changes should significantly
improve our current 80% drop out rate for new applicants.
24. 34 of the planned 69 DMB exits for 2019/20 have been delivered, and a further 9 are
scheduled before the end of Q2. There is a strong pipeline of activity and confidence
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in delivering the remaining 27 exits this year to deliver £6.4m in year benefit. 10
onsite conversions with Short Term Contracts have now been announced with very
minimal stakeholder reaction and positive customer feedback. These are on track to
be delivered this year. The deal to franchise 74 DMBs to WH Smith has almost
concluded with 68 branches implemented to date.
25. Network numbers as at the end of August 2019 stand at 11,628 which is broadly in
line with our expectations. There has been a small month on month decline in network
numbers and whilst we expect this trend to continue throughout Q2, an increase in
the number of new local branches opening in Q3 and Q4 is expected to offset this. We
plan to introduce 220 new local branches in 19/20, 73 of which have already been
delivered, increasing customer convenience and helping to maintain our network
coverage. Overall, we have opened close to 500 new network locations over the past
three years.
26. The Parcel Shop trial is now fully tested and ready to launch, with 5 locations already
lined up in central London and 8 contracts in total already signed. We have been
trialing the concept in Finsbury Dials over the last two months with positive feedback
from colleagues and around 25-30 transactions per week. Our first live branch is due
to open imminently in Tottenham Court Road. We have completed 7 Mains to Locals
trials with a further 7 planned for September and October. The results are extremely
positive to date with commercial benefits for POL (reduced remuneration rates) and
the Retailer (smaller PO footprint and increased retail sales). McColls have converted
two of their branches to date and are quoting 9% increase in retail sales and around
£4k per annum reduction in branch operating costs through staff savings. Based on
this initial performance they have asked us to look at another 40 locations across their
estate which we are currently exploring.
27. The procurement for next generation Self- Serve Kiosks is now being reviewed to
include software requirements and the next stage is to test the market to ensure that
that the full cost per kiosk meets our expectations. Commercial terms and lease
arrangements have now been agreed for 26 kiosks in 21 of our agency branches
generating incremental income of £115k per annum for Post Office. Positive feedback
has been received from postmasters in terms of the levels of workload migration from
the counter and potential for staff cost efficiencies. In those agency branches with
multiple kiosks, postmasters are reporting an average of 55% mails workload
migration and £1300 staff cost savings per week. Plans are also progressing to further
improve and simplify the customer journeys on our existing Self-Serve Kiosks prior to
this year’s peak Christmas trading period.
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Appendix 1 - Retail Scorecard
Rolling
3-month Rolling
Average
Period 5
Target Actual Target Actual Target
yodey Auayend [!eIeY Pur PeLSS F FEL
[Retail Gross income e
[Retail Trading Profit Retail I £m A e
Customer Sessions per week Network! # e
Banking Gross Income. cap I fm e
IOMB Programme Costs Prog tk e
—
ICustomer Responses RD + — e
nate Shopper - Dangerous Goods wis I — ° I
Mystery Shopper - Customer waits I 9% a
IMails Segregation MRIL %
ICash & Banking Project Progress cap I RAG e
Average PM remuneration increases YOY RO % e
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Tab 4 FST&1 and Retail Quarterly Report
POST OFFICE PAGE 9 OF 9
Appendix 2 - Retail Income by Product
Period 5 YTD FULL YEAR
Income (£m) Act I Bud PY Act YoY¥% Bud PY —YoY%
Parcelforce
Special Delivery
International Priority & Standard
Stamps
Labels (1st & 2nd Class)
RM Signed For
Home Shopping Returns
Other Trading
Annual Fee
Mailwork & Mails non trading
Total Mails
Retail (Inc Gift cards & Other)
Gift Vouchers branch
Tot etal IRRELEVANT
Lottery Variable
Camelot Fixed
Health Variable
Health Fixed
Total Lottery
Banking Services
Card Account
ATMs
Total Banking
Payment Services
Payzone
Total Payments
SSK Commercial Terms
Gross Income
IRRELEVANT
Appendix 3 - Customer KPIs
CURRENT] LAST
KPIs source I PERIOD I PERIOD yD east Target
(ps) I (Pa)
Customer Driver voc 85.4% 85.4% +0,0%I 85.4% I 87.9% N/A
Effort (96 saying Post Office Voc I 1.1% I 81.9% -0.8%I 81.0% I 84.3% 82%
is Easy to do business with)
Wait time Acceptability voc 92.3% 92.7% -0.4% I 92.3% I 96.2% N/A
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pliance ii) Network Report
POST OFFICE BOARD PAGE 1 OF 5
Network Report and SGEIs
A
uthor: Tracy Marshall Sponsor: Debbie Smith Meeting date: 23" September 2019
Executive Summary
Context
Pp
9g
al
‘ost Office is proud of its social purpose, codified in our funding agreement with
jovernment as maintaining a network of at least 11,500 branches providing access to
n agreed set of ‘services of general economic interest’ (SGEI). We currently receive a
Network Subsidy Payment on this basis. Post Office Ltd produces a Network Report
e
al
p
very year providing information about our network and customer accessibility. We
Iso monitor compliance against SGEI provision on a monthly basis and report
erformance to UKGI. The purpose of this paper is twofold: to formally ask the Board
to approve the annual Network Report for 2018/2019 and to confirm compliance with
the Entrustment Letter and Funding Agreement in terms of SGEI provision.
Questions addressed in this report
1.
AWN
What is the Annual Network Report?
What are our SGEIs and did we comply against them in 2018/2019?
What activity will take place to further assure SGEI compliance for future years?
What do we need to do next to progress?
Conclusion
1
. The Annual Network Report provides information about the Post Office network and
customer accessibility for 2018/2019 year as required under Provision 11 of the
Postal Services act 2011. It demonstrates compliance against the full suite of
agreed accessibility criteria and a growth in network numbers.
SGEI, or Services of General Economic Interest, include benefits such as pensions;
passports; bill payments; postal services, and universal access to cash. Providing
these SGEI products is a prerequisite of the Network Subsidy Payment (NSP) and
stipulated in the Entrustment letter and Funding Agreement. Post Office Ltd met its
SGEI requirements at the end of March 2019 and continues to do so.
An internal audit in March 2019 concluded that appropriate processes were in place
to support our assertion that we were meeting our SGEI requirements but
challenged the levels of assurance in place around SGEI provision. Internal Audit
have been asked to review the SGEI validation process and this is underway. For
future years, it is recognised that additional substantive audit work may be
required to support the Board's confirmation of compliance.
Board sign off to both the 18/19 annual Network Report and SGEI compliance are
required. Following this, the Network Report can be laid before parliament and
published on our website.
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pliance ii) Network Report
Input Sought Input Received
1. Approval to the 2019 Network 2. The draft Network Report has been
Report and confirmation of reviewed by UKGI, Retail and Post
compliance with the Entrustment Office Corporate Affairs. Internal
Letter and Funding Agreement with Audit have also reviewed our
respect to SGEI provision as at March processes
2019
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pliance ii) Network Report
The Report
What is the need or opportunity and why now?
The significance of our network numbers and SGEI criteria
1. Post Office is unique amongst commercial businesses in having a social purpose to
provide essential products and services to communities across the country, even in
the thousands of locations where it is not commercially viable. We are proud to do
so and have confirmed this position in our Funding Agreement with government.
This makes clear that "the Secretary of State expects POL to maintain a network of
at least 11,500 Branches for the duration of the Funding Period...[of which]...at
least 11,000...shall be required to provide all of the SGEI Services.”’ SGEI, or
Services of General Economic Interest, include: benefits such as pensions;
passports; bill payments; postal services, and universal access to cash. A full list of
these services can be found at appendix two.
2. Providing these SGEI is a prerequisite of the (up to) £160m of Network Subsidy
Payment (NSP) for the period 2018-2021. Post Office ended 2018/2019 with a
network of over 11,600. Government clients can and do withdraw services from
branches on occasion, driving licences being one example.
3. We also have a set of ‘access criteria’ designed to ensure our network remains
representative of the communities we serve, particularly in rural areas. These
largely relate to x percent of the UK population being within y distance of a Post
Office, e.g. we need to ensure that, "99% of the population to be within 3 miles
and 90% of the population to be within 1 mile of their nearest Post Office outlet.’.
Details of our access criteria can be found at appendix three.
4. We consistently exceed our network numbers and network access criteria , as
demonstrated by the latest figures from the Network Report and at Appendix 2.3
We also assure actual availability of SGEI across our network through operational
monitoring and ongoing central analysis which identifies any issues and ensures
they are both resolved in branch and noted for reporting purposes. Details of SGEI
criteria and performance can be found at appendices four and five.
criteria. In practice it is impos to meet
store service in any area covered by this requirement
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What do we propose to do and why?
Assurance processes for the Network Report and SGEI compliance
5. We will submit the annual Network Report to the Post Office Board each year for
formal sign off, in advance of it being laid before parliament and published.
6. For 18/19 we are asking the Post Office Board to approve compliance with the
Entrustment Letter and Funding Agreement with respect to SGEI conformance
based on network provision data referred to in appendices four and five. This
demonstrates that a sufficient number of branches are able to transact SGEI
products and services across our network.
7. The internal audit concluded in March 2019 noted that it was unclear whether
sufficient SGEI assurance processes were in place. Internal Audit have been asked
to review the SGEI validation process and this is underway. The work to date has
not identified any areas of concern that would result in the level of assurance
provided to UKGI being overstated. It has however identified the need for SGEI
requirements to be clarified, along with the need to ensure any agreement with
BEIS, UKGI and other Agencies in connection with the delivery of these services
are kept up to date. Actions to achieve clarity and oversight will form part of the
recommendation for a more robust approach to assurance and sign-off in future
years, which may include external audit activity.
What do we need to do next to progress?
8. Our process around the publication of the annual Network Report has already been
audited and deemed robust. The internal audit on SGEI compliance is already
underway and will make recommendations for the future assurance of this area.
For 18/19 we are seeking approval om SGEI conformance and approval of the
Network Report, to enable it to be laid before parliament and officially published.
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Appendix
1. Annual Network Report for 2018/2019
See separate document.
2.
Category of Service
4 Processing social benefit and tax
credit payments to the public.
Processing of national identity
2 andlicensing scheme
applications,
3 Universal payment facilities for
Public utility services.
4 Access to postal services
Universal access to
and banking fa
5 Government savings instruments,
‘especially for rural customers and
those on social benefits:
Services of General Economic Interest provided by Post Office Ltd
Service Provided
Cash payment of state benefits including state pension, child benefits and tax credits.
Issuing of vouchers to eligible asylum seekers.
Providing passport application forms for customers to complete and return
Checking and authentication of passport applications and supporting documentation
Capturing biometric data for Biometric Residence Permits.
Providing vehicle licence application forms for customers to complete
Receiving payment for vehicle licences and Photocard Licences
Services for the sale of Rod Fishing Licences.
Provision of facilities for payment of electricity, gas, telecommunications and water bills.
Payment options include pre-payment and other budgeting schemes (e.g. savings stamps).
Provision of facilities for payment of tax bills and social housing rents.
Provision of access to postal services which the universal service provider (Royal Mail Group
Limited) is required to provide under regulatory conditions and directions issued by OFCOM in
accordance with section 36 of the Postal Services Act 2011 and the designated Universal
Service Provider Conditions issues by Ofcom 27 March 2012
Provision of basic community banking facilities (cashing of cheques, cash deposit, Post Office
card account and automated cash withdrawals and deposits) and cash transmission facili
(postal orders), in particular to socially excluded customers. This includes deposits and
withdrawals of cash by businesses local to Post Office branches.
Access to certain Government savings instruments
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3. Performance against Network Accessibility Criteria
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Accessibility Performance
National Local
Postcode
Criteria Total Total Peprived Urban Rural Districts with
Population I Population Urban
ri " Population I Population I less than 95%
within 3 I within I Population I fOFRSEOn I oopuries I Population
miles mile I within 1 mile I “hn } mile I within etre aa
within 6 miles
99% 90% 99% 95% 95% °
Target
Performance I 927% 92.7% 99.4% 98.2% 98.7% 3
* We have never fallen below the target for the 6 main, proximity-based, criteria. In practice it is impossible to meet the postcode
criterion at all times but we act immediately to restore service in any area covered by this requirement
4. SGEI product categories and performance against network coverage
requirements
Network coverage of SGEls (Services of General Economic Interest)
+ Processing soil benefs and tax credit payments to the public ‘1,000 ‘14st
2 Processing of national identity and licensing scheme applications 11,500 Cent contract dependent
3. Universal payment facilites for public uly services 11,500 11,625
4 [Accesso postal services 118500 11625
5 Universal access to basic cash and banking faites, especially for rural customers and those on social
11,000 11,491
benefits
5. Category 2 SGEI provision
Category 2 breakdown
MAIN 3,402, 29) 3,399 533) 2,115) 3,000}
LOCAL 3,965) 0) 1,193 0 12 3,238}
DMB 191 74 191 137 191 74
Traditional 2,447 0) 651 3t 128 1,998I
Outreach 1,633 t) 678 0) 237 1,246I
Total 11,638] 103] 6,112 701 2,683] 9,653]
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Category 2 Accessibility Performance against contractual obligations
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The Post Office g
Network Report
2019
PRESENTED TO PARLIAMENT PURSUANT TO SECTION 11
OF THE POSTAL SERVICES ACT 2011
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The Post Office
Network Report
2019
PRESENTED TO PARLIAMENT PURSUANT TO SECTION 11
OF THE POSTAL SERVICES ACT 2011
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contents
Size and makeup of the network / 04 I
Accessibility of the network/ 08
Products and services available / 10
Further information on Post Office Limited can be found at corporate. postoffice.co.uk including the
Annual Report and Financial Statements.
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Size and make-up of the network
The Post Office network serves communities, individuals, families
and businesses. It is a key element of the UK’s infrastructure;
meeting the need for postal, financial, government and telecoms
services.
Maintaining the size and accessibility of the
network is a key policy aim of Post Office
Limited and at the end of March 2019 there
were 11,638 branches. Based in local
communities, the Post Office has a unique
reach across all areas of society - for example
almost 93% of people in the UK live within a
mile of a Post Office branch, 99.7% within
three miles and 99.4% of those living in
deprived urban communities live within a mile
of a Post Office branch.
At the end of March 2019, there were 191
Directly Managed branches that are run by
Post Office Limited employees. The remainder
of the network is made up of 11,447 branches
that are run on an agency basis.
Amongst the Post Office branches operated
on an agency basis there are different Post
Office branch models. These range from
outreach services (typically small part-time
branches using a village hall or a mobile van
which enable services to continue to be
provided to communities which would not
otherwise receive them), through to Post
Office branches run by independent
postmasters alongside their retail offer, and
larger franchise branches (for example those
operated by the Spar or WH Smith).
In recent years the Post Office has opened
branches in communities where we do not
currently provide services, so that we can
reach new customers. In 2018/19 there were
328 new branches opened to help ensure the
network continues to meet customer needs
and expectations
Number of Post Office branches
2014/15 2015/16
corporate postoffice.co.u
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2016/17
2017/18 2018/19
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Quarterly change in network
size over recent years
Date
31.03.14
31.06.14
30.09.14
311214
31.03.15
30.06.15
30.09.15.
311218
31.03.16
30.06.16
30.09.16
31.12.16
31.03.17
31.06.17
31.09.17
31.12.17
31.03.18
30.06.18
30.09.18
3112.18
31.03.19
Total
11,696
11,686
“11,631
11,627
11,634
11,597
11,566
“11,609
“11.643
11,648
11,645
11,633
11,659
“11,582
11,559
11,536
11,847
11,892
“11587
“T1875
11,638
by region in 2018/19
Change in Post Office branches
No. of No. of
quarterly branches branches
Notchange change atendof _atendof_~—=sNet_— bof loss
sas ae Region March 2018 March 2019 Variance gain
- on North East 490 497 7 14
North West alg 1 “8-07
Yorkshire and I
The Humber 951 951 0 0
‘West Midlands 900 910 10 i
SouthWest 1,268 1288 —~COSSSD
South East 1,373 1,382 9 OF
London ~~ 662 6s (ss
East of England ‘1,116 7134 1 16
East Midlands 879 879i
Northern Ireland 485 498 27
Scotland 1,398 1,388 “07
Wales 906 930 26
Total 1547 11,638 a 08
2014/15 to 2018/19
2014/15 2015/16
2016/17
2017/18
Percentage of Post Office
branches in rural, urban and urban
deprived areas out of the total
number of Post office branches
2018/19
Burt a I I Urban deprived
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Regional proportion of each type of Post Office branch at
the end of March 2019
North East 496 497504 389372
North West 346346 65.4 363358
Yorkshire and the Humber 493.486 S07 340
‘West Midlands S07 00-—«S93 296295
SouthWest =—~S—=SOB1~—SCSBSSCL’. 163147
“South East “S04 500496 a4 8a
‘London ii 09989 191 191
on a aes
East Midlands OLS. 38.2 211207
Northen Ireland 66.4 65.733, $3.4
‘Scotland “56 656 34.4 ia 304301
Wales 683 684 3l7~~—=S«316 SS ~—SdSS~SC*SCLS“‘iKO CGD
Total 529 627 471 473 350 353 121 121 258 252
Regional changes in rural Post Office branch numbers.
Rural at end of Rural at end of
Region March 2018 March 2019__Net change _% of loss/gain
North East 243 247 4 16
North West 387 3 -08
ands 366 2 “05
South West - 864 10 12
South East 692
East of England 681
erates nn ;
Northern Ireland 322 327 5 16
Scotland a7 710 Zi “08
Wales ee 636 7 27
Total 6110 6131 2 03
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Regional changes in urban Post Office branch numbers
Reg
North East % 9 38 3) 40 12
North West 266-260-623 02 “07
Yorkshire and The Humber 164 169-5 3.0 06 7 18
West Midlands 188 161 3 1.9 24 12 22
South West 60 28D 20 5 12
South East 7 88 18 14 i «18
London 125 1283S 21 421
East of England 41401 28 435 445 «10 «2.3
East Midlands a 70 14 il 336 ~-338~=S2SSsC«
Northern Ireland 8 «90~=*«‘ StCti(t« 66 163 «IBD
Scotland We 44 03 48147830
Wales 28 180-216 31 287,294 7A
Total 1401 1403 2 ~~ 01 «4036-4104 68 «= 17S5,437 5,507 70 «13
Post Office branches by model types in 2017/18 and 2018/19
1547__ 1,638
12,000
9768 9.814
1517 1,633
Directly Managed y Outreach Grand Total
includ
(including Satelite
Mobileand Hosted}
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Accessibility of the network
The Post Office is committed to meeting the accessibility criteria
that were originally laid down by the Government in 2007, and
have been reconfirmed by successive Governments since.
The criteria cover UK wide accessibility for total,
urban, rural and urban deprived populations.
Moreover, they ensure a strong geographical
distribution of Post Office branches by including a
separate criterion that works at postcode district
level. There are around 3,000 geographic level
postcode districts throughout the UK (an example
would be the HP22 part of the postcode),
Wide coverage across the UK ensures that the
Post Office is accessible for all. This is the case for
the population as a whole, and also for specifically
analysed groups such as the elderly,
disadvantaged, those on low incomes and those
with disabilities. Itis also the case for small
businesses, where the Post Office acts as a key
national infrastructure supporting this important
and growing part of the economy.
Compliance with
Government's minimum
network access criteria, at
the end of March 2019
The Government's national access criteria are:
1. 99% of the UK population to be within three
miles of their nearest Post Office outlet
2. 90% of the UK population to be within one
mile of their nearest Post Office outlet
3. 99% of the total population in deprived urban
areas across the UK to be within one mile of
their nearest Post Office outlet
4, 98% of the total urban population across the
UK to be within one mile of their nearest Post
Office outlet
5. 95% of the total rural population across the
UK to be within three miles of their nearest
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Post Office outlet
In addition, the following criterion will apply
at a local level to ensure a minimum level of
access for customers living in remote rural
areas,
6. 95% of the population of every postcode
district to be within six miles of their nearest
Post Office outlet
The results against these access criteria are shown
in the table opposite
The Post Office measures the performance of the
network against the Government access criteria by
breaking down the population across the country
into census Output Areas (OAs), Accessibility is
calculated by measuring the distance of the centre
(population weighted centroid) of the OA to its
nearest Post Office access point.
The total national accessibility is then calculated
by adding the total population of each of the
census OAs deemed to meet the criterion divided
by the total population asa whole expressed as a
percentage.
Urban, Urban Deprived and Rural accessibility is
measured by taking account of OAs classified as
Urban, Urban Deprived and Rural respectively
only.
The Post Office provides Citizens Advice with the
location co-ordinates of all individual open and
trading Post Office branches. This is the same core
data upon which the accessibility results are
based.
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Accessibility Performance
Criteria le v Sri
Minimum requirement 99% 99% 95% 95% 0
2018/19 Performance 99.7%
4% 98.2% 98.7%
3
“The Postcode District (PCD) accessibility can be impacted by a single branch not providing service at the time of the
reporting. In this instance there were service issues offecting 3 PCDs and the position on each is as follows
1158 The service at Howmore is experiencing service issues. Tis is @ very deep rural location which
makes serving the area dificult but the Post Office continues to work on ths.
PA2I Kames and Tighnabruich Post Offices were not trading at the time of the report, but both were then subsequently
covered with o mobile van service and anew PO Local service has now opened at Komes.
PH38 - Acharacle Post Office was not able to provide out
ich services to Glenfinnan and Lochoitort at the time of
the report. The locations for the outreaches are in hotels. At Lochailort, the hotel operates on a seasonal basis and the
service is now available. Glenfinnian is no longer available for use for the Post Office outreach service.
Accessibility to the Post Office branch network for key groups
across the UK at the end of March 2019
The Postal Services Act 201] (Provision Tl) also
requires reporting on Post Office network access
for anumber of user groups over and above the
established Government Access Criteria as
follows;
+ Small businesses
+ Disadvantaged individuals
+ Individuals on low incomes
+ Individuals with disabilities
+ Individuals over the age of 65
The 2019 accessibility results for each of these
categories are shown in this chart:
Criteria
Small businesses 929% —-99.7%
Disadvantaged individuals "999%
individuals with
incomes (<1Ok) 99.9%
Individuals with
incomes (<20k) 97.6% 999%
Individuals with disabilities 95.2% 99.8%
Individuals over
the age of 65 1.6% 99.6%
CAMEO income data a Postcode level classfation system
for identifying GB consumers basedon itely hovsehold income,
This accessibility reporting is over
and above the Government
Network Access Criteria. The
analysis has been conducted by Post
Office Ltd's in-house Geographic
Modelling Team based on the
network of open Post Office
branches at end of March 2019. Key
data sets used in the analysis to
identify the key user groups were as
follows
Small businesses
UK business locations from
SimpleGeo (201
Disadvantaged individuals
Based on the various Indices of
Multiple Deprivation available for
England, Scotland, Wales and
Northern Ireland as of 2014 at
Output Area level.
Individuals on low incomes
Based on CAMEO Income data
which categorises each Output Area
ithin the UK as one of 8 income
bandings (8 = Less than £10k, I=
More than £100k). (CAMEO Income
has been calibrated against key
market research reports such as the
Expenditure and Food Survey and
the New Earnings Survey).
Individuals with disabilities
Based on data (for England, Wales &
Scotland) taken from the Office for
National Statistics ‘NOMIS' facility
which provides the November 2013
count of Disability Living Allowance
claimants lower Super Output Area
For Northern Ireland, data was taken
from the Department of Social
Development's Northern Ireland
Neighbourhood Information Service
(NINIS) website at Output Area
level
Individuals over the age of 65
Based on the 201] Census
population broken down by age at
Output Area level
With the exception of the Small
business data which is based on
actual locations (to the nearest 50
metres), the network accessib
for these specific groups was
measured using the same
methodology as the measure of the
network against the Government
Access Criteria - by breaking down
the individual populations across the
country into census Output Areas
(OAs) and by calculating
accessibility by measuring the
distance of the centre (population
weighted centroid) of the OA to its
nearest Post Office access point.
comporate postoffice.couk PAGE 9
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Products and services available at the Post Office
Government Services The Post Office offers a range of services for customers on behalf of Government
Departments and Councils including applications, payments, identity verification, data capture and information
services - available in a range of branches across the network.
Service Availability Description
Post Office Card Allbranches A basic account for customers who are in receipt of state pensions, benefits or tax credits
Account
Local council services
Car Tax - Motor
Vehicle Licence Issue
chanced sone)
International driving
may ean:
Biometric Residence
Permit
“Biometric Residence
Permit collection
GOVUK Verify
CQC- CRB
registration service
Rod fishing licences
“Selected
“Local Area based
Selected
branches
branches
“Selected
branches
“Selected
branches
ed
branches
“Selected
branches
” On-Line only
" Selected
branches
“All branches
based on
demand
signature and sends the information securely to the Home Office.
Payments are made into the account by the paying department and customers can withdraw
cash at all Post Office branches or the Post Office cash machi a
‘The Post Office provides services on behalf of over 300 local count
cof applications and payment services both from and to residents and customers. Services
include cash collection from residents for rents, rates, council tax, parking fines and licence
fees, payment services including asylum seekers allowances, emergency welfare payments and
rebates; form checking including benefits, planning and concessionary travel applications and
identity checking and verification services,
Car Tax - Motor Vehicle Licence and Statutory Off Road Notification (SORN) services
provided. Customers can have their documents checked and renew their car tax at over 5,000
Post Office branches nationwide
The photo on the DVLA photocard licence has to be renewed every 10 years. The DVLA
Photocard Renewal service at the Post Office helps save time and makes sure the photocard
renewal application meets DVLA requirements by taking a photo to the required DVLA
standards, capturing an electronic signature and sending the data electronically and securely to
the DVLA.
‘Applications can be made in selected branches for an International Driving Permit which is
required to drive legally in many places overseas alongside a UK driving licence
is covering a wide range
Customers can take their passport applications to a Post Office that provides the check and
send service where the application form and documentation are checked to ensure that
everything is correct. The application is then despatched by Royal Mail Special Delivery.
Passport application forms are available from Post Office branches offering the Passport Check
& Send service.
“Customers who need to have photocopies of identity documents certified (for example when
applying for a mortgage, bank account or new job), can have original documents checked and
tocopies certified at the Post Office.
‘Customers who need to apply to stay in the UK who are from outside the European Economic
Area (EEA) may need to apply for a Biometric Residence Permit and can do so at selected
Post Office branches if they receive an invitation letter from the Home Office. The Post Office
captures the customer's biometric details by taking their photograph, fingerprints and digital
‘Customers who have processed their application for a Biometric Residence Permit
centering the UK can apply to collect the permit from selected Post Office branches.
"Customers seeking access to services on GOV.UK are able to do so via Post Office's Verify
service. The Post Office is one of eight companies offering this form of identity assurance.
Once verified customers are able to use a single username and password to access a growing
number of services across government. The service is only available online.
"The Care Quality Commission (CQC) is the independent regulator of all health and social care
services in England. Customers who need a Criminal Records Bureau (CRB) check from the
COC can get their application checked at the Post Office to verify their identity
‘A range of rod licences can be paid for in branches where there is a local demand in England,
‘Wales and the border region of Scotland,
Further information on the products and services available from Post Office can be found at postoffice.co.uk
or by calling 0345 611 2970.
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Products and services available at the Post Office
Mails A range of Royal Mail Group Limited and Parcelforce Worldwide services are available from
Post Office branches nationwide
Service Availability Description
Letter and All branches UK and international letter and document delivery options available. Delivery options include
Document Services fast and secure with end-to-end tracking, a signature taken on delivery, or a standard delivery
for less urgent items.
UK Parcels All branches Guaranteed UK Parcel services are ideal for a valvable gift or important item that absolutely
Guaranteed has to be there tomorrow:
Royal Mail Special Delivery Guaranteed by 9am@
Royal Mail Special Delivery Guaranteed by 1pm®
Parcelforce Worldwide express24 (available in selected branches)
Parcelforce Worldwide express9 (available in selected branches), express10 and expressAM
{available in selected branches)
Irelandexpress (selected branches)
Ui Parcels Confirmed All branches Confirmed UK parcel services provide extra peace of mind of proof of delivery with a
signature:
Royal Mail Signed For® 1st Class I Royal Mail Signed For® 2nd Class
Parcelforce Worldwide express48
Parcelforce Worldwide express48la
lected branches only
“Standard UK parcel services are r
for non-valuable items
Royal Mail Ist Class I Royal Mail 2nd Class
Parcelforce Worldwide express48
Parcelforce Worldwide express48large - selected branches only
“"UikParcels Standard All branches -
Guarantee
ternational parcel services are ideal for fast and secure international parcel
Guaranteed branches delivery, with the added security of end-to-end tracking and online confirmation of delivery
Parcelforce Worldwide globalexpress I Parcelforce Worldwide globalpriority
International Parcels Allbranches Confirmed international parcel services for extra peace of mind with tracking or signature
Confirmed on delivery: Royal Mail International Tracked@- Royal Mail International Signed®, Royal Mail
International Tracked & Signed
““Tpternational Parcels Allbranches Standard International parcel services are reliable and easy to use and offer a range of delivery
Standard options:
Royal Mail International Standard I Royal Mail International Economy
Parcelforce Worldwide globalvalue (available in selected branches)
Parcelforce Worldwide globaleconomy (available in selected branches)
Mostbranches Drop § Go - a free, fast-track service aimed at small businesses, online sellers and anyone
sending mail regularly. Customers top-up a prepaid card online or in-branch, drop-off their
items in branch and ‘go. The branch will process their items on the same day they are
dropped-off, deducting funds from the customers’ card as they go and the customer can view
their transaction history and manage their account online.
“Drop 8 Go
itional postage All branches ‘Articies for the Blind, HM Forces letters (British Forces Post Office) etc.
services
Philatelic
branches day covers (stocked based on demand).
Local Collect/ Most branches Undelivered postal items are taken to the nearest participating Post Office by the postal
Convenient Delivery delivery staf for later collection or customer has opted for the collection at their local Post
‘Office branch.
ick 8 Collect Mostbranches Online ordering available for delivery to their local Post Office branch.
Convenient Collect
Home Shopping ‘ilbranches Acceptance of Royal Mail Home Shopping Returns and Tracked Returns which can be
Returns accepted as a pre-printed label or QR code driven where the label is printed in branch
(cel ilers only)
Redirection All branches Mail redirection service for customers who are moving home.
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Products and services available at the Post Office
Telecoms The Post Office offers a range of telephony products including Homephone products and Broadband
services.
rvice
Availability
Description
Home Phone
Unlimited Broadband
Unlimited Fibre
Broadband
Unlimited Fibre
Broadband Plus
“UK international
Phone cards
Moblle E top-ups
Pout Slice Directory
Enquiries (118 855)
Eto
Most branches
Most branches
Most branches
“Most branches
“Most branches
Affordable line rental service with Unlimited weekend calls to UK landlines and low call rates.
12 month contract. Simple application process at most Post Office branches, online or by
phone.
Totally Unlimited Broadband, Average peak time speed: 11Mb, Wi-Fi router and Unlimited
weekend calls to UK landlines. Choice of contract lengths available. Simple application process
at most Post Office branches, online or by phone.
“Totally Unlimited Broadband, Average peak time speed: 36Mb, Fibre Wi-Fi router and
Unlimited weekend calls to UK landlines. Choice of contract lengths available. Simple
application process at most Post Oifice branches, online or by phone.
Totally Unlimited Broadband, Average peak time speed: 63Mb, Fibre WiFi router and
Unlimited weekend calls to UK landlines. Choice of contract lengths available. Simple
application process at most Post Office branches, online or by phone.
UK international calling card offering cheap calls to national and international destinations.
All branches
Top-up service forall pr
ay mobile providers.
Customers can save money by using a more affordable alternative to more costly 118 services.
One flat rate service charge for one number enquiry.
Financial Services The Post Office offers a range of financial services products including banking, foreign
exchange, bill payment and savings and investment products.
Service
Availability
Description
Personal banking
and Business
banking
‘Cash machines
All branches
Selected
Branches
Post Office offer a range of core services - cash deposit, cash withdrawal, change giving and
cheque handling - in a standardised and sustainable manner, to virtually every Personal, SME
and Business customer of almost every UK bank.
These services are provided through a “Banking Framework’ which has been established to
ensure continuity, standard service and consistent operational provision to each participating
bank.
‘Around 2,400 free-to-use cash machines are available at Post Office branches nationwide.
Bureau de Change
All branches
“YA wide range of commission free currencies and the Post Office Multi-Currency card, 3,600
branches offer a range of currencies on demand. An additional 1,400 branches offer Euro and
Dollars on demand as well as Turkish Lira in the Summer with a further 4,000 offer Euros on
demand. Currencies can be pre-ordered in any Branch or Online for collection at any branch,
Travel insurance
enon Ga
Nang
‘Selected
‘Selected
Selected
Branches
branches
branches
Single Trip, Annual Multi-Trip and Backpacker products available. Premier Travel Insurance
available in selected Post Office branches. The full Travel Insurance range, including Super
Economy, Economy, Standard, Premier and Premier Plus available on-line and over the phone
Post Office Multi-Currency Travel Money Card offers the security of travellers’ cheques with
the convenience of plastic making it a secure, convenient way to carry foreign currency. You
can load the card with up to 13 Currencies ~ including Euro, US Dollar and Sterling - and then
use it in restaurants and bars around the world that welcome Mastercard. The Travel Money
Card App makes it easy to Top up, check balances and recent transactions.
International money transfer service, customers can send money to over 200 countries, with
the cash available in minutes worldwide. Available in around 6,500 branches.
“Bill payments
All branches
‘Acceptance of payment and pre-payment towards a variety of bills including gas, electricity,
water, phone, council rent, mail order and insurance. (Some schemes available on an area basis
as agreed with local authorities, In October 2018 Post Office announced its acquisition of
Payzone Bill Payments Limited which is now part of the Post Office Group.
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Products and services available at the Post Office
Service Availability Description
Paystation and All branches To charge electric keys, Quantum Gas Cards, and mobile phone top ups. (Stocks of electricity
charging of tokens for meters are also available in selected branches based on local schemes)
electricity and gas
meter tokens
Mortgages ‘On-line or by Post Office offers a comprehensive range of mortgages for first-time buyers, home movers and
phone re-mortgages, applications can be made on-line or by phone.
Credit Card Information in The Post Office Money Credit Cards offers a range of credit cards offering a range of features
some branches, —_and benefits. Information is available in some branches and customers can apply online.
Personal Loans Onlineonly The Post Office Money personal loan offers flexible borrowing between £1,000 and £25,000
with fixed monthly payments.
Online Saver ‘Online only The Online Saver offers easy access with no notice and no penalty and unlimited withdrawals.
Online Bond Online only The Online Bond offers 1 ,2, 3 year terms with a guaranteed fixed return.
ISA In branch, on- The Post Office offers an Online ISA, an Easy Access Cash ISA, a Fixed Rate Cash ISA anda
line, by phone or Junior ISA.
post depending
‘on the product
Instant Saver Selected Easy access variable rate product with a bonus for the first 12 months. Apply by post or at
branches selected Post Office branches. Access to over 60,000 LINK cash machines.
Growth Bonds Selected Fixed term bond product offering 1, 26 3 yr terms. Apply by post, or at main Post Office
branches branches.
Motor Insurance On-line and via Car, motorbike and van insurance can be purchased on-line and over the phone. Information
the phone* is also available in branches, information and quotations are also available via price comparison
websites
Home Insurance On-line and via Home Insurance can be purchased on-line and over the phone. Information is also available in
the phone* branches. Information and quotations are also available via price comparison websites.
Life Insurance and On-line and via Life Insurance can be purchased on-line and via the phone. Post Office branches hold
Over 50s Life cover _the phone* information to introduce the service to customers.
“Petinsurance and Ondineand via Pet insurance and Business Insurance can be purchased on-line and via the phone. Post Office
Business Insurance the phone* branches hold information to introduce the service to customers.
* information available in branches
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Bank account services available at Post Office branches
Bank / Building Society
Cashplus Yes Yes No
Allied Irish Bank Yes Yes Yes
Bank of Ireland - Yes Yes Yes
Bank of Scotland Yes Yes Yes
Barclays “ Yes Yes S™~*«SYes
ante ——————— we eo
Clydesdale Bank Yes Yes
Danske
First Direct
First Trust Bank
Halifax”
“Handelsbanken
HsBc
Lloyds Bank
“Metro (business customers)
Nationwide Building Society
NatWest
Santander
The Co-operative Bank
The Royal Bank of Scotland
Yes - Deposit
slip not required
Think Money
‘TSB Bank
Ulster Bank
“Virgin Money
“Yorkshire Bank
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Royal Mail Group Limited products, stamps and services available
at Post Office branches* (end March 2019)
‘Ist class stamps (individual)
2nd class stamps (individual)
Other stamps
‘Ist class stamp book
2nd class stamp books
‘Stamps books vending
Royal Mail Signed For® Stamp
Royal Mail Special Delivery Guaranteed”
Stamp
First Class Labels
Second Class Labels
Royal Mail Signed For® Ist Class (sale and
accept)
Royal Mail Signed For® 2nd Class (sale
and accept)
Royal Mail Special Delivery Guaranteed
by 9am® (sale and accept} ~ also with
Saturday Guarantee
Royal Mail Special Delivery Guaranteed
by Ipm® (sale and accept) - also with
Saturday Guarantee
International Standard
International Tracked® (sale and accept)
International Signed (sale and accept
International Tracked & Signed (sale and
accept)
International Economy
Redirection / International Redirection
~ consumer
Redirection / International Redirection
~ business
Special Circumstances redirection
Home Shopping Returns/parcel returns/
returns high volume/Labels to Go
HM Forces letters (British Forces Post
Office <2kg)
Parcelforce Worldwide express?
Parcelforce Worldwide expressl0
Parcelforce Worldwide expressAM
Parcelforce Worldwide express24
Parcelforce Worldwide express48
Parcelforce Worldwide express4Blarge
Parcelforce Worldwide Sundayexpress
Parcelforce Worldwide globalvalue
Parcelforce Worldwide globalexpress
Parcelforce Worldwide globaleconomy
Parcelforce Worldwide globalpriority
Parcelforce Worldwide British Forces
Post Office parcels
Parcelforce Worldwide irelandexpress
Parcelforce Worldwide consignment
subsequent item
Special Stamps Sheets
Coin Covers
Commemorative, Smiler Sheets
First day envelopes
Mini Sheets
Presentation packs
Prestige Stamp Books
Special Stamps Retail Books
Stamps Cards
Annual products including Yearbook /
Yearpack
Christmas Stamps Retail Books
Convenient Delivery
International Reply paid Coupons
(redemption only}
Local Collect
Poste Restante
The following products are also
accepted at Post Office branches
On Line Postage (parcels)
On Line Postage (letter)
Ist class/2nd class letter stamped items
Ist class/2nd class Small and Medium
Parcels Meters (franked) pouches
Ist class/2nd class letter (franked) mail
Ist class/2nd class Small and Medium
Parcels (franked mail)
Bulk postings franked mails
Bulk postings stamped mails
Postage Paid Impression bagged mails
Prepaid Stationery
Special delivery Business Response by
9am
Special delivery Business Response by
Ipm
Response services (FREEPOST &
BUSINESS REPLY)
International Business Response Service
(Outbound)
Parcelforce Worldwide Contract /
Prepaid?
Parcelforce Worldwide Contract /
PrepaidlO
Parcelforce Worldwide Contract /
Prepaidl2
Parcelforce Worldwide Contract /
Prepaid24
Parcelforce Worldwide Contract /
Prepaidas
Parcelforce Worldwide Contract /
Prepaid globalexpress
Parcelforce Worldwide Contract /
Prepaid globalpriority
Parcelforce Worldwide Contract /
Prepaid irelandexpress
Parcelforce Worldwide Contract /
Prepaid British Forces Post Office Parcels
Articles for the Blind
Parcelforce Worldwide europriority
return
Parcelforce Worldwide Contract
evroreturns
Parcelforce Worldwide contract
europriority (Parcelforce Contract
Globalpriority)
Overseas stamped mails
Overseas meter mails
* Some services are only available at
selected branches
comporate postoffice.co.uk
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POST
OFFICE
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Tab 6 Health and Safety Report, including violence and robberies report
POST OFFICE PAGE 1 OF 4
POST OFFICE GROUP EXECUTIVE
Performance Review - Health & Safety
Authors: Martin Hopcroft Sponsor: Mo Kang Meeting date: 12" Sep 2019
Executive Summary
Context
Keeping our employees healthy and safe is our legal responsibility and is fundamental
to our success.
Our Health & Safety performance has improved significantly over the past 6 years. We
have a rolling 3-year plan to drive compliance, targeting a reduction in safety metrics
including accidents; lost time accidents (LTIFR); days lost; and personal injury claims.
Our H&S reporting and safety management system is measured against the externally
recognised standard, OHSAS 18001 and performance is reported monthly to the Group
Executive and at each Board meeting.
Questions addressed in this report
1. What are the trends on accidents and on violence across Post Office?
2. Are there any significant risks emerging and what are we doing to mitigate?
Conclusion
The prevention of accidents has improved materially year on year, see 5yr performance
chart below. At P5 we forecast LTIFR (Lost Time Incident Frequency Ratio) to out turn
0.174, on track to meet our target for 19/20 of 0.178. Whilst we have also seen a
reduction in year on year robberies and CViT incidents, an increase in violent robberies
earlier last year, the presence of firearms and a number of ATM rip-outs raised our
concerns. We continue to review trend and continue to with a programme to install
additional equipment in higher risk locations including fogging, CCTV cameras
Year/KPI 15/16 I 16/17 I 17/18 I 18/19 I 19/20
Forecast
All accidents 198 129 112 81 79
All accidents/1000 29.3 21.0 22.0 16.9 20.0
Absence accidents 38 16 21 15 12
Absence Accs/1000 5.62 2.61 4.13 3.14 5.05
LTIFR, 0.367 I 0.168 I 0.271 I 0.184 0.174
Days fost Gusto oz I 259 I 480 I 245 I 242
accidents
Days lost/1000 117 36 94 51 61
RIDDOR 14 9 14 7 ie}
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Network robberies currently show a 30% increase YOY (12 month rolling, 150 v
115). Injuries remain comparable to last year YTD (4 vs 3), with approx. 1 injury per
10 incidents. Injuries include cleaning fluid being sprayed, a small cut to shoulder, and
a minor puncture wound from a blade. Weapons are seen in approx. 57% of incidents,
(although this rose to 82% in P4 which was consistent with P4 18/19), 63% of these
being blades. We continue to see positive results in the ‘High Risk’ robbery programme
where we are installing fogging and IP cameras. Criminal activity in known hotspot
areas has seen recent increases in Greater Manchester & West Yorkshire. In P4, an
incident involved suspects threatening the Pmr with a knife and then using the keys
being carried by the Pmr to enter the fortress where the safe was open. Another incident
where the suspect jumped over the counter and threatened the clerk with a knife and
took cash from the tills. Local Safercash meetings have been attended allowing
networking opportunities with other industry players. There have been 49 Operation
Torch visits undertaken by the Security team, primarily in high risk and hot spot
locations and 74 other security related visits (including post incident), undertaken to
the network during the period to support, educate, assist and inform.
ATM gas attacks are showing signs of slowing, partly due to successful gas
suppression activations and lower cash holdings. On average, Oct 18 to Feb 19, there
were 6 attacks per month, and an average monthly loss of £181k. Mar 19 to May 19
saw an average of 3 attacks per month and average monthly losses of £30k. There were
4 unsuccessful gas attacks due to prior installation of Gas Suppression units and 1
unsuccessful Ram Raid in period 4 (July). We have installed 589 Gas Suppression kits
(GSK), as part of ongoing ATM protection programme (99% complete) and
approximately £405k saved as part of ongoing ATM reduced holdings initiative (not
counting GSK successful deployments). 4 people have been found guilty in relation to
the ATM attack at Heaton Moor PO in February. Court date for sentencing 28/10/2019
Chace PO, CV3 3DP suffered a robbery (25/07/18) after the staff locked the door and
began filling the ATM. Masked men used a battering ram to smash through the glass
front door to gain entry, the loss was £66k. 3 defendants have been sentenced to a
total of 41 years. ATM gas attack crime is very dynamic, with criminals quickly moving
to lower risk geographical areas. Significant trends on the continent include using solid
explosives, a trend likely to increase in the UK which makes our roll-out of cash
destruction (ink & glue) critical. The future of ATM crime is already evolving on the
continent with the use of solid explosives such as TATP (used in the Manchester Arena
bombing) to attack ATMs. If this type of crime targets POL in the future our proposed
cash destruction solution can be upgraded to ensure criminals will not be successful in
obtaining useable cash. There is currently a 3 month lead time from order to the first
piece of kit being installed.
CViT robberies continue to reduce from the highs of last year, 50% down YTD (5 v
10). We have rolled out 122 body cameras, 65 CCTV vehicle streaming and 20 tracked
I-boxes and have completed the introduction of cash destruction into 50 I-boxes to
increase protection initially in the Birmingham and Chester depots where incidents have
been recorded. A risk assessment is currently being undertaken for ‘case across
counter’ in rural and low risk sites and discussions continue with the CWU. There was 1
incident during period 4 as the crewman exited the vehicle to start the delivery he
observed a male coming towards him with a machete, crewman threw iBox at him. Male
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fled and down the road to another male who used a Still Saw to cut open box and
remove pouch. There was close liaison with PSNI and Belfast Supply Chain due to
‘Marching Season’ and high risk events necessitating the relocation of Police resources
ensured CViT services weren't at greater risk. Tiger Kidnap training has been provided
in Sheffield to new crew members.
If CViT crime is displaced we would install more cash destruction systems in affected
depots. For robbery and burglary we continue a 4 year installation programme for
identified high risk branches. In addition we are also looking at cash destruction systems
for branches. We continue to engage within the industry and recent membership of
Safercash will provide greater access to both CViIT and ATM crime data, along with
various other regional meetings. Grapevine continue to scan media and social media.
In response to abusive and aggressive behaviour, temporary IP cameras with
automatic aggression detection will be made on a case by case basis. We are also
working closely with the British Security Industry Association (BSIA) and will be meeting
their training partner who are supporting a Met Police programme to share best practice
and guidance across the industry. Basic training is currently provided to DMB staff and
to all colleagues who may come across violence in the workplace. The BSIA also sharing
best practice and introducing members to partners who are supporting initiatives.
Safety Performance. Total accidents are level with 2018/19 at 33 v 33 (DMBs are
down at 12 (19), Support are up at 8 (3), and Supply Chain are slightly up at 13 (11)).
Whilst the volume of lost time accidents remain relatively low, 5 in 19/20 v 6 in 18/19,
a serious accident involving an employee who slipped in a hotel bath (61 days) and two
physical injuries in Supply Chain due to assaults (15 days) have led to an increase in
total lost days (101 v 68). There were no lost time incidents in June, 1 in July, 1 in Aug.
The Supply Chain Safety Plan is progressing well with safety champions sharing best
practice and improvement opportunities at their safety forums, including signage. Local
risk assessments and safe systems of work continue to be reviewed and strengthened
and depot shift managers are receiving ongoing coaching from the SC H&S Lead. BSIA
and Mitie visited Midway and shared their approach to ‘hearts and minds’ campaigns,
tools and plans. BSIA Communication Manager will work with us over the next few
months to develop a campaign that will extend to their wider membership. We are also
meeting the Occ Health MSK expert on 13th September to commence an ergonomic
review of coin and manual handling and risks facing the Supply Chain ageing workforce.
Property Statutory Compliance (risk assessments / inspections) remains high at
95% with 98.45% recommended actions completed during Q1. The latest external
FRA’s demonstrated significant improvement in compliance and discussions are
continuing with CBRE and their Fire experts Metro Safety. The latest external fabric
surveys (Low Risk) still suggest a satisfactory outcome. There is still some concern
regarding documentation missing from site log books and CBRE are taking action to
audit books and close this gap. An update will be provided at Safety Board in October.
Workstation/DSE risk assessments and lone working guidance has been incorporated
into the general H&S training modules issued through Success Factors in April and
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July, ahead of an exercise to refresh all support team local risk assessments,
commencing September. The annual H&S module content has been reviewed for Supply
Chain and face to face training in the workplace reintroduced for higher risk activities
including manual handling and use of equipment in Supply Chain.
We are beginning to see further improvement and reduction of road risk through
analysis of telemetry data and driving behaviour in Supply Chain. We are working to
strengthen a number of areas including driver safety training and the introduction of
Alcolock (breathalyser integration with key management) on which we are consulting
CWU. Other initiatives include the reissue of driver handbooks (CViT, Company Car,
Grey Fleet), profiling business drivers from Selenity data and capturing maintenance
records. The new Fleet Team structure will continue to support the Road Risk Policy
Action Plan.
Input Sought
The Group Executive are requested to note the current health safety performance
and content of this report and input to a discussion at the meeting.
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Health & Safety Perform
Number of Employee Accidents - Monthly - Period 5 = 6 (33 YTD) DMB Accidents - P5 YTD
(Target to achieve a year on year reduction)
25
ice — P5 (Aug) 2019/20
20
15
10 Year to Date
17/18 15
= hi i miet9 "1
oR RRR RREeRe ee ee 019/20 2
P3 PA PSG
Pl P2 P7 PB PO PIO P11 P12
Supply Chain Accidents -P5 YTD
(2016/17 2017/18 mw 2018/19 = 2019/20
Davs lost due to accidents / 000 emplovees - Cumulative
soo
ne ; Year to Date
an 017/18 35
sao 18/19 11
nS 019/20 13
200
a I nl DMBs — For the current branches there
co & Ss = = = = has been a slight increase in accidents
Led Led 3 has bis id from 11 to 13 YTD in 19/20. Last year
2015/16 2016/17 = 2017/18 = 2018/19 m 2019/20 there were 19 reported by P4 but a
franchised. Causation is mainly due to
Overall, there have been 5 lost time accidents in POL in 19/20, incurring a lack of attention closing doors, using
total of 101 lost days, (compared to 5 incidents in 18/19 with 68 lost days). safe inserts or faulty parcel hatches.
Supply Chain — Supply Chain accidents
have increased slightly from 11 to 13
LTIFR - Lost Time Injury Frequency Rate ~ Period 5 YTD, some due to a lack of awareness
of potential hazards and not following
LTIFR - Rolling Lost Time Incident Freq Rate (reset P1) procedures.
‘as0g All Post Office - Employee
oem) LTIFR P5 YTD
0.700 YTD PS - 0.174
0.600 2018/19 out turn - 0.184
05500 2019/20 target - 0.178
0.400 Benchmark - 0.300
0.300 Absence accidents/000 SiP:
0.200 1.26 P5 YTD v 1.02 (YTD 18/19)
0.100 ae LTR lost days / 100,000 P5 YTD: 3.52
soon vs 2.19 (P5 YTD 18/19)
PG Py PB POLO PAL P12 PL P2 PS OPA OPS
ines om LTR Supply chain nen post office
rinse rage tren pot taget_ rR 0 ponchmart
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There was one lost time incident in P4 where a colleague tripped over a
mat entering Bark St. Bolton. There have also been a couple of incidents
where colleagues have slipped in hotel showers when staying away for
work. Advice was given in our annual H&S training and it may be that
incidents are better reported. The H&S team will be looking closely at this
trend and reminding those who travel to take additional care.
Lost Time Rate (I
's I 100,000hrs) — PS
14.0
12.0
10.0 Near Misses — P4 2019/20
#0 A total of 1 in DMBs where a customer
60 pushed another who fell backwards.
40 Supply Chain ~ 19 in P4 and 94 near
30 misses recorded YTD. There is better
reporting and understanding of near
0.0 misses. The majority of these are
2 203 4 5 6 7F 8 9 10 1 12 unsafe conditions. However, there
_ — scree ia arial have been a few trends eg overweight
bags and housekeeping issues that
Robberies — P4 19/20
Rolling Robbery incidents
ro pa op ome
aloe 12 Wont
Commentary ~ Robberies
P4— 11 robberies in P4
compared to 6 last year, 6
successful (3 last year)
YTD - 38 robberies YTD (v 25
in 18/19)
Rolling 12 months ~ 150
robberies compared to 115 in
last 12 month period
Se 7 Re mm mA A
n
"
year, 5 blades (4 last year)
YTD ~ 26 incidents involving
‘weapons YTD (vs 20 last year),
15 blades vs 11 last year
Rolling 12 months ~ 113
incidents involving weapons
compared to 94 in the last 12
month period
Rolling Number of Weapons
oueeeE SEE
Commentary - CViT
P4-1 CViT incidents compared
to 3 last year, 1 successful (1
last yr).
YTD —5 CVit incidents YTD
{compares to 10 last year),
with losses of £56k vs £99k
last year.
Rolling 12 months ~ 12 CViT
incidents compared to 24 in
last 12 month period.
Supply Chain - Employee
LTIFR P5 YTD
YTD PS - 0.477
2018/19 out turn - 0.586
2019/20 target - 0.420
Benchmark 0.600 (BSIA update Q2)
Absence accidents/000 SiP
3.53 PS YTD v 4.91 (YTD 18/19)
LTR Lost days / 100,000 P5 YTD: 3.52
vs 8.81 (P5 YTD 18/19)
have been tackled by Safety
Champions as a result of this reporting
and sharing.
Road Risk P5 19/20- RTCs
RTCs
18/19 YTD = 40
Overall commercial fleet RTCs up 5%
Due to a spike in mobile PO RTCs (11)
although no repeat offenders amongst 178
MPO driver community.
Rolling CVIT Incidents ‘Commentary - Weapons: Blameworthy
vd P4—9 incidents involving 19/20 YTD = 28
: ‘weapons compared to 5 last 18/19 YTD = 19
An increase of 50%. All incidents in PS
incurred minor damage eg low hanging
branches or reversing into inanimate
objects at low speed.
Initiatives include:
Supply Chain OD is in final stages with Fleet
Team centralised.
A project underway to increase fleet
compliance amongst MPO driving
community and to bring a much improved
focus on telemetry and RTC performance.
A new overarching Road Risk Policy has
been developed, with improved training
and compliance and maintenance checks to
cover Commercial Fleet, Business Cars &
Personal Car use.
Road Risk and H&S teams are scoping
products to alleviate fatigue and improve
journey planning.
Online driver training has been provided to
employees who drive on business.
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Project LEO Update
Authors: Ben Foat Sponsor: Ben Foat and Owen Woodley Meeting date: September 2019
Context
The Board has been briefed on and has approved in principle a new group legal entity
structure (through the legal entity optimization project, LEO) which involved the
establishment of a new holding company (‘HoldCo’) above Post Office Limited (‘POL’),
the transfer of the shares in each of Post Office Management Services Limited (‘POMS’
or ‘POI’) and Payzone Bill Payments Limited (‘PZBPL’) to HoldCo, and the establishment
of a new financial services entity (‘FSCo’) and, potentially, a services company
(‘ServCo’). On further consideration of the structure, Management concluded that it
would be preferable to adopt a simplified and potentially more efficient approach to the
group legal entity structure to ensure the realisation of the FS strategy and to mitigate
the potential contagion effect of carrying out regulated activities in an unregulated legal
entity. In the proposed new structure, POL would continue as the parent company and
the existing POI entity would be utilised as the vehicle for the POL FS Business. There
would be no requirement for a new HoldCo or FS entity to be set up. Approval for the
new proposed legal entity structure was requested from the Board in July 2019. On
review of the proposal, the Board requested that Management provide further detail of
the operational, regulatory and governance requirements to give effect to the new
structure.
Questions addressed in this report
1. What are the required steps and approvals needed in order to move the FS Business
into POI?
2. What would be the associated impact on the governance framework and operations
of both POI and POL?
Conclusion
The transfer of the FS Business into POI and equipping POI as an authorised firm to
undertake new types of regulated activity is a significant project that should not be
underestimated. The detailed steps and deliverables required to achieve this are set
out in the body of Report.
In addition, the Report (i) sets out the changes that will need to be made to the
governance frameworks and the impact on operations of both POL and POI, and (ii)
includes a comparison table of the activities that are required to transfer the FS Business
into POI vs those required to transfer the FS Business into a FS Newco. It should be
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noted that both of these options will require a significant amount of work, resources
and funding and with similar timelines.
In summary, if approval is given by the Board for the proposed new legal entity
structure, the next steps required are:
1. To finalise negotiations with UKGI in respect of the Framework Document and
Articles of Association. Although the Board has previously authorised the CEO or
CFO and the GC to agree final versions; any outstanding material risks which are
not resolved during negotiations will have to be brought back to the POL Board for
further approval. We expect to finalise negotiations by no later than end Oct ‘19.
2. Confirm with KPMG, via the ongoing ‘Route to Dividend’ work, that the revised legal
entity structure does not inhibit the shareholder from (i) realising a dividend in the
future, or (ii) reduce the potential size of the dividend, or (iii) have any material
adverse tax implications. The results of the Route to Dividend work are being
presented w.c. 16'" September.
3. POI and FS Business will need to prepare and define:
(i) A Target Operating Model (‘TOM’) for the combined business to enable both POI
and FS Business strategies. The purpose of the TOM will be to set out the overall
operating model design and guide all aspects of implementation.
(ii) A new governance framework and organisational structure for POI/FS Business,
to be agreed by POL and rolled out.
(iii) The roadmap for delivery of the TOM which, in combination with the above, will
also provide much of the content required to receive approval from the FCA via
the necessary Variation of Permission application.
a. The VoP will need to include a regulatory business plan with a combined
business
We expect that (i), (ii) and (iii) above will take c. 6 months to prepare.
4. Regulatory, Board and Executive approvals to then be sought as required.
5. Peregrine negotiations to be completed and all agreements executed.
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Input Sought Input Received
The Board is asked to consider and approve in Advice from Linklaters LLP.
principle the revised Project LEO structure.
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Report
86 of
44
Steps Plan for the transfer and integration of the FS Business into POI:
iL,
Corporate
Once the necessary board approvals of both POL and POI are in place:
11
Due Diligence: Necessary due diligence investigations for the intra-group
business and asset transfer will be conducted focussing on, (i) ensuring assets
are transferred effectively, (ii) preserving valuable rights, (iii) ensuring third
party liabilities are avoided, (iv) compliance with regulatory requirements and (v)
managing employment issues.
It will be critical as part of the due diligence exercise for the FS Business to
identify which, if any, products (e.g. bill payments), will be considered out of
scope and will remain in POL.
Transaction Documentation: Business and Asset Purchase agreement will be
prepared which will be the instrument to transfer the businesses/assets from POL
to POI.
1.3 Price: The transfer will normally take place at book value using the carrying value
shown in POL's accounts (assuming that POL has distributable reserves). In other
circumstances, the transfer must take place at market value.
1.4 Tax: The tax treatment of any business/asset transfer will also be considered. If
both companies are in the same group for tax purposes, then it is likely that the
transfers can be undertaken on a tax neutral basis. VAT, the taxable status of
the assets being transferred, VAT group arrangements and the possibility of going
concern treatment need to be assessed.
1.5 Capital Contribution: POL may be required to make a capital contribution to POI
to enable POI to comply with its regulatory capital requirements which is
expected to increase in light of the additional regulated activities being
undertaken by POI following the transfer of the FS Business. However, because
the combined business will not hold client money, this is not expected to be in
the millions.
1.6 Contracts: Third party (i.e. Banking Framework, Bank of Ireland, Capital One)
supplier and service provider agreements (i.e. reseller and JV _ related
arrangements (i.e. FRES)) relating to the FS Business and currently with POL will
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need to be identified and novated/transferred across to POI as will any existing
contracts between customers and POL. Any third party consent requirements will
need to be identified and obtained. Initial due diligence has been undertaken in
establishing what third party consents will be required. There may need to be
revised commercial terms between parties (e.g., BoI and POL) to reflect the
change in risks and costs for matters such as compliance oversight.
1.7 Name Change: Board recommendation and Shareholder approval will be required
to effect a change of name for POI so that it reflects the combined insurance and
financial services business.
2. Regulatory
In order for POI to be in a position to undertake new types of regulated activities
relating to new product types, the following critical steps would need to be taken:
2.1 Review of POI current regulatory status.
2.2 Full mapping of all regulatory requirements for the new and integrated products
and services identifying all rules including those relating to:
Financial promotions (through all relevant channels);
Pre-contractual disclosures;
Contractual documents;
Formalities for contract formation;
Rules relating to relevant post-contractual activities (including complaint
handling);
Regulatory reporting;
Capital requirements;
Senior Managers Regime (December 2019);
Certification of staff (December 2019); and
Governance - systems and controls and risk management etc.
2.3. Gap analysis against existing processes, procedures and governance structure etc.
to identify where the existing business model is sufficient to support the new
business, where it requires enlargement to support business, what platforms are
required to support the new business and how those will interface with existing
platforms (as relevant).
2.4 Identification of suitable candidates with the appropriate experience and expertise
to manage the process and the business going forwards on the POI Board and
Executive team.
2.5 Business continuity and disaster planning for the new business to be undertaken
and implemented.
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2.6 Increased AML, CTF and cyber-security requirements to be identified and
implemented.
2.7 Evidencing to the FCA how it will continue to meet its regulatory obligations
for both new, existing and integrated businesses in POI with no customer
detriment.
2.8 Change and increase its capital and liquidity positions to accommodate the
new risks with the integrated businesses.
3. Requirements for the application to the FCA for a Variation of Permission
jus
an
3.1 Application: POI would need to apply for a variation of permission (“VoP”) to add
the relevant permissions for the new activities to be undertaken to its existing
permissions and to add the new product set. A detailed project plan that clearly
shows the journey from the current business model of POI to the expanded model
will be required. The FCA will require evidence that POI will continue to meet all
of its regulatory obligations for both the new and existing business and that it
will ensure that no customer detriment arises during or after the build out. This
assumes that the FCA has no current concerns about the POI business. No issue
has been raised by the FCA to date in this regard.
3.2 Timing: Following external legal advice, where there are no existing concerns
with the firm (as is the case for POI), applications for a VoP are generally dealt
with more quickly than a wholly new authorisation. This is partly because the FCA
has the comfort of knowing that the firm is already experienced in operating
within the regulatory perimeter and therefore knows what the expectations are
for governance, policies and procedures, customer treatment, etc. That said, the
FCA will need to be satisfied that the expansion has been properly thought
through, including considerations for how resources will be increased to deal with
the additional services and customers, how new and existing platforms will
operate together and how the firm will ensure that existing customers suffer no
detriment.
The statutory time limits for the processing of applications is six months from
when the FCA determines the application to be complete, with a backstop date
of 12 months from the date it receives an incomplete application (e.g. because
information or documents are missing). The FCA Service Standards for 2018
confirmed 100% performance against those time limits for non-consumer credit
firms in the year April 2017 to March 2018. It is anticipated that it will take circa
6 months to prepare POI for the required changes and the VoP application.
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4. Governance
4.1 POI Board needs to be notified and the necessary approvals obtained for:
a) the transfer of the FS Business from POL to POI; and
b) the application for a variation of its permissions (VoP) to the FCA.
4.1.1.1 As part of the due diligence investigation for the transfer of the FS
Business, a full review of the current governance structure will be required. This
includes a review of the membership of the POI Board and Executive to ensure the
its members have the appropriate levels of skills and experience required for a
regulated insurance and financial services business.
4.1.1.2 The new POI Board will need to ensure that there are appropriate
operational processes, controls, governance and resources in place to manage the
FS Business in addition to its existing Insurance business.
4.1.1.3 Review of existing Group policies and processes to ascertain what, if any,
will not be appropriate for the FS Business and will have to be independently
developed due to increased regulatory oversight.
4.1.1.4 Conflicts of Interest. As flagged in the July Board paper, the revised
approach means that the existing conflict of interest, whereby there is an inverted
parent / AR structure will remain. Although POL has been concerned over the
potential conflict which arises from the CEO of POI reporting into the CEO of POL,
it is not uncommon in the financial service sector to have an ‘inverted’ structure
whereby a regulated subsidiary appoints its parent company as an AR.
At present this potential conflict of interest is managed by the CEO of POL, as the
Approved Person, reporting into POI. There is no legal reason why POL cannot
continue with this arrangement / structure, unless by virtue of the governance of
the relevant entities, potential conflicts of interest are identified which cannot be
managed or the FCA expresses concern about this arrangement in the context of
POL being the AR for POI.
5. Organisational Structure
The proposed new organisational structure for POI will be defined based on the
combined underlying business components and incorporating any additional
regulatory requirements. Management of both the current POI and FS Business
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will work together to review key roles within each of the current businesses i.e.
CEO, Managing Director, Finance Director, HR Business Partner, Compliance
Director will need to identify the optimal organisational structure for the
combined businesses.
6. Operations
It is critical that, post transfer, POI continues to maintain its operational and
regulatory independence in order not to compromise its or POL’s regulatory
status. Due diligence investigations will also review the following key areas to
identify what, if any, changes will be required as a result of the increased
regulatory oversight and regulated activities that will be undertaken:
6.1 Shared Services
The current POI shared services model will be reviewed to identify additional
resources that may be required for POI to maintain the minimum level of
independence required to fulfil its regulatory obligations and remit.
6.1.1 Compliance
The current POI Compliance framework will need to be reviewed and developed to
ensure an appropriate and compliant Risk and Control environment. This may
include:
- building the resources and capabilities of the Compliance and Risk functions to
deal with the increase in products and services and the scale of the business,
including identifying key regulatory positions independent of POL (i.e.
Compliance Officer etc.);
- developing a suitable Risk and Control Framework for the combined POI/FS
Business; and
- identifying any changes required to (i) established standards for compliance
training programmes, (ii) risk reporting and analytics based on risk across the
combined businesses, and (iii) arrangements with Bol and Capital One , which
will need to be reflected in amendments to the Peregrine agreement[s] and the
Capital One agreements.
6.1.2 Information Technology
Full review of all IT of both POI and FS Business to ensure that:
e to the extent required, the systems currently used for the insurance
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mediation interface with others to ensure correct dataflows. For example
(accepting that this is a minor matter), where a customer calls to notify of a
change of address, how is that communicated and updated across all
accounts held by that customer to ensure that renewals, statements etc. go
to the correct place; and
* any new systems are fully tested before launch.
6.1.3 Finance
The Finance capability for the combined businesses should remain broadly similar
to the current service provided by POL. Consideration needs to be given to
approvals that may now be required from the post transfer POI which were
previously required from POL.
6.1.4 Customers
A review of customer services (i.e. call centres) to identify required changes to
manage increased regulatory oversight. Designing the build out to ensure that
there is no impact on continuing to service existing clients
6.1.5 Staff
Training of staff on the new products and services and hiring suitably experienced
staff (as relevant) will need to be undertaken.
7. People
7.1 Transfer of Undertakings (Protection of Employment) (‘TUPE’) Regulations
7.2 The transfer of the FS Business into POI is likely to give rise to a TUPE transfer
of employees. As such, 90 days prior to the transfer we must commence an
information and consultation exercise with any affected employees. Where the
employees are union grade, this exercise will need to be with the trade unions.
If the transfer is likely to result in redundancies, it may be possible to commence
concurrent redundancy consultation.
7.3 FS Business employees in scope to transfer (in most cases this will be those doing
majority POL FS work) will have the right to object to the transfer in which case
their employment will automatically come to an end on the transfer date. It may
be possible to agree retention bonuses to retain commercially key personnel.
7.4 Questions will arise during TUPE consultation about which of POL’s policies,
benefits and terms will transfer to POI. It is likely that anything conferring a
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financial benefit ought to transfer. If the unions are involved they will certainly
expect this.
7.5 Transferring POL employees into POI may create a two-tier workforce to the extent
that POL policies, benefits and terms are more generous that POI’s. Harmonizing
terms is likely to be unlawful. It is possible to maintain a two tier workforce. Many
employers do. Unrest caused by a two tier workforce is, however, likely to be
exploited by the trade unions. At present, POI does not recognise any union.
Whilst possible, it is unlikely that union recognition will transfer as a result of
TUPE. The unions will, however, certainly argue for that and they will try and win
recognition in the usual way by securing the appropriate level of membership and
support. The existence of a two tier workforce may create an environment in
which the unions find it easier to win recognition in POI than previously.
7.6 TUPE makes it very difficult for an employer to change terms and conditions of
employment or to dismiss any employee because of a TUPE transfer unless the
employer can demonstrate an “Economic Technical or Organisational reason
entailing a change in the workforce” (an “ETO reason”). Any proposed changes
to terms and conditions or dismissals around the time of the transfer will need to
be carefully considered and managed.
7.7 TUPE transfers are likely to weaken the enforceability of post termination
restrictions against transferring employees. It would be advisable to identify
commercially key personnel, review the drafting of their restrictions and consider
whether we should procure that they enter into new restrictions for fresh
consideration.
8. Pensions
The level of employer contributions to the Group Personal Pension Scheme (up to
11%) should transfer with the FS Business employees. However, it is understood
that POI already provides identical cover. As far as the DB pension scheme is
concerned, these benefits will not transfer. However, the trustees of the DB scheme
will want to understand and assess the impact of the FS Business transfer and
whether it will have any impact on the “employer covenant” currently available to
support the pension schemes. If it can be shown that there is a material detriment
to the ability of the pension schemes to meet their liabilities, mitigation may need
to be offered (e.g. by entering into appropriate guarantees across the Post Office
Group).
9. Costs
Against a 19/20 allocation of £1.8m, year to date spend is c£500k. Subsequent
to finalising with UKGI the Articles of Association, Framework Document and
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Route to Dividend work (which we expect to cost a further c£100k), it has been
agreed that, assuming it is approved, the delivery of the revised proposal would
be better placed within the FS Portfolio of Change. As such, the remaining £1.2m
of the original 19/20 allocation has been handed back to ‘central change’, which
can be requested, by the FS Portfolio Team once all of the Board and Executive
approvals are in place.
As part of the Project Plan and TOM which is to be prepared, the costs of the
transfer and implementation will be identified and included in the budget and
funding plan for the project. These costs will include FCA applications, external
adviser costs, additional resources etc.
10. Framework Document and Articles of Association
The Framework Document and POL Articles of Association need to be finalised
and agreed with UKGI. The Articles of Association for each of the subsidiary
companies, POI and PZBPL, will also need to be finalised and agreed and adopted
by the respective Boards.
Significant progress has been made on the Framework Document and Articles of
Association however there remains a number of material issues which, if not
resolved during negotiations will have to be brought back to the POL Board for
further approval. We expect to finalise negotiations by no later than end Oct
19,
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APPENDIX 1 - Comparison Table of Activities —_e
®
gq
g
Legal + AoA & Framework Document V
+ Due diligence for intragroup business transfer 1 V
+ — Intragroup Business and Assets transaction documents V V
+ TP Consent to novate contracts V V
+ Novation of agreements & 3° party contracts Vv y
* Update intra-group contracts (POL/POl) v y
+ Creation of Newco x V
* Name Change v y
Finance + Funding of transfer of FS business and assets V V
+ Tax and VAT Implications analysis (now incl. in RtD) V V
+ Prepare and book Newco to reflect issue of equity xX V
+ Entity creation in accounting systems x Vv é
+ HMRC Tax Clearance Vv V a
+ Valuations — FS Business V Vv 3
+ Entity Corporate Finance Model (BAU intra-group funding) V Vv 3
* Change of Corporate Insurance V Vv 2
: Regulatory + Review of POI regulatory status Vv x
a * Mapping of all regulatory requirements V V
* Gap analysis against existing processes, procedures and V V
governance structures
+ Approved Persons applications for new roles Vy V
* Approved Persons training Vv V
* Director checks (e.g. Fit & Proper, SMCR) V V
* FCAApplication for Variation of Permissions Vy x
* FCAApplication for Permissions to undertake regulated activities xX V
* Change and increase capital and liquidity position v xX
* Fund new capital requirements for Newco xX V
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PAGE 13 OF 13
Setting up New co (incl. name agreement)
Create new governance framework (including appointment of new
directors and NEDs)
Revise POI governance framework (including reviewing board
appointments to reflect POI and FS Businesses)
Board approvals of POL and POI
Information and consultation exercise
Identity FS Business employees to transfer
Management of terms and conditions for FS Business employees in
POl
Review of roles and responsibilities
Impact on Pension Scheme with transfer FS Business employees
Review/Creation of Shared Services Model
Review/Creation of Compliance Framework
Review of all IT requirements
Review of Finance capability
Review of Customer Services i.e. call centres etc.
Training of staff and recruiting for new roles
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Framework Document & Articles of Association Update
Author: Sherrill Taggart Sponsor: Ben Foat Meeting date: 23 September 2019
Context
At the July 2019 Post Office Limited (POL) Board, the CEO or CFO and General Counsel
were given authority to finalise the Articles of Association (AoA) and Framework
Document (FD), subject to any further material changes.
Significant progress has been made in negotiations with UKGI in relation to finalising
both documents. However, there are some material points that remain outstanding and
on which an agreement has not yet been reached.
The key issue outstanding on the FD is the requirement for POL to have regard to the
government wide corporate guidance applicable to public corporations listed in an
appendix to the FD and any future relevant guidance as specified by Government to the
extent that such guidance is applicable to POL as a Public Non-Financial Corporation.
In a departure from the current set of AoA for each of the POL group of companies, the
proposed AoA, now include:
« Group Reserved Matters: Matters included in the AoA for all group companies that
require consent from BEIS. In the case of POL’s subsidiary companies’, in addition
to POL providing consent to these matters (as the parent company), POL must,
in turn, seek the consent of BEIS, as ultimate shareholder of the Post Office
Group. There are no group reserved matters in the current AoA of POL or its
subsidiaries.
« Company Reserved Matters: Matters included in the AoA that require consent from
their shareholder i.e. in the case of POL, BEIS and in the case of POI and PZBL,
POL.
The inclusion of the Group Reserved matters at both Group and Company level will have
the effect of creating a “dual consent requirement” i.e. POL and BEIS which, while not
necessarily having an impact on BAU, may hinder, delay or prevent growth opportunities
for the business i.e. acquisitions, intra-group reorganisations and funding etc.
Questions addressed in this report
1. Which Group Reserved Matters proposed by UKGI in the AoA are not yet agreed and
what types of activities could these delay, restrict or even prevent?
Post Office Paymeni
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2. Which provisions within the draft FD cause POL concern and why?
Conclusion
1. All Company Reserved Matters and Group Reserved Matters which should not inhibit
BAU activities have been agreed with UKGI. There are four outstanding Group
Reserved Matters which, should they require shareholder consent, have the
potential to slow or even prevent the execution at a pace required to operate
effectively in the markets within which POL and its subsidiaries operate. For
example, these include intragroup reorganisations / mergers and the raising of
finance (including from POL).
2. We are concerned that staying silent on whether or not the Public Sector Pay and
Terms Guidance is applicable to POL in the FD could result in the Secretary of State
later arguing that it is applicable and insisting on its implementation. This could
have a material impact on POL being able to attract and retain talent in a private
sector/commercial market.
3. The additional provisions which have now been included within the draft FD in
relation to the annual business plans and 3 yearly strategic plans will require
additional resourcing, significant forward planning and co-ordination.
Input Sought Input Received
The Board is asked to note: Advice from Linklaters LLP
(i) the impact to the business as a result of the
requirements and obligations on the Post Office
Group as detailed in the paper; and,
(ii) the additional processes and resource which will
be required to ensure the additional
requirements in the AoA and FD = are
implemented and adhered to.
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Report
Which Group Reserved Matters proposed by UKGI in the AoA are not yet agreed
and what types of business activities could these delay, restrict or even prevent?
1. Although a number of Company Reserved Matters exist in the current POL and Post
Office Management Services Limited (POMS or POI) AoA, there are no group
reserved matters. Payzone Bill Payments Limited’s (PZBPL) current AoA do not
include any company or group reserved matters (the AoA have remained unchanged
since acquisition).
2. Supported by Linklaters, a pragmatic approach has been taken to negotiating the
AoA with UKGI. Recognising that they are the Shareholder Representative we have
reached agreement on all Company Reserved Matters for POL and the majority of
the Group Reserved Matters. The potential consequence of these Group Reserved
Matters is that approval may be required more frequently for decisions that the POL
Board (and the Boards of its subsidiaries) had previously been able to make without
shareholder consent. Andrew Goddard, the Managing Director of Payzone Bill
Payments Limited (PZBPL) and Ian Holloway, Compliance Director, for Post Office
Insurance, have also been consulted on potential impact on BAU.
3. The group reserved matters which have been proposed by UKGI and that, to date,
we have been unable to agree from a commercial perspective (not a legal or
regulatory) to are as follows:
(i) 43.3(K): The formation of any subsidiary undertaking or the issue, allotment,
purchase, cancellation or transfer of Shares, or granting of any Share Rights,
in the company.
(ii) 43.3(L): The sale, issue, allotment, purchase, cancellation or transfer of any
shares by the company in any subsidiary undertaking or in FRES Limited
(while an associated undertaking of the company) or in any other associated
undertaking of the company.
(iii) 43.3(M): The amalgamation or merger of the company with any other
company or business undertaking.
(iv) 43.3(0): The restructure or re-organisation of the Post Office Group
structure such that the company’s shareholding in its subsidiary undertakings
is altered or amended.
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4. The table below sets out where these articles already exist as company reserved
matters within POL, POI and PZBPL’s AoA. Accepting the changes requested by UKGI
would now require POL to request consent for these matters from BEIS prior to
undertaking such matter (in the case of POL) or providing consent to POI or PZBPL.
Article Included in existing POL Included in existing Included in existing
AoA as Company POI AoA as Company I PZBPL AoA as Company
Reserved Matter? Reserved Matter? Reserved Matter?
43.3(K) Yes Yes No
43.3(L) No No No
43.3(M): I No Yes No
43.3(0): I No Yes No
5. The acceptance of these group reserved matters could, particularly for POL’s
subsidiary companies, delay, restrict or prevent:
(i) Re-organisations and structuring ahead of acquisitions and or disposals,
including intragroup mergers and the raising of finance; and
(ii) Organising its existing business and the ability to create new divisions / sub
divisions (e.g. where a new subsidiary is required for regulatory or local law
requirements).
6. This concern is heightened as a result of the existing deemed consent process
(whereby consent would be deemed granted if no response is provided within 10
business days) now being supplemented by a procedure which allows for the
indefinite extension of the period for UKGI to respond to requests - as long as they
initially request an extension within the first 10 business days, and then request an
additional extension, of such other time period required, within the subsequent 10
business days following the initial extension request.
Which provisions within the draft Framework Document cause POL concern and
why?
1. The purpose of the FD is to set out:
(i) The parameters within which POL is expected to operate;
(ii) The obligations with which POL is expected to comply; and
(iii) Certain aspects of the relationship between the Shareholder, the
Shareholder’s Representative and POL and how it is expected that the
Shareholder, the Shareholder’s Representative and POL will interact with
each other. The FD is supplemented by the key governance documents (as
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applicable): (i) the AoA; (ii) the current Entrustment Letter; and (iii) the
Funding Agreement.
2. While the FD is not legally binding, given that it will be a public document, it will
be difficult for UKGI and POL to step away from its terms which govern the
relationship between the parties.
3. The current draft of the FD requires POL to have regard to the government wide
corporate guidance applicable to public corporations listed in an appendix to the
FD and any future relevant guidance as specified by Government to the extent that
such guidance is applicable to POL as a Public Non-Financial Corporation. This is a
very broad obligation on POL and there is a risk that the Government will expect
certain current and future guidance to apply to POL despite the fact that legally
POL would not be required to apply this guidance.
4. This risk has been highlighted by the Public Sector Pay and Terms Guidance
(PSP&TG) which covers pay setting arrangements for public sector employees,
including departments, non-ministerial departments and agencies, as well as for
public sector workers in non-departmental public bodies and other arm’s length
bodies. The guidance provides a framework within which all departments will set
pay, and for departmental pay strategies and pay reporting, unless there is an
existing multi-year or other agreement in place. The guidance, which was updated
on 22 July 2019, is expressed to be a “reminder of the cross-cutting public sector
pay and terms rules that are in place, and the government's expectations on public
sector employers”.
5. While the FD does state that POL is exempt from Cabinet Office spend controls, is
not subject to the Civil Service Pay Remit Guidance and the POL Board retains
operational freedom to make remuneration decisions in the best interests of the
business, UKGI are unwilling to specify that the PSP&TG does not apply to POL
and, instead, propose to stay silent on its application to POL.
POL has previously received QC opinion and advice from Linklaters (in December
2018 and June 2019 respectivel
7. Whilst the PSP&TG is not legally binding or enforceable, if UKGI considers that the
PSP&TG does apply to POL and POL chose not to comply with it, the Secretary of
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State could exercise powers in the AoA to compel POL to comply, such as replacing
the POL Board.
8. _UKGI has been provided with the QC opinion obtained by POL and this is currently
being considered by HMT. POL is waiting on a response from both HMT and UKGI
on this key issue.
9. Separately, a number of additional provisions relating to agreeing strategic /
business plans, accountable officer obligations, responsibilities of the Board and
the Chair; the process for appointing directors and the Chair etc. are now included
in the draft FD. Although certain of these activities are currently included in POL’s
existing AoA (e.g. the requirement to set and agree a strategic plan for the group
with BEIS), and from a governance perspective they may appear to be in the
ordinary course, they do represent a notable uplift from the current group practices
and as such will require resourcing along with the appropriate planning for
compliance. For example, in relation to provisions for the creation of group
business and strategic plans:
. A small team will need to manage the process for and content of the group
business and strategic plans. The provisions will require POL, with sufficient
input from the subsidiaries, to design a business plans annually and a
strategic plan for the following 3 years. This then needs to be considered and
approved by the POL Board, and ultimately by BEIS. This will require
significant forward planning and organisation. Any changes to these
documents will also require separate shareholder approval, a process for
which is outlined in the FD.
° In addition to the group business and strategic plan, the subsidiaries will be
required to set similar business and strategic plans specific to their business.
However, the creation of these subsidiary business and strategic plans, and
any changes to such plans, will only require the consent of its shareholder
(i.e. POL) and not BEIS, so long as such plans or amendments would not
constitute a material variation or amendment to the group business plan.
° Consideration of the timing of Board meetings and when the business and
strategic plans are to be considered. The FD requires specific timelines for
approval and planning etc. This would need to be managed.
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GE DISCUSSION PAPER
Post Office Approach to SMEs
Author: Barry Morse Sponsor: Owen Woodley Meeting date: 11 September 2019
Executive Summary
Context
The UK SME market is a large and important market for PO. There are approximately
5.7 million SMEs (3.4 million sole traders and 2.3 million registered companies). The
sector is acutely important to UK PLC as a key driver of employment and innovation.
It is also the focus of attention for myriad financial, logistics, and business services
suppliers. Whilst competitive, the diverse needs and highly fractured nature of the
SME market makes it difficult to point to dominant suppliers or uncompetitive sectors.
Building primarily on Mails-based relationships, PO is already well known as an
essential and trusted supplier to many sectors of the overall SME market. In recent
years, PO has launched a few SME-focused products with varying degrees of success
(e.g. Drop & Go; SME Insurance) and explored banking opportunities with Bol and
TSB. Recognising that efforts to date have been more tactical than strategic, the
question for this paper is whether there is a better way forward.
This discussion paper provides a high-level description of what are seen as the most
compelling near-term opportunities for PO. For reasons detailed, these are focused
around identity and the brand potential for a “Post Office Marketplace” offering
financial and other services into the sector. There could be alternative approaches in
other parts of our product set which could broaden this offer over time. These are
mentioned but not developed in any detail.
In an effort not to obscure core strategic concepts, this presentation does not provide
a detailed description of SME sub-sectors, market sizing, competitive landscape,
financial analysis etc. This can be done as part of follow up work.
Questions addressed in this report
1. What is the need and the opportunity and why now?
2. How could PO help and what are the options on the way ahead?
3. What do we need to do to progress?
Input Sought
The GE is asked to discuss the content and consider next steps
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The Report
What is the need and the opportunity and why now?
1.
. To date, PO has provided Mails-related (e.g. Drop & Go) and Banking
The SME market spans the gig economy workers to sole traders to partnerships
and limited companies in every sector. The UK defines businesses by the
number of employees: micro-businesses (0-9), small (10-49) and medium (50-
249). Around 54% of all employees (60% of private sector) work for SMEs.
. The biggest “business” issue facing SMEs relates of course to what they do and
how they make profit. Whilst PO’s services are mission critical to some parts of
the SME community (e.g. parcels), this need is far from ubiquitous and unlikely
to be at the centre of our relationship with SME market as a whole.
. However all SMEs do have some level of “administrative” need in the following
categories: regulation (formation, filings); financial (banking, insurance);
professional (accounting, VAT, tax, payroll); IT (web); employee verification;
customer and supplier verification; property management; and logistics
(delivery, inventory, storage). This is where PO could help.
Framework cash services to the SME community. A previous attempt to sell
SME insurance proved unsuccessful and the book was sold in 2018. At various
times, further opportunities were explored, e.g. a PO-commissioned report in
2014 by Market Gravity discussed a complete mail solution, banking, insurance,
co-working space, networking, online communities, branch services, SME
promotions, telecoms, utilities, government services, logistics, set-up services,
funding, advice, incubator and training.
. Few of these ideas took hold. Without an overarching plan to mount a sustained
multi-product effort, the likely costs to sell one-off services into the non-
homogeneous SME market would have been prohibitive. It did not work then,
and it is unlikely to work now given the costs of customer acquisition.
. The biggest single administrative issue facing the SME community is “access to
finance”. PO’s currently exclusive banking partner has not shown any real
interest in the UK SME market, thereby denying PO an anchor product upon
which to sustain an SME campaign. But that situation is about to change. It is
expected that PO will be released from exclusivity arrangements in the near
term, allowing it to provide financial services to SMEs with few restrictions.
. The second biggest administrative issue facing SMEs is “navigating regulation”.
Regulation is a significant burden to SMEs. Company formation, establishment
of bank accounts, employee recruitment, property management, customer and
supplier vetting, business payments, payroll administration and taxation are all
heavily procedural and require absolute compliance.
. Today, SMEs purchase administrative assistance from a variety of providers in
multiple forms. Whilst Government's drive to simplify digital compliance has
made life easier, it has given rise to new cyber security threats. Banks have
made it easier to set up accounts and manage transactions but managing
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signing authorities, overseas payments and compliance reporting remains a
challenge. SMEs still rely heavily on lawyers, recruiters, accountants and
brokers. But a lot of their services are giving way to software-based
alternatives, many of which are offered free or bundled with bank offerings
(e.g. FreeAgent). As companies grow outside the UK, they require the services
of international service suppliers (e.g. LexisNexis, Thomson Reuters, D&B).
9. Even the largest service companies have yet to establish any level of
dominance. Banks are in the best position to meet a quorum of needs but face
many cross-selling restrictions. New Challenger banks are having some success
by making everything digital, integrating free accounting software and
integrating a full array of third-party services via marketplaces. This works well
in the micro-business segment but has limitations as companies outgrow
freeware (e.g. FreeAgent to QuickBooks to Sage to PWC).
10.Of course, none of these growth challenges materialise if SMEs cannot get
access to start-up and growth finance. An SME's view of its bank is more about
access to finance than administrative support. This is why the Challenger bank
marketplace is particularly intriguing. By allowing third-party lenders (e.g.
iwoca), Challengers can maintain good relations with their account holders even
during periods when they are not prepared to lend.
11.In short, most SMEs eventually need access to finance and we believe they
would buy administrative services from their finance provider or a conduit to it.
Navigating regulation is another mission-critical need with solutions becoming
ever more digital, putting more focus on the need for identity and security.
How could PO help and what are the options on the way ahead?
12.PO has several options for succeeding in the SME market. Success is defined
herein as value creation for SMEs and UK PLC and long-term sustainable
profitability. The decision will be a function of many factors including level of
strategic ambition, people/financial resources, availability of partners, market
timing, point of market entry, government support, execution, integration with
existing businesses, competitive reaction and macro-economics.
The four main options are:
A. Current Incremental Approach. Business as usual. No specific focus on SME
market. Continue to focus on consumer markets. Pursue derivatives of
consumer services for SMEs on an ad hoc basis. Incremental upgrades to
existing services such as Drop & Go (e.g. replace home grown account system
with stickier credit card solution). Regularly monitor market developments with
respect to implementing a more ambitious approach later.
B. RegTech-led approach. Focused investment in ID services for both
consumers and companies. Individual (e.g. Verify) and business (e.g. LEI) ID
services are essential building blocks for RegTech if we could utilise PO’s
relationship with government to become a critical part of the work-flow
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infrastructure between SMEs and regulators. Develop services in conjunction
with leading business data firms (e.g. LexisNexis). Major focus on employment
verification (e.g. DBS, right to work). Offer these services through multiple
channels including the Banking Framework (e.g. AML/eKYC onboarding).
Product roadmap will include ID credentials repository and certified digital
documents and signature. (NB RegTech is usually defined as technology that
helps banks meet regulatory requirements. For the purposes herein, RegTech
will have a broader definition to include all services that help SMEs meet
regulatory challenges)
C. FinTech-led approach. Develop a banking proposition for SMEs in conjunction
with a leading digital bank - business current and savings accounts with a full
suite of transactional products. The combination of PO’s market reach and
Challenger bank technology is a potential winner, selling PO services and
supplemental third-party products through a marketplace. The Fintech would
bring banking skills, capital and licenses in return for major market boost and a
share of the revenue. This option will probably be a second phase activity
within PO's proposed UBA (basic bank account) partnership. There is concern
that I
. arrangements with service partners liki Iso need to be observed.
D. Unified FinTech/RegTech approach. Pursue both FinTech and RegTech
investment strategy in unison. Integrate ID services advantage into the
banking service offering. Tilt the banking coopetition model to more competitive
one, depending in part on medium and longer term prospects for Banking
Framework. Develop a more robust lineup of financial product partnerships for
sale through the marketplace. Target the micro-business sectors (esp. the gig
economy) via a Starling Bank-type model featuring easy switching between
personal and business accounts. PO will have a competitive advantage in ID
Services if it is prepared to invest, allowing us to offer faster, less expensive
and more secure bank services. This option is aggressive. If PO believes that
bility of the
What do we need to do next to progress?
13.The most successful technology companies build things that the market needs
and are willing to pay for - things they believe they can do well. Established
companies do transformative things that are essential for survival.
14.Whilst it is unclear whether a concerted push into SME services is essential at
this time, it is reasonably clear Option A will not deliver the potential for a
transformational opportunity here. The sheer size and potential for profits in
this highly fractured market should be of interest to PO, albeit it would require
a very significant change of emphasis for PO to position itself to compete in that
digital world. Simply implementing incremental upgrades such as replacing
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Drop & Go Accounts with a stickier credit card solution are no-brainers, but will
not move the dial. The first steps are undoubtedly in the area of identity.
15.Identity services are the most critical infrastructure component in the digital
world. Every major technology company is doing everything in their power to
control the user’s sign in. This gives them visibility into their customers’ needs
(data analytics). PO should be in poll position to become a major force in the
UK identity market. It has a long history of processing physical identities and
has a perceived preferential relationship with Government. Making money today
in digital identities is challenging, but whomever builds critical mass will
become an essential piece of the more lucrative and thriving RegTech industry.
Aggressive planning and action in RegTech (Option B) is highly recommended.
16.The banking industry is also on the march towards a fully digital future. Today,
PO is well compensated for taking on the cash needs of Banks’ geographically
undesirable customers. That business will not disappear in the near term, but
the direction is clear. PO now has an opportunity to team with a new breed of
purely digital bank to help solve a number of key problems and opportunities —
a debit card solution to compete more effectively in FX in future, addressing
financial inclusion and SME access to finance. The key challenge will be to find
the right FinTech partner willing to shoulder the financial burden in return for
shared income and the potential for wider adoption.
17.Some traditional banks will have concerns about PO’s potential entry into SME
banking. It is possible that situation will be easier to manage with time. PO has
from Bol to operate in business banking.
Provided that PO goes forward with the forthcoming UBA business case, it has
nothing to lose by adding SME business account capabilities to the evaluation
criteria when engaging with potential UBA partners (Option C). These
exploratory discussions need not be public and the introduction of business
banking would not be announced at the outset. Announcing new business
banking services for a series of very specific target markets (e.g. eBay traders)
could help to mitigate any Banking Framework push-back.
18.With respect to the SME market, initial point of market access and timing are
critical to create sustainable momentum with our partners and manage
potential impact on current business. If business banking is likely to be on hold
for at least 12-18 months, it does not make sense to dedicate resources to a
comprehensive “Unified FinTech/RegTech” SME strategy at this time (Option
D). This could be delayed for a year until progress has been made on Options
and B and C. In other words, they could be run as separate projects.
19.In summary, we believe that Option A would be to miss a potentially significant
opportunity for PO and therefore recommend going aggressively at Option B.
We also recommend investigating Option C in the context of the proposed UBA
project but it is too early to develop a unified SME strategy under Option D.
20.We should also continue to explore wider opportunities to expand an SME
market position into other areas of our product set like Parcels etc.
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Appendix
BRWN
Basic Functions of a FinTech Account
Indicative ID Services Roadmap
Starling Bank Business Account
General Issues to consider
1. Basic Functions of a FinTech Account
Receive payments; Pay invoices; Withdraw your cash; Write cheques; Pay tax
bills; Transfer balances; Make bank transfers; Set up direct debits; Set up standing
orders; Manage finances through an app; Perform telephone banking; Borrow
money through an overdraft
2. Indicative ID Services Roadmap
e IDs and certified credential repository for SME responsible parties and Sole
Proprietors. Regulator compliant (Companies House, AML/KYC, HMRC ...)
SMEs use for all key people and new employee verification.
IDs for Individuals, directors, responsible parties & employees
Branch and online applications / credentials collection
SMEs control release of reusable certified information
o Banks, insurers, landlords, suppliers, customers, government ...
Reusability of certified (meta-marked) credentials
API integration into 3" party registries of directors, controlling parties
Build relationships with D&B, Thomson ... for access to overseas registries
Digital starter offering for new business
Digital commerce offering for online merchants
Customer and supplier verification and onboarding services
Digital signatures and documents for regulatory compliance.
3. Starling Bank Business Account
Some of the features and benefits of Starling Bank’s business account.
No monthly fees for small businesses
Deposit money at over 11,500 Post Office branches nationwide
All eligible deposits are protected by the FSCS up to £85,000
Manage cash-flow with real time
Categorised transactions
Share transactions with accountant or accounting software
Switch from business to personal in app with a tap.
Apply in under 10 minutes with 100% mobile signup
24/7 customer support
Open Banking Marketplace
Starling Bank is one the UK’s leading alternative banks and unlike other some other
business accounts above offers FSCS deposit protection. They have authorised by the
Prudential Regulation Authority since July 2016. What really sets them apart is the
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Starling Marketplace of third-party apps with integrations with services like Xero,
PensionBee and Wealthify. They also have no monthly maintenance fee and don’t
charge fees to send or receive money via Faster Payments, Direct Debits, and
Standing Orders. Therefore, Starling might be a good choice if you don’t need in-
branch services most of time and are happy to bank primarily via app or online.
4. General Issues to Consider
Government support and assistance - Government should be broadly
supportive of strategies intended to spur financial inclusion and improved SME
access to finance. These are good stories that should play well and could very
well be rewarded.
Banking Framework - Government consistently chides the banking
community for not providing SMEs with sufficient access to finance. POL should
assume that Banking Framework push-back will be in direct proportion to the
credibility of its UBA and Business Bank Account partner(s). We do not foresee
issues related to UBA at this time. But business accounts are another matter.
This will have to be managed carefully.
Data Analytics - Without data analytics, POL will not compete effectively in
SME or any other market. Data analytics start with knowing the identity of
uses (consumer and business) activity. POL needs a step change in its
approach to data analytics.
Partnership model - How to develop a long-term partnership with an
entrepreneurial VC / PE backed firm that will eventually exit through IPO or
trade sale? How to achieve positive proactive forward momentum over the long
term?
Technology integration — POL has much to gain from working with the latest
generation of FinTech providers. They have developed solutions that
dramatically reduce the costs to launch and operate new services. Integration
with POL’s legacy systems will be an important issue.
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GROUP EXECUTIVE UPDATE PAPER
Transactional Banking
Authors: Jeff Smyth/ Barry Morse/ Chrysanthy Pispinis Sponsor: Owen Woodley —Meeting date: 11 Sept. 2019
Executive Summary
Context
Challenger Banks and Fintechs have substantially changed the banking landscape
and given rise to new opportunities for providing better banking services to all
consumers and small businesses. Irrespective of Post Office’s (PO) reach and brand
resonance, the above market changes are putting pressure on our existing product
lines.
In particular, business lines such as payments (sterling and forex) and retail FS will
continue coming under pressure from disruptive business model and continuously
increasing customer expectations. The banking disruptors will also give rise to better
solutions for POCa, bill payments, Postal Orders and other products.
PO plays an important role in providing access to essential financial services to those
customers who need them the most. There is an opportunity for PO to play a greater
role in ‘front-of-wallet’ financial services and in the broader financial inclusion
agenda through a transactional banking capability.
QieStlanis addressed in this report
What is the concept of a transactional account and why is it important for Post Office
now?
2. How will it benefit Post Office’s existing and new customers and impact current Post
Office business lines?
3. What are our next steps and timelines, in terms of opportunity sizing and market
engagement scheduling?
Conclusions
I
PO customer reach & FinTech technology is a winning combination in an evolving
market.
The time is right. Multiple business lines from POCa to retail and transactional FS
are under pressure. The situation will not improve without a next generation
(account-based) platform for PO (financial) products for consumers and businesses.
A strategic transactional banking capability / platform, able to meet multiple use
cases, including a clear inclusion objective is the right thing for consumers, the
government and society as a whole.
The key challenge is to quickly find the right partner with whom to build a mutually
beneficial relationship.
nput Sought
This is a complex topic and we have many unanswered questions. The GE is asked to
provide its steers and any further considerations or questions the team needs to be
mindful of and answer as it seeks to execute the next steps outlined.
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The Report
What is the concept of a transactional account and why is it important for Post
Office now?
1. Challenger Banks and FinTechs have substantially changed the banking landscape
and given rise to new opportunities for providing better banking services to all
consumers and small businesses. Key drivers include:
a) Regulation: Government / regulatory policy changes have enabled a flood of
new entrants into the provision of banking services. A continuum of banking
licenses are readily available to all serious participants. Having started with
Advanced Payment and e-Money licenses, the most serious Challengers have
now graduated to full banking licenses. Open APIs, broader access to Faster
Payment Scheme (FPS), and similar initiatives have opened banking
infrastructure to all
Technology: Challenger banks and their FinTech suppliers are building new
digital-only solutions that have major advantages over the vast legacy systems
developed over generations by the major traditional banks. These systems
feature compact cloud-based banking cores, native multi-device support, the
latest in cyber and fraud detection, AI and bureau-based credit scoring, direct
rails to FPS via ClearBank, low cost multi-currency payment rails and open
banking APIs for third party offerings
c) Reduced Operating Costs: The combination of regulatory liberalization and new
technology has facilitated a serious reduction in costs
2. The same forces will have a negative impact on the medium-term outlook for retail
and transactional FS products. The challenger banks will also give rise to better
solutions for POCa, bill payments and other products.
3. One of the outcomes achieved in our negotiations with Bank of Ireland is the ability
to contract with a new provider for current accounts/ transactional banking (personal
and small business).
4. The above circumstances make this the right time to establish a transactional
banking offering; our central premise is that this is best achieved by partnering with
a fintech (rather than a ‘traditional’ bank with legacy systems), allowing PO to benefit
from flexible technology, and the fintech to benefit from our access to the UK
consumer market.
5. In a saturated, price-led, ultra-competitive current account market, with relatively
low customer switching levels, ease of use and differentiation will be need to be core
components of a transactional offering from PO. Our working hypothesis is the
introduction of a ‘universal bank account’, with ‘modular’ features and capabilities
depending on the customer need, and which would also meet the needs of the
financially excluded:
a) PO would partner with a fully UK-licensed ‘challenger bank’ to provide basic and
premium current accounts to anyone achieving Verify credentials (noting that
more vulnerable customers may not be able to complete a Verify process).
6. The table overleaf outlines potential features and approaches; they are indicative at
present, and would be developed into a roadmap, taking into consideration, inter
alia, customer needs/use cases, commercial return, current contractual obligations
and exclusivity restrictions.
b
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Unrestricted single and/or multi-currency current account (IBAN)
UNIVERSAL BANK Unrestricted debit card (single and/or multicurrency)
ACCOUNT Joint accounts, multiple cards ...
UK ATM enabled Contactless EMV
oe _BACS, FPS, UC, DC inbound transfers
Unrese ed Oe 2 SuperApp mobile interface:
Information & Advice; Pension Dashboard; Pockit-type tools; ID services; Easy Bill Pay, P2P
payments, remittances, standing orders, ...; TravelApp functionality
“some services only I 9 Customer onboarding with PO ID Services (requires Verify-level enrolment)
available with Premium I 9 Banking Framework Plus access to PO ATMS and cash services (deposits, withdrawals, orders)
(fee) Accounts Q Onboarding with PO ID Services?
Customer access and support (mobile, online, in branch, telephone)
2 Integrated Digital marketplace for financial services
Financial 1D” Savings, investments, credit cards, overdrafts, loans, mortgages, insurance ... POL products;
Marketplace Partner products; third party products
7. Many UK citizens and legal residents find themselves unable to enjoy the full benefits
of the UK financial system, getting no advantage of basic banking services (current
and savings accounts), reasonably priced credit or time & cost efficient bill payment
services. The under-served market consists of 5-8 million people. It represents a
core constituency within the 17 million consumers that regularly visit our branches.
a) We have already enrolled more than 1.1 million Universal Credit recipients in
Verify. Just that process alone meets KYC-AML requirements to open bank
accounts. The PO has important advantages in launching new services into this
market, namely our trusted brand, incumbent offerings and unrivaled network
How will it benefit Post Office’s existing and new customers and impact current
Post Office business lines?
8. We envisage the ‘universal’ bank account to have unrestricted multicurrency
transactional/current account and debit card functionalities, with use cases to be
fleshed out over time. Non-cash FX is the priority use case, but there is a multitude
of use cases and opportunities — all based off the same strategic platform.
9. Non-cash FX: The Board discussion in July 2019 outlined that the growing
segments of the travel money market are the debit and credit card segments,
comprising of ~60% of travel money spend and growing; the 30% FX cash & ~5%
prepaid card (segments where PO is currently present) are declining. The
introduction of a multicurrency transaction account & debit card would address this
gap and put PO a better position to compete in the FX market, on the assumption it
wants to be #1 in Travel Money.
10.One of the earlier working assumptions was that this account would offer a
solution/response to the DWP bid for POCa (due in October 2019). Current DWP
requirements seem to be moving towards a voucher-based service (as opposed to a
bank account or even pre-paid card). As such, the Retail team is managing the DWP
POCa process separately. Depending on the timelines of a new transactional banking
solution, the existing POCA customer base could be migrated to this account, and
ahead of the currently planned POCa closure in late 2021.
11. Other use cases, for financial and non-financial products, can be considered over
time. SME banking is one such use case. This could be on a standalone/exclusive
basis, (e.g. through existing partner relationships) or in a ‘marketplace’ type
approach for potential new products (e.g. Investments). The business models and
approaches can vary depending on the product and customer need.
12.Another central hypothesis is that customer verification (and perhaps on-boarding)
would happen via PO digital ID services —- though solutions will also need to be
available for the more vulnerable or excluded.
13.Building a successful business model for the “inclusion” market is challenging.
Government limits the fees associated with Basic Bank Accounts (BBA) and carefully
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monitors cross-selling / bundling more profitable / add-on services. Success will
depend on establishing a ‘premium’ version of an account amongst a broader
community of consumers and SMEs. Revenue would be achieved from balances,
‘premium’ account fees, potential government incentives, a marketplace (PO sales
& third party commissions).
a) One avenue that could be explored is in partnership with existing Banking
Framework partner(s), and support migrate their existing BBA customer
base
14.Developing such a proposition (in contrast to current and future ‘point’ solutions/
card-focused strategies) is a heavy lift, and requires significant resource in the long-
term in order to build a capability that meets a multitude of use cases over the
coming 3-5 years; but it gives PO longer-term strategic capability, in a phased
approch. It would provide PO a platform for sterling and non-sterling payments —
supporting current customer retention across a variety of products — and a ‘gateway’
for additional products and services. As existing partnerships expire in the coming
years (e.g. MoneyGram in 2021), it gives PO optionality in terms of meeting
customer needs through different business models. The flipside is that this is a
complex piece of work, with no easy/quick-wins.
a) The market is increasingly offering consumers and businesses faster,
cheaper and easier ways to manage finances and financial transactions.
By providing or having open access to their customers’ current accounts,
competitors can offer them new solutions that bypass the current intra-
bank, inter-bank and credit card ‘rails’.
15. Setting up a broader transactional banking / strategic platform capability does not
come without risks, which include:
a) Proposition differentiation
b) Timing to market
c) The wider commercial construct and medium-term profitability (for PO and
the partner)
d) PO's ability to execute quickly and efficiently
e) The positioning of such a capability against existing product lines and
partner relationships, in particular the Banking Framework, and the Bank
of Ireland (for retail FS and FX)
f) Considerations such as regulatory/ licensing constraints, procurement, etc.
What are our next steps and timelines?
16.Understanding of the commercial relationship and value exchange: on the
assumption that the partner will shoulder most of the operating cost, we will need
to work through quickly what PO can offer that has most value (brand, customer
access, unique proposition, etc.). Whilst a consumer transactional account might
have challenging economics, considering that alongside an SME banking proposition
could significantly enhance the economics for both parties (As previously discussed
at GE, any SME propositon development would need to be considered in light of the
Banking Framework)
17.Market soundings of potential partners: PO requires a partner (or eco-system
of partners) who holds the required banking licenses, has great technology, shares
our commitment to the UK consumer and is willing to craft a (long-term) partnership
that meets PO’s needs and constraints. Please refer to Appendix Figure 1 for key
qualifications and terms of reference for partner discussions
18.Development of Business Case: Key workstreams that will feed into the Business
case development are as follows:
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Partner
Engagement
Marketing &
Market Research
Products,
Technology &
Operations
Business Impact &
on
Legal & Finance
Partner qualification, Work to Terms of
Reference, targeting, approach,
confidential discussions
Market data, internal data analytics,
competitive landscape, business model
(pricing / revenue assumptions)
Core offering, roadmap, marketplace, PO
integration, PO Money platform sharing &
marketplace sales
POCa / DWP planning, Banking Framework;
and all other current PO offerings
Partnership structure, NDAs, partner
procurement planning, exclusivity
arrangements, financial plan
Partner plan, revenue assumptions
Market plan, Marketing plan
Product roadmap, operations plan,
cost assumptions
Interim messaging, information
exchange with all lines of business
Partnership structure options
Procurement options
Financial model
19.The project will be predominantly resourced through existing headcount in the FS
product team. Funding will
be requested for ‘chargeable’ resource (Project
management, IT, legal, etc.) and for specialist consultant resource - the latter
required to support market expertise and ‘informal’ sounding of the market.
20.Proposed timelines (subject to any procurement considerations):
a) Project Start
b) Shortlist of potential partners:
c) Business Case
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Appendices
Figure 1A: Partner Qualification
Essential
Qualities
Figure 1B: Terms of Reference for Partner Discussions
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E> British Gas
British Gas GE Update
Andrew Goddard
a
brLJOOLL
61/60/1 L-6L0z sequiaidas 11 AIUIUOW 39
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Executive Summary
BG awarded PZBP an exclusive 5yr contract (signing 30/9), replacing existing POL contract and enabling
access across POL & PZ network. Go Live date is Jan 1, 2020 with full transition from Paypoint
Winning BG represents a major success in delivering the Payments strategy, endorsing the rationale for
buying Payzone to leverage the larger network to secure new clients and generate incremental footfall
Winning key clients leads to winning major retail groups eg, Coop, SPAR et al & the critical dependency to
deliver rPos integration, backed by HiH
British Gas have 2.5m pre-pay and post-pay customers (of 23m in UK) paying Over the Counter,
generating 100m transactions pa (20% of the bill payment market), with 80% of transaction via Paypoint
outlets and 20% via Post Office
With the POL and PZ network every British Gas customer in an urban area is within a mile of the network
and every rural customer is within 3 miles of the network
Over the 5year term, the deal will deliver }**«! transactions, generate £38m_.dross_revenue. j!RRELEVANT! net
IRRELEVANT
Critical dependencies are Paystation deployment with upgrade of POL terminals & ADI functionality ig
(Additional Data Items) across POL estate
JBUON SBD YsNUg By) BULAAIIEp 40) UONBIedaig OL GEL
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61/60/1 L-6L0z sequiaidas I) AIMUOW 39
PrLJOLLL
September Update
Key successes / progress in August
Confirmed delivery of pre-paid product on PZ
network by Oct
Agreed business requirements document
(products, settlement, invoicing) with BG
Retail readiness of PZ network well advanced &
engagement & signage program commenced
Successful engagement with all key suppliers to
deliver the project (Siemens, Itron, Accenture,
Ingenico, ATOS)
Cemented project team and work-stream leads
around a detailed critical path with
dependencies & risks
Improvements in working engagement with key
stakeholders across POL and PZ following
Scottish Power launch eg, LRC, IT
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Key priorities in September
Signing Contract
JBUON SBD YsNUg By) BULAAIIEp 40) UONBIedaig OL GEL
Approve Investment request
Senior engagement meeting and updates
Finalise customer & agents marketing plan and PR
launch post-contract signing
Enable legacy pre-payment & post-payments
transactions on PZ network
Commence development of ADI functionality
Deliver Smart Energy solution via HiH
Accelerate Paystation deployment & initiate new
XAC terminal program team .
POL-BSFF-0014596_0116
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High Level Critical Path
I october I November I December I January I February I March I
JBUON SBD YsNUg By) BULAAIIEp 40) UONBIedaig OL GEL
fsS RR 8888 gg2e8 EERSSSRESSER ESSER SSSR
F Contract fae Wi contract & compliance (30/9)
o
E
‘© Communication & PR plans (9/9)
ae Retail Comms si
os
ae Customer Comms Des ev
3
sz Social Media & PR
5 ee. network readiness complete (29/11)
3
fe POL Retail network = : ; Implement POL branch
-
8 Front office (PZ Client take-on) (AE Build
3
2
§ Back Office (Integrate PZ Txn with POL back office) (EEUU Enna NPE ei fideciness (18/11)
£
ADI (additional data items)
EEE ER trternat process alignment (25/11)
@ BG Cards / Keys order (2/9)
Service i I vesion I ae] Go-live Exclusively on PZ & POL
3 t network (1/1)
Process enhancements
Operations
& Go Live
POL-BSFF-0014596_0117
L-6L0z Jequiaidas 11 AIMUOW 39
so
8
Fy
By
Major Risks & Mitigations
Risk Mitigation
1. Contract signing delays due to unresolved
position / approval governance around BG _
requirements and dependent on BG agreement to a
Risks low of business failing to meet operating
~_ IRRELEVANT
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JOBUOD seO YsHUG a4) BULAAIIEp Jo} UONeIEded 0} GEL
“IRRELEVANT !
2. Failure to deliver 91% ADI (additional data
information) coverage across Pol and PZ
network by end Jan & 100% by end April
3. Delays in finalising customer marketing plan
impacts effectiveness
4. 3mth lead time for replacement key & card
distribution to PZ network, impacting provision
of the service
payment (tbc)
Deployment o'
Established senior BG & POL/PZ engagement
BG finally dedicated experienced program lead
Bi-weekly marketing meetings in place
BG to place order wc 9/9
levice as Paystation replacement
@
POL-BSFF-0014596_0118
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Q
m
=
g
61/60/L L-610z Jaquiaidas I
Customer Communication Plan
We need to deliver an effective communication plan, that minimises customer disruption
and delivers a seamless, improved CX
POL00155501
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JoeNUOD seQ YsNUG au) BuLeAliap 40) UoNesedeld OL GEL
(- “Yk >)
+ BG - to lead the development of Marketing Brief which will
Customer inform overall plan
Se rs Ne SF
‘a >) (
Xe
Retail Network
+ PZ/PO - to lead the development of comms and Marketing
plan across Payzone outlets (retailers), PO network branches
& Postmasters and external activity (TBC post marketing
brief)
Ps
te
External Press Release
i
>)
F
+ Messaging for initial announcement will vary slightly
depending on whether we announce before or after contract is
signed. Ongoing support.
S Me al
@
POL-BSFF-0014596_0119
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4
5
o
3
2
3
5
3
5
6
ey
a
&
Snap-shot of marketing activity
"
- Warm up (eNewsletter) A
- ‘Further information’ (targeted comms) 0
- ‘What you need to do’ (before migration) ¥
H
®
Email /
Websites Letters /
Commence Training - Support Network / Postmasters with information (training) - transition, FAQs, value of driving further
ongoing development \____footfall ===
Branch finder ensuring Packs ~
a seamless CX - Payzone featured within Everyday Essential leaflet diverting
- ideally one system t customers to PO terminal Li
. to look up >I PaZONC - Awareness - National branch presence (Posters & Signage}
PR/Media PO & PZ locations. s Branch ’
= Announcement Agents and
g PR content plan Customers to have Target BG customers - Social engagement H
3 access to the same plan; broad awareness of service followed by 3
2 system, to search for series of targeted customer messages aligned '
g nearest outlets to email plan. ,
S i
g H
ix i
= 1
3 H
e ;
o
Aug Sep Oct Jan Feb
2019 2019 2019 2020 2020
agent community H if 4 ation of British Gas comms channels targeting their
7 1 < it it it
Internal ~ Launch: comms & regional engagement events ' ' British Gas ee eee are paying at Paypolnt Channels Inckide
Comms ~ On-going comms including infographic and video platforms 1! - IVR & Call centre
- Hothouse regions with additional support to embed (in io! - Social Media
ee emer) ty - BG bills & pre-paid card material
5 :
8
9,
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Retail Readiness — POL Impact
The vast majority of Post Offices will accommodate incoming volume with minimal
operational stress, due to the simplicity of bill payment transactions and existing
operational head room:
JOBUOD seO YsHUG a4) BULAAIIEp Jo} UONeIEded 0} GEL
* ¢.30% of the Post Office network will see an increase of below 25 tx per week, which is an increase
in customers of less than 5%
* ¢.30% of the Post Office network will see an increase of 25 - 100 tx per week, which is an increase
in customers of between 5% and 10%
* ¢.30% of the Post Office network will see an increase of 100 — 200 tx per week, which is an
increase in customers of between 10% and 20%
* ¢,10% of the Post Office network will see an increase of more than 200 tx per week, but only 100
of those branches may need to use additional counters to ensure customer service is not negatively
impacted. The majority of these branches already have equipment already available which is not
currently being fully utilised
Over the next 3 months all Post Office branches will be visited between 1-3 times to
ensure all equipment, staff and processes are fully ready to absorb all incremental BG
transactions.
@
POL-BSFF-0014596_0121
6L/IGO/LL-6L0z Jequiajdas II AjuUoW 3D
bbl Joezt
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Retail Readiness - Payzone Impact
With 95% of outlets expecting an increase of up to 200 transactions per week (29 per
day), we do not expect any operational issues in managing the new British Gas
transactions in the Payzone network.
JOBUOD seO YsHUG a4) BULAAIIEp Jo} UONeIEded 0} GEL
A summary of the expected impact is provided below:
* ¢,25% of the PZ network is forecast to have an increase of less than 25 tx pw
* ¢,55% of the PZ network is forecast to have an increase of between 25&100 tx pw
* ¢,15% of the PZ network is forecast to have an increase of between 100 - 200 tx pw
* ¢,5% of the Payzone network is forecast to have an increase of over 200 tx per week, with only 8
branches forecast to have an increase of over 500 tx per week
Over the next 3 months all Payzone locations will be contacted or visited to ensure all
equipment, staff and processes are fully ready to absorb all incremental BG transactions
@
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Program Structure
Programme
Director
Damian Scholes
Robinson
Tech Programme
Manager
Andrew Jenkins
Business
Programme
Manager
Jo Armishaw
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Technical Commercial, Client
Finance & Legal
Dependent Projects Workstream Lead Waretean een
Ralph Wort Damian Scholes
Operations Retail Readiness
Workstream Lead Workstream Lead
Matt Dowsett Simon Lambert
Marketing & PR
Workstream Lead
Michele Di Stazio
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Tab 11 Disaster recovery test: lessons learnt
POST OFFICE LIMITED
AUDIT & RISK COMMITTEE
Belfast Datacentre Disaster Recovery Exercise
Author: Craig Bibby — Sponsor: Shikha Hornsey Meeting date: 23°° September 2019
Executive Summary
Context
The Fujitsu operated Belfast Datacentre hosts Horizon our Post Office counter trading
application, and other business critical applications. The resilience of this datacentre
has not been completely tested since 2013 due to the high risk of recovery of some
obsolete applications (POLSAP) and equipment in the legacy estate. Post Office policy
for critical infrastructure is to conduct annual IT Disaster Recovery (DR) tests to ensure
that should an incident occur we can be confident of these plans. It is also a commitment
to a number of our partners, clients and our customers.
On 24'" August 2019 a failover test was attempted, but could not complete. This paper
provides an update on the test and recommends next steps.
Questions addressed in this report
1. How did the failover test go?
2. Has our risk position changed?
3. What are our recommended next steps?
Conclusion
1. There are lots of positives to take from the well planned test execution and many
lessons learned. It’s reassuring to know 6 years after the last attempt that the
Horizon application and key live product integrations worked. However a number
of small niggles delayed progress and ultimately at 2am an internal datacentre
network routing issue was found. The rollback was successful and Post Masters
were ready for trading by 5am.
2. Whilst we have higher confidence in our ability to failover, fundamental elements
of a successful full DR test still haven’t been completed and it can be argued that
we haven’t met our contractual obligations. Should the failure be made public, it
could worsen our PR risk.
3. We explored 3 options: a full DR test over Christmas, a full DR test over May
bank holiday, or a partial DR test October 12/13" followed by full DR in May
2020. Our recommendation is the final option as a partial test will allow us to
confirm our trading platform works in a DR situation, materially changing our risk
profile.
Input Sought
Agreement to proceed on Saturday October 12" to failover to the secondary datacentre,
run a suite of model office transaction tests and failback before Branch trading
operations on Sunday 13".
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Page 2 of 8
The Report
How did the failover test go?
All pre-test activities were completed successfully in the build up to the exercise, with
one minor hardware issue reported and quickly resolved, culminating in a GO decision
on Thursday 22" August. Test environments were shut down and baseline testing
performed on Friday 23" August. The exercise commenced at 17:00 Saturday 25"
August.
Time \Objective Result
Saturday 17:00 IPost Office Data Gateway (PODG) shutdown
‘Controlled shutdown of the Primary datacentre and
MasterCard disconnect Vocalink connection
Saturday Failover to Secondary datacentre.
20:00 - 22:00 IHardware and applications brought online.
JPMorgan confirm Fujitsu online banking.
Saturday 22:00 IConnectivity confirmed with DXC for POCA (Post Office
\Card Account)
Saturday 22:20 IMasterCard implement Vocalink connection
[Connect Counters to the secondary datacentre for
model office testing
Restore PODG and Horizon online services in the
isecondary datacentre.
POL decision to regress and failback to primary
ldatacentre
Sunday 02:12 IMasterCard disconnect Vocalink connection
Sunday 02:15 ILogs recovered, failback to primary datacentre initiated
Sunday 02:30 IFailback to primary datacentre
Sunday 05:00 IMasterCard implement Vocalink connection
Sunday 05:03 IBranch trading restored
Sunday 06:00 INetwork banking connectivity confirmed
PODG and Horizon online services restored, overnight
batch initiated
Sunday 15:00 IAll back office file processing confirmed and validated
Saturday 20:00
Saturday 22:30
Sunday 01:00
Sunday 02:00
Sunday 08:00
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The plan below shows the checkpoint at which the test was halted. Horizon was available
for trading the next morning by 5am, with all follow on batch files delivered to our
clients and back office systems.
‘Saturday
Branch Services
peer onscanee secmany ou carne Bh rece on try ome WE sever ureee Bh ccnen et Bee
WHAT WENT WELL?
There were a number of significant milestones achieved and activities completed that
give us confidence in any future test.
» Fujitsu’s technical plan was robust with controls in place to regress, enabling POL
to take the decision to protect service and assure no trading impact.
>» Once a decision was made the failback procedure was executed quickly and
branch trading ability was restored in good time.
>» All hardware components and applications were stood up successfully in the
secondary datacentre.
>» The support of all key partners was very good, implementing changes to enable
the test and providing support in diagnosis where required.
>» The back office file processing was manually processed by Accenture with no
customer impact, with POL users also validating data quality successfully.
> Proactive communications to branches were sent through all available channels,
including customer information posters, posted to branches.
> Communication to our clients detailing the impact to trading and client files was
largely effective, although 2 of 562 client’s files were escalated by clients. These
were quickly resolved during the exercise and have been added to our planning
for next time.
WHAT WENT WRONG?
Technical and organisational improvements have been identified, with remediation
plans detailed below.
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Issue Status
> The load balancer was hiding source IP meaning that
the counter IP wasn’t being sent through to the
network reverse proxy for authentication. This was
caused by incorrect source Network Address ;
No Brarich Translation (NAT) on the Citrix Load Balancers. Likely
[Access to >» There was insufficient time to resolve during the test ving a
Horizon but logs were taken. Fujitsu have now made changes, pene a
and technical teams have proposed how these can be
tested prior to a full failover.
> Testing is planned for 28'" September (more info
included below in next steps).
» Additionally, there was inaccurate policy based
routing for counters and any traffic would not have Likely
Counter been returned. This error was discovered after the resolved,
polry test, on analysis of the network logs taken. pending re-
inte » Configuration change applied and issue resolved. test
» Testing is planned for 28th September.
» Vocalink connection was initially unsuccessful on
failover, the issue was resolved and validated without I Under I
Vocalink any intervention. investigation
connectivity I > The route cause is being investigated with (does not
MasterCard. Prevent re-
test
> This does not impact the decision to retest. )
> Incorrect storage presentation to branch database,
Branch due to incorrect mapping. This caused a 30min delay I Resolved
Gatabase during the August DR test, configuration was correct, A curing t
ptonage storage represented and resolved during the test. USUEE Lest
Communicai
> Digital team did not have sufficient lead time to use
Digital all proactive customer channels. Lesson
Channels > Communication team lesson learnt, this will be Learnt
incorporated into communication plan.
» Two clients reported delayed files during the exercise,
despite proactive communication of the exercise
Client impact. mn Pi
EngagementI > This will be addressed with Post Office CRM’s for ee deel
Santander & Global Pay to ensure information is
passed to client’s Operational teams.
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Planning & Execution
> The service desk did not inform callers directly that
. these issues were due to a planned test - although Improvement
ne Service instructed too. action for
es > This will be re-emphasised with the desk before the next time
next test.
Has our risk position changed?
BUSINESS CONTINUITY
Overall we perceive the risk to our business continuity has reduced due to the successful
components and technical updates following lessons learned in the test. However some
fundamental items remain untested.
Unchanged or negative changes to risk
Positive changes to risk position
Across the business and key
partners the planned approach is
well understood, and was working in
practise.
position
Branches could not connect to the
Horizon application to perform any
live transactions.
All applications were shut down
successfully.
A full day’s volume of transactions
did not occur.
The Horizon application was stood
up in the secondary datacentre for
the first time in 6 years.
@\eI
Failing back with additional
transactions in the database (a
slightly different process) was not
completed
The live connections to banking
(Vocalink), Paystation (Ingenico),
AEI Booths (Thales) and payments
were confirmed as active (although
no transactions).
0
Nightly batch integrations (PODG)
were not processed from secondary
datacentre, following a days
transactions.
Uidisy
FACTORS IMPACTING OUR DECISION TO TEST
Prior to conducting the test we evaluated a number of factors. These are re-evaluated
below.
Factor
Change in evaluation
See section above - we evaluate that this risk has reduced.
» Known technical issues have been remediated with changes
and a plan to test these fixes is in progress.
» Positively the applications were fully stood up in the
secondary data centre with links to 3" parties for live
integration tested.
Risk to trading ina
disaster situation.
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Factor Change in evaluation
This factor remains unchanged from when previously evaluated —
it is still likely Post Office will remain on Horizon in the Belfast
datacentre for some time, the Belfast Exit project has not re-
started.
Post Office policy commits to performing business continuity tests
at least annually. It could be said that we’ve met the terms in the
banking framework which states that Post Office should, “test and
update their business continuity and disaster recovery plan
annually. Post Office shall promptly implement any necessary
remedial actions identified by or as a result of such tests”,
however it could also be argued that it is implied that the test
should be successful.
Post Masters, clients and partners were communicated to
frequently on the lead up to the test. It was also communicated
Group Litigation that the second outage window was not required. Whilst we’ve not
Order and media __Iseen any media coverage on this issue, we can only assume that it
coverage could be known our DR test could not complete.
A re-test will require further outages, but assuming it is successful
we will at least be able to confirm our DR plans work adequately.
How long Post
Office bears the
above risk
Commitment to
clients & banking
framework
The risk of Having just completed a significant portion of the test, overcoming
conducting the a number of issues on the way and safely failing back. This risk is
exercise somewhat reduced.
What are our recommended next steps?
We have seriously considered 3 options. The first two follow the same process we
followed for this bank holiday; failover on a Saturday, full day’s trading on secondary
on Sunday, failback to primary for bank holiday Monday. We haven't considered a non-
bank holiday weekend due to the increased risk to trading. Our options are:
1. Full test May 2020 bank holiday
2. Full test over Christmas
3. Partial DR test on October 12" followed by full test in May 2020
In all cases we first need to confirm that the network issues that prevented success in
August have been resolved. This in itself requires some Branch downtime.
ISOLATED NETWORK TEST
The proposed way to test the network without full application failover is to route all live
counter transactions through the secondary network, whilst all applications remain
uninterrupted in primary. Switching the network requires at best a 3 minute downtime
for the network. We've selected 10pm on Saturday when we expect c.505 branches to
be open, with between 1-4 transactions a minute across the network. We will
communicate the following to Post Masters:
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Branch Network Primary
= == Datacentre
10pm - 10 min downtime. Error
message displayed in Horizon 2 :fn fa ay:
a
10:10 - Normal trading resumes.
Model office testing begins a
10:40 - 10 min downtime. Error Fass! Mes = <<
message displayed in Horizon we)
10:50 - Normal trading resumes Normal Ops amp"
DR Situation Gem) Secondary
Network Test 2 \_Datacentre
DR TEST OPTIONS
1. Conduct a similar test over May 2020 bank holiday
The plan and approach for this is clear, however it means retaining our current risk
until May 2020.
2. Conduct a similar test over Christmas
Perform a full test during the Christmas period. The graph below shows transactions for
the last Christmas that fell on a Wednesday, compared to an average week. The
opportunities to run a day’s test on secondary with lower transactions than usual are
the 24", or 31% meaning failover would start on the 23°, or 30".
This is technically possible but we judge the potential PR risk to be higher due to the
time of year. Additionally whilst we have time to lock-in resources, some important
people within Post Office and are partners will no doubt be unreachable.
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ter recovery test: lessons learnt
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3. Partial DR test on October 12", followed by full test in May 2020
Over a standard weekend we do not want to fail to secondary for an entire day due
to the increased risk to trading on the Sunday or Monday due to issues in failback.
However we have technically planned for a fail over — fail back in one evening.
The proposal is to:
> Saturday 28'* Sept - Confirm the network issues have been resolved by
routing network traffic temporarily through the secondary data centre (pre-
requisite to the below).
>» Saturday 12 October 6pm - Failover to secondary datacentre. Conduct
transaction and live service testing from Model Office 10-2am. Failback to
primary confirming all transactions are correctly reconciled.
>» Sunday 13‘ October 6am - Primary System available for trading.
This would materially improve our risk position (see updated table below) having
confirmed our trading platform can failover as planned. We are investigating also
bringing up PODG in our secondary datacentre and using a test file to demonstrate
that batch processing could occur. This would turn the bottom right arrow partially
green also.
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Positive changes to risk position oeeens ee cane
Across the business and key
partners the planned approach is
well understood, and was working in
practise.
Connection from branches to Horizon
for live transactions would have been
confirmed
All applications were shut down
successfully.
A full day’s volume of transactions
did not occur.
The Horizon application was stood
up in the secondary datacentre for
the first time in 6 years.
= II
Fallback to primary with transactions
conducted in secondary would have
been tested.
The live connections to banking
(Vocalink), Paystation (Ingenico),
AEI Booths (Thales) and payments
were confirmed as active (although
no transactions).
L
Nightly batch integrations (PODG)
were not processed from secondary
datacentre, following a days
transactions.
=
4
=>
Following this we would wait until May 2020 to complete full annual DR, and
maintain the schedule annually going forwards.
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Tab 12 Cor
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act for employee travel services
POST OFFICE PAGE 1 OF 4
GROUP EXECUTIVE DECISION PAPER
Business Travel Contract
Author: Angela Lamarra Sponsor: Barbara Brannon Meeting date: 11 September 2019
Executive Summary
Context
Post Office’s current Travel Management Company (TMC), Capita Travel & Events,
were contracted to provide services until 30 Sept 2017. The contract was extended
non-compliantly in order to run a tender process using a Crown Commercial Services
framework. This framework was repeatedly delayed requiring a further non-compliant
extension before Post Office could commence a tender process.
Following an open and fair procurement competition during 2018, Capita were
awarded the provision of Online and Offline Business Travel Solutions.
Questions addressed in this report
1. What do we propose to do and why?
The Post Office Business Travel Management Contract with Capita & Events expired
on 30 Sept 2017 and was extended non-compliantly pending the availability of the
CCS “RM 6016 Public Sector Travel and Venue Solutions”.
2. What options did we consider?
Alternatives to delaying and extending non-compliantly were considered however
Post Office would lose central government buying power and associated discounts
against a rising market by running a full public tender [OJEU]. All large TMC
organisations were bidding to be appointed to the CCS Framework and were
content to wait.
Following a PCR-compliant tender process, Capita have been awarded subject to
contract, as they met both Post Office requirements and demonstrated ‘Value for
Money’.
3. What do we need to do next to progress?
The Board is asked to approve the contract with Capita Travel & Events at an
estimated value of £3.5 million per annum. This estimate is based on average year
on year spend, may go up or down based on Post Office demand and therefore
approval headroom up to £10m is requested. There is no minimum spend
commitment aside from travel manager services at circa £61k p.a.
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Tab 12 Contract for employee travel services
POST OFFICE PAGE 2 OF 4
Conclusion
1. The Board is asked to approve the contract with Capita Travel & Events at an
estimated value of £3.5 million per annum. This estimate is based on average year
on year spend, may go up or down based on Post Office demand and therefore
approval headroom up to £10m is requested. There is no minimum spend
commitment aside from travel manager services at circa £61k p.a.
2. The Initial contract term will complete in 28/02/2021. CCS are proposing to extend
the Framework out to February 2023 which Post Office may take advantage of if
the commercial terms are acceptable. An additional 12 month Termination
Assistance Period, ending in Feb 2022, can be utilized if needed. Should Post Office
wish to extend the contract out to the full length of the Framework, additional
approval will be sought.
The awarded provider Capita are the incumbent supplier therefore there will be no
interruption of the service or any material transition/exit plans to implement.
Capita have launched a new travel portal which they propose to migrate Post Office
to and this forms part of their proposal.
Input Sought Input Received
1. The Board is asked to approve the 1. Procurement.
new Business Travel contract with 2. Contract Owner: Barbara Brannon
Capita at a value of £10 m (non- 3. Legal
committed spend) until 28/02/2021
including a termination period of 12
additional months.
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POST OFFICE
Summary
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Business Requirement
Post Office needs to ensure ongoing travel
management services through an integrated, full
service TMC that covers Rail, Air, Hotels.
Travel Management services include:
« Provision of on-line and off-line booking services
(Rail, Air, Hotel);
« Access to preferred hotel rates based on
aggregated volumes;
« Compliance, service management and
management information;
* Travel Manager, etc.
Business Sponsor
Procurement: Barbara Brannon
Total Contract Spend/Value I Spend: £3.5 mill per year (FORECAST)
This includes Management/Transaction Fees (£61k
per year) and pass-through costs (e.g. Travel Fares,
Hotel, etc.). The spend is not guaranteed or
contractual committed as this is a demand based
contract
Figures includes Business Travel and Hotel
Accommodation
Procurement Lead
Angela Lamarra
Budget Approval Status
Liability
1) Contract Operation: Travel Services are funded on
a per travel basis as required by the employee and
his/her business area requiring the travel services.
2) Procurement hold the budget for the fee paid to
the Travel Management Company (TMC) for the
Travel Optimisation Manager Service
The total aggregate liability of each of the Customer
and the Supplier in respect of all Losses incurred
under or in connection with the Enabling
Agreement as a result of Defaults or Client Cause
(as the case may be) shall in no event exceed in
relation to any Default or Client Cause (as the
case may be) occurring in the relevant Enabling
Agreement Year, the higher of one hundred
thousand pounds (£100,000) or a sum equal to
one per cent (1.0%) of the Estimated Total
Charges for such relevant Enabling Agreement
Year.
Risks and M
The new Online Booking Tool will be accessed via the
CCS Platform. Capita will also launch a new
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services
POST OFFICE PAGE 4 OF 4
website which will be more user friendly and will
offer additional booking features.
To ensure a smooth transition to the new online
booking tool and platform, a detailed
Implementation Plan will be provided by Capita
and an Implementation Manager will be assigned.
The implementation process will take 12 weeks.
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Tab 13 Review of GE Action Points and Up
POST OFFICE LIMITED GROUP EXECUTIVE
Decisions and Actions of a Group Executive (“GE”) meeting held at
Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ
on 17 July 2019 at 09.30 hrs
Present: Alisdair Cameron (AC) Interim Chief Executive
Mark Davies (MD) Group Communications and Corporate Affairs Director
Rob Houghton (RH) Chief Operating Officer
Ben Foat (BF) General Counsel
Mo Kang (MK) Group HR Director
Debbie Smith (DS) Chief Executive — Retail
Owen Woodley (OW) Chief Executive — Financial Services, Telecoms and Identity, Group
Marketing and Group Digital & Innovation
In Attendance: Veronica Branton (VB) Head of Secretariat
Kathryn Sherratt (KS) Finance Director (from item 5.)
Adeola Oke (AO) Consultant, Deloitte
Micheal Passmore (MP) _ Finance Director (items 1. & 2.)
lan Smith (IS) KPMG (item 2.)
Cathy Mayor (CM) Finance Director — Retail (item 2.)
Max Jacobi (MJ) Head of Finance (item 2.)
Alastair Roman (AR) Finance Director (item 2.)
Martin Edwards (ME) MD ~ Identity Services (item 3.)
Chrysanthy Pispinis (CP) Director - PO Money (item 5.)
Amanda Jones (AJ) Network Director (item 6.)
Nick Beal (NB) Head of Agents’ Development and Remuneration (item 6.)
Meredith Sharples (MS) Telecoms Director (item 7.)
Issues discussed. All items, with the exception of the pensions buy-out
item, were for the 30/31 July Board Strategy sessions and changes to papers
were discussed, agreed and reflected in the versions submitted to Board.
1 Change Plan and Financial Performance Report
2. Financial Strategy for POL
3. ‘al Identity
4. Pensions Buy-Out
5. Travel Money
To consider what banking permissions would be required for an FX BF
linked current account.
6. Agent Remuneration
7. Telecommunications Strategy
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Tab 14 Items for Noting - forwar
Post Office Board Agenda
Date: I Monday 23 September 2019 I Time [12.30 - 16.30 hrs] I Location 1.19 Wakefield
Present Other Attendees
‘© Tim Parker (Chairman) I ¢ Tim Franklin ‘* Veronica Branton
(Company Secretary)
‘Nick Read (CEO) © Carla Stent
© Ken McCall (SID) © Tom Cooper
* Alisdair Cameron (CFO)
Agenda Item Action Needed Lead Timings
1. I Welcome and Conflicts of Interest Noting Chairman
2. I Minutes of Previous Board meetings including I Approval Chairman/
Status Report Veronica Branton I 4) 35 4 as hrs
3. I Report back from Committees (verbal) Noting
- ARC Committee Carla Stent
- Remuneration Committee Ken McCall
- Nominations Committee Chairman
4. I CEO Report (verbal) Noting & Input Nick Read 12.45 — 13.00 hrs
5. I Finance Al Cameron 13.00 - 13.30 hrs
5.1 Financial Performance Report Noting & Input
6. I FST&I and Retail Quarterly Reports Noting & Input Owen Woodley/ I 13.30- 14.15 hrs
Kathryn Sherratt/
Emma Springham
Debbie Smith/
Cathy Mayor
7. I Network Debbie Smith/ 14.15 = 14.35 hrs
i) Services of General Economic Noting & Input Tracy Marshall
Interest Compliance
ii) Network Report Approval
8. I Royal Mail Negotiations Noting & Input Debbie Smith/ 14.35 - 14.50 hrs
Mark Siviter
9. I Group Litigation Order (including mediation Noting & Input Ben Foat/ Alan 14.50 - 15.30 hrs
issues) Watts
10. I Starling (Workers’ rights case) Noting & Input Ben Foat/ 15.30 — 15.40 hrs
Laurence O'Neill
11.I Legal Enterprise Optimisation (Framework ‘Approval Ben Foat 15.40 — 16.00 hrs
‘Agreement and Articles of Association)
12.I Health and Safety Report, including violence Noting & Input Mo Kang/ Martin I 16.00 —16.15 hrs
and robberies report Hopcroft
14
13.I Contract approvals Approval
Employee travel services
14.I Items for Noting Noting All 16.15 - 16.30 hrs
14.1 Pensions Buy-out
14.2 Sealings
14.3 Future Meeting Dates
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14.4 Forward Agendas
15.I Any Other Business Noting and Input Chairman
16.I Date of next meeting Noting Chairman
29 October 2019
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Tab 14 Items for Noting - forwar
Group Executive Agenda
Date: I Wednesday 16 October 2019 I Time: 09.30 — xxx [ i6eation:II 1.19 Wakefield
Present:
Nick Read (Chair) © Shikha Hornsey
* Alisdair Cameron © Mo Kang
© Mark Davies © Debbie Smith
Ben Foat * Owen Woodley
Other Attendees:
© Veronica Branton (Company Secretary)
Other attendees, as shown against agenda items
Agenda Item Action Needed I Lead Timings
1 Five year plan Approval for Al Cameron/ Kathryn 09.30 -
Board Sherratt
2. ‘Agent Remuneration Approval for Debbie Smith/ Amanda
Board Jones/ Nick Beal/ Cathy
Mayor
3. DMB Update Discussion Debbie Smith/ Tracy
Marshall
4. ATM Strategy Approval for Debbie Smith/ Martin
Board Kearsley
5. Telco update (conclusion of the RFP and auction I Approval for Owen Woodley/
update) Board Meredith Sharples
6. Group Litigation Order Approval for Ben Foat/ Amanda Jones/
Board Julie Thomas
7. Starling (Workers’ rights case) Approval for Ben Foat/ Laurence
Board O'Neill
8. Payzone Bills Payment Limited Approval for Debbie Smith/ Andrew
8.1 Strategy and Update Board Goddard
8.2 Capital Injection
9. Scoping for strategic work on customers Approval for ‘Adeola Oke
Board
10. Back Office Transformation: ‘Approval of plan _ I Shikha Hornsey [Ben
- plan to resolve underlying issues to resolve
= restatement of confidence in the accounting I Underlying issues,
controls in the interim restatement of
confident in
- plan for cash management
accounting
- plan for Transtrack. controlsin the
interim, plan for 14
cash
10. Review of GE Action Points Veronica Branton
11. Items for Noting Noting All
The Financial Performance Report and Quarterly Change Plan will be discussed at the GE meeting on 21
October 2019.
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11.1 Health and Safety Report
11.2 Forward Agenda
12.
Any other Business
Noting
All
13.
Date of next meeting: 09.30 - 17.00 hrs, Monday
11. November 2019
Noting
44
The Financial Performance Report and Quarterly Change Plan will be discussed at the GE meeting on 21
October 2019.
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Post Office Board Agenda
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29 October 2019
[Time] (11.45 - 16.30 hrs} I Leeation) I 1.19 Wakefield I
Veronica Branton
(Company Secretary)
© Carla Stent
* Ken McCall ‘*_Tom Cooper
* Alisdair Cameron (CFO)
Performance and current issues
1. I Welcome and Conflicts of Interest Noting Chairman
11.45 - 11.50 hrs
2. I Minutes of Previous Board meetings including I Approval Chairman/
Status Report Veronica Branton
3. I CEO Report Noting & Input Nick Read 11.50 - 12.10 hrs
4. I Finance Noting & Input Al Cameron 12.10 = 12.40 hrs
4.1 Financial Performance Report
4.2 Quarterly Change Report
Break 12.40 - 12.50 hrs
Strategy
5. I Five Year Plan [Decision?] Al Cameron 12.50 - 13.30 hrs
6. I Agent Remuneration Decision Debbie Smith/ 13.30 - 14.15 hrs
Amanda Jones/
Nick Beal/ Cathy
Mayor
7. I Payzone Bills Payments Limited Noting & Input Debbie Smith/ 14.15 = 14.45 hrs
7.1 Strategy and Update Andrew Goddard
7.2 Capital Injection
8. I Telco (conclusion of the RFP and update on the I Noting & Input Owen Woodley/ I 14.45-15.15 hrs
auction) Meredith
Sharples
9. I Digital Identity Decision Owen Woodley/ I 15.15-15.45 hrs
Martin Edwards
10.I Scoping for strategic work on customers [Noting & Input or ‘Adeola Oke 15.45- 16.00 hrs
decision?)
Updates
11.I Group Litigation Update Noting & Input Ben Foat/ Alan 16.00 - 16.15 hrs
Watts/ Amanda
Jones/ Julie
Thomas
12.I Starling (Workers’ rights case) Update Noting & Input Ben Foat 16.15 - 16.20 hrs
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‘Approvals
13.] Contracts Approval 16.20 - 16.25 hrs
Noting and governance items
14.] 14.1 Health & Safety Report Noting All 16.25 — 16.30 hrs
14.2 Sealings
14.3 Future Meeting Dates
14.4 Forward Agendas
15. I Any Other Business Noting and Input Chairman
16. I Date of next meeting Noting Chairman
26 November 2019
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