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Minutes of the Group Executive (“GE”) meeting held at
100 Wood Street, London, EC2V 7ER on Wednesday 28 June 2023 at 11.00am
Present:
@ Nick Read (Chair) Kathryn Sherratt — deputising for Alisdair Cameron
¢ Sarah Gray —deputising for Ben Foat Patrick Bourke — deputising for Richard Taylor
¢ Zdravko Mladenov ¢ lan Rudkin — deputising for Jane Davies
¢ Tim McInnes Barbara Brannon — deputising for Owen Woodley
Martin Edwards — deputising for
Martin Roberts
Other Attendees:
Rachel Scarrabelotti (Company Secretary)
Other attendees as shown against agenda items.
Apologies: Al Cameron, Jane Davies, Ben Foat, Richard Taylor, Owen Woodley, Martin Roberts
1. Pre-discussion
There was no pre-discussion.
2; Finance
Kathryn Sherratt/ Asha Patel
AP joined the meeting at 11:10.
2.1 Financial Performance Report
Key discussion points were as follows:
© KS spoke to the re-shaping of the Financial Performance Report, advising that further
changes were expected to the form of the Report ahead of the September Board
Meeting;
* AP detailed the headlines for P2 noting the position on revenue and trading profit as
against budget and outlined variances and why. NR queried whether the Mails team had
provided any insight into the trends being observed such as the decline in footfall in
branch and also queried whether the Mails revenue target set was appropriate. ACTION
AP replied referencing the point KS had made initially; the finance team was very
conscious of the need for deeper analysis of financial results and going forward business
owners would be provided with a template to complete including providing narration
around the results. NR requested a copy of the template and noted the analysis that had
been undertaken on customer experience; it would be important to align the different
analysis to look for correlations across the data. NR queried when the template
reporting was due to commence. AP replied that this would be trialled for P3, ahead of
reporting to the Board in September. ACTION ME expressed support for the new
template and requested that this include a section to detail impacts on Postmaster
remuneration. NR referenced the potential STIP metrics for FY23/24 and the need to
make the link very clearly between profit, mails and banking and Postmaster
remuneration;
e AP spoke to Postmaster remuneration for the period, outlining the interactions
underlying the result and advising that in absolute terms we were tracking below prior
year. KS contributed that management would need to find solutions to improve this
position;
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¢ AP detailed the results on non-staff costs and branch discrepancies for the period. NR
queried the budget for branch discrepancies. AP replied. NR noted that the position
was worsening. AP spoke to the work that EY were undertaking in relation to branch
discrepancies and the recommendations that had been received. KS advised that M Park
was of the view that branch discrepancies could be wound into RTP path clearing
activities, however it was not clear as to when and what activities would be carried out.
ME contributed that aspects of branch discrepancies fell into BAU and other parts were
included in RTP path clearing. ZM and KS commented that they were not clear which
parts of branch discrepancies fell where and the financial implications. ME advised that a
plan needed to come back to GE, although the implications of a delay on NBIT rollout on
RTP path clearing activities was not known at present. ACTION NR shared his view that
regardless of the timing for the rollout of NBIT that the work in relation to branch ME/M
discrepancies needed to be progressed and that the Retail team needed to come back to Parks.
GE promptly with a plan. ME undertook that a plan would be presented to GE next
week. The root cause of branch discrepancies was discussed and ZM offered the
assistance of the Technology team if the Retail team needed help with data as to the use
of the dispute button;
© NR queried the management and tracking of central costs as against the cost savings
target set and noted that the Shareholder was very concerned about the level of central
costs. TM advised that data on the status of this was included in the Board Away Day
pack and also in the pack for the next session with the Minister. AP noted that part of
the savings expected were due to come from OD, however currently the monies
allocated for a revision to headcount could not be drawn on as there was no process in
place nor any governance around a process. KS contributed that the People team had
advised that a program needed to be established before access to the funds to revise
headcount could be taken. Whilst KS accepted this, KS was of the view that this was an
activity that needed to be progressed. IR queried how the fund amount was set. TM
replied, advising that the approach was very targeted and not a structured program as
such. ACTION IR took an action to raise this with P Quinn. AP noted that P Quinn had IR/ P
undertaken to speak with each GE member. NR requested that the meetings with GE Quinn/
members be held and that the matter be returned to GE in another 2 weeks. GE
GE RESOLVED to APPROVE the onward forwarding of the Financial Performance paper to the
Board.
Product Profitability
Key discussion points were as follows:
e AP spoke to the slides detailing the results of profit profitability for FY22/23 by business
unit;
* TM noted the high percentage of remuneration for Postmasters on Mails and
commented that there was no logic as to this. ME contributed that whilst there were no
policies around the sharing of profit for individual products that remuneration
fundamentally needed to be based on fair distribution across Postmasters;
¢ KS advised that the finance team had undertaken the work as a mathematical exercise
and queried whether the matter was sufficiently ready for the July Board. NR agreed
that the matter should be deferred from the July board and requested that ME and the
commercial team be closely involved in the work. AP advised that she had worked with
the commercial team and undertaken the analysis with each of the business units. NR
noted the absence of Postmaster remuneration in the analysis and suggested that the
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desired level needed to be included then the commercial targets set against this and
tested as to whether these were achievable in the market;
ACTION NR requested that the matter be returned to GE the following week with a plan
to address the points raised above.
Facility Agreement and Security Headroom — Verbal Update
It was noted that an update on the position under the Facility Agreement and in relation to
Security Headroom would be included in the July Board CEO Report.
Transforming Technology
Tim McInnes/ Zdravko Mladenov
Horizon Replacement Update
Key discussion points were as follows:
ZM outlined the proposed approach for the update to be provided to the Board along
with the pre-briefing and engagement with NEDs;
TM detailed the guidance that the Shareholder Representative had provided as to the
content of the funding submission;
Speaking to the slides, ZM clarified that the NBIT cost saving measures identified were
not recommendations, however, if only part of the funding request was provided then
these would be the options from a management perspective;
ZM detailed the proposed content for the July Board meeting being to provide context as
to what the NBIT costs were and the factors driving the recent increases, revisiting the
business case for NBIT, options to reduce NBIT costs, the policy choices the Shareholder
could take that would help us reduce costs, and the degree of external assurance
proposed;
ZM outlined the main cost elements of NBIT. ZM noted that the costs encompassed RTP
activities, although these were at a preliminary stage, and K Secretan had made a
number of assumptions based on what G Clark had assumed, for example in relation to
training. TM pointed out the inclusion of optimism bias and contingency. BB requested
that the costs slide be updated to include a bar next to each column to show what had
been spent to date;
ZM spoke to the key drivers for the increase in NBIT costs from £180m to £848m.
Questions and discussion followed in relation to the proposed extension of the Fujitsu
contract;
ZM posed the question of whether the Horizon exit business case still made sense and
spoke through this issue. NR asked ZM to detail the cost of staying on Horizon with
Fujitsu as against the cost of staying on Horizon with a third party supplier. ZM replied
that Fujitsu would not stay on indefinitely so the other options were to locate a third
party supplier to take on accountability from Fujitsu, or to bring support for Horizon
inhouse. ZM shared his view that he did not think either of these options was very
palatable. NR queried how HMT perceived the alternative options. ZM replied that the
appetite for these options receded as these were spoken through with HMT, and that the
view was that if a third party to take on Horizon support then someone very senior in
government would need to take this decision. ZM advised that further analysis of the
risks for Post Office and the Shareholder in respect of the alternate support options was
required and would be undertaken. ZM advised that over a 10 year period moving to
NBIT was still slightly more expensive than staying on Horizon, however, over time it
became less expensive so the business case for NBIT remained. BB queried, if the
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business stayed on Horizon would there be macro improvements during this time. ZM
replied that there would not be;
« ZM detailed a number of options to save costs with NBIT:
- The first option was to go live with a more limited product set. This would reduce costs
in the near term, then we had the option to build back the products in time. Commercial
colleagues had advised that the build back might be illusory, as more and more branches
would not have the products as NBIT deployment progressed, so the customer could
move on. Significant work was being undertaken to assess whether this was
commercially and contractually possible. ACTION TM queried whether the travel
business could be run via FRES. ZM advised that the team could explore this option more
aggressively; zM
- The second option was to go live without stamp stock management. The technical team
were building for stock stamp management requirements, as per contractual obligations
to RMG. An alternative could be for the Company to buy stamps as stock, which would
go on balance sheet, although this one off investment would need to come from HMT.
TM queried whether there was an option for Postmaster’s to purchase stamps directly
from RMG; this could simplify things considerably and the working capital facility would
not need to be increased. BB contributed that this arrangement would require
significant re-negotiation with RMG. TM offered a further suggestion that the Company
act as an intermediary with the ability for Postmasters to buy stamps on Branch Hub. KS
noted that the spend associated with these other options would need to be explored.
ZM outlined possible other controls in relation to stamps that could be built on NBIT such
as quantity. There was discussion around the inability to print stamps in branch with the
sovereign’s head pictured. BB noted the legislative constraints around this and TM
pointed out that the Shareholder could pass secondary legislation in relation to this
however;
- A third option of not assuring low risk branches was considered. ZM advised that
currently we were assuming a high level of cash audit witnesses although this could be
reduced. Given the importance of this exercise perhaps this was not the money we
wished to save however. TM queried whether an auditor really needed to be engaged to
conduct this exercise. KS advised that A Cameron had thought one of big 4 firms would
be engaged to count cash and stock and agreed with ZM that this was a very significant
activity. IR queried whether we did not have the technology to do the counting
ourselves. ZM replied as to the importance of having an independent witness present. A
further option was to start with zero balances on NBIT, with the cash and stock not being
counted on the day of migration. The cash and stock would be taken away and counted
at a central location. This would mean that this activity could be removed from the NBIT
critical path. ZM noted there would need to be video witnessing and chain of custody
would need to be preserved. KS noted the alternate option deferred the sorting out of
any issues in relation to branch discrepancies. ME contributed that significant branch
discrepancies should have been attended to during path-clearing. NR was unsure that
the alternate option would be accepted by Postmasters;
- The fourth option was to reduce the number of branches. Savings associated with this
option were predicated on reducing the number of branches by circa 2,000. ME
referenced the existing network strategy and noted that the more time taken for NBIT
migration, the more time in which we could achieve the reduction in branches via churn
and the network strategy plan. Discussion followed in relation to maintaining the access
criteria however achieving the reductions by way of altering branch format. TM
contributed that the government could waive the network number;
- The fifth option was to increase the pace of deployment as deployment went on;
- The sixth option was to reduce the time spent on site during deployment;
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- The seventh and eighth options involved stopping NBIT. ZM spoke through option 7 and
remaining on Horizon, advising that Fujitsu could exit by 2027 and that a project was
underway looking at the possibility of having a third party supplier take over the Belfast
Data Centre. ZM detailed option 8 which involved pausing NBIT and transforming the
Company first. ZM advised that this option seemed to be favoured by the Shareholder
Representative. There were no cost savings with this option. TM queried whether NBIT
could be continued with however in tandem with progressing elements of business
transformation. ZM agreed, although advised he was not clear as which elements of
business transformation would need to be prioritised and that he would be concerned
about the ability to execute;
e ZM detailed the NBIT presentation update provided to HMT yesterday. ZM shared his
view that the additional funding request made could result in a 12 to 18 month funding
settlement so we would need to think about what we could achieve during this period
including focusing on the R2 release and the brilliant management of this and obtaining
acceptable external assurance in order to access further funding. TM shared his view
that an additional funding settlement could be for an initial 2 year period, then further
funding for 1 subsequent year.
GE RESOLVED to APPROVE the onward forwarding of the Horizon Replacement Update paper to
the Board.
Pin Entry Device (PED) Replacement Project
ZM spoke to the paper. BB queried the pricing. ZM replied, advising that benchmarking had
been undertaken, and that the pricing was not unreasonable.
GE RESOLVED to APPROVE the onward forwarding of the PED Replacement Project paper to the
Board.
July Board Away Day Update
Tim Mcinnes/ Jack Foden/ Martin Edwards/ Chrysanthy Pispinis
CP joined the meeting at 14:00 and JF joined the meeting at 14:04.
JF, CP and ME outlined key content proposed for the Board Away Days. Questions and discussion
followed.
GE RESOLVED to APPROVE the onward forwarding of the July Board Away Day paper to the
Board.
JF and CP left the meeting at 14:28.
Rebuilding Trust
SR, DW and GL joined the meeting at 14:30. BB left the meeting at 14:30. IR left the meeting at
14:35.
Inquiry Update
Diane Wills/ Gemma Ludgate
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Key discussion points were as follows:
5.2 Inquiry SteerCo — Governance Matters
Diane Wills/ Gemma Ludgate
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THE GE RESOLVED to APPROVE the paper for onward forwarding to the Board.
5.3 HMU Update
Simon Recaldin
SR advised as follows:
the proposed process to be followed in relation to the re-engagement of former POL
employees in HMU was being progressed;
Areview of strategic issues ahead of the commencement of Phase 5 of the Inquiry was
being undertaken;
In relation to GLO disclosure, we still did not have a GLO disclosure agreement in place
and continued to work at risk. In terms of the DSARs, Freeth’s had indicated they would
withdraw the DSARs if they could see progress was being made on disclosure;
There existed an emerging operational risk in relation to the interim payment process
where it appears some payments to HMRC have not been made;
SR and NR continued to participate in the restorative justice process and had attended
meetings last week in Northern Ireland. Further restorative justice meetings were
scheduled for next week. NR spoke to the experience of the meetings last week in
Northern Ireland: the stories were harrowing as was the impact across families and
generations.
The GE RESOLVED to APPROVE the paper for onward forwarding to the Board.
5.4 HSS — Decisions - Wrongful Death Claims
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SR spoke to the paper which the GE RESOLVED to NOTE and APPROVE for onward forwarding to
the Board.
DW, GL and SR left the meeting at 15:03.
6. Procurement
Liam Carroll
LC joined the meeting at 15:03. LC spoke to the paper highlighting the requests in relation to the
Peters and Peters contract, the Zunoma contract and the proposed short and long term sourcing
strategy for NBIT Support and Development.
TM queried approvals in relation to RTP procurement and spend. LC advised that a paper on this
could be included with the other procurement papers for the July Board meeting. ACTION GE
requested that a proposed paper for the Board on RTP procurement and spent be brought toGE LC
next week.
The GE RESOLVED that:
(i) The onward forwarding of the paper to the Board be APPROVED; and
(ii) The contract award for Creative Agency Service to the Krow Group with an initial
term of 24 months and 3 x 12 month options to extend up to a maximum contract
spend of £25m over the 60 month period be and is hereby APPROVED.
IR and BB re-joined the meeting at 15:15.
7. Common Issues Judgement (CI) Dashboard
The GE RESOLVED to APPROVE the paper for onward forwarding to the Board.
8. Approval Requests
8.1 Central Investigation Unit (CIU) Resourcing
Sarah Gray/ John Bartlett
SG joined the meeting at 15:25 and JB at 15:27.
Key discussion points were as follows:
* JB spoke to the paper outlining the request for additional resource to service the backlog
of investigations (which was increasing) and also to bring in additional support ahead of
the rollout of NBIT where there could be a number of referrals to CIU. Even if 1% of
branches were identified as having potential issues there needed to be resource in place
within CIU to attend to these cases;
e NR queried how would JB prioritise BAU work in his team. JB replied referencing the
prioritisation as set out in the paper;
e KS clarified that the ask was an increase in budget. SG replied that it was, however
outlined the potential financial payback in future years. JB noted this and shared his
view financial savings should not be the basis for this decision, it was only one element.
KS advised that whilst the Group Executive did not appear to disagree with the ask, that
there needed to be understanding as to where this money would come from in the
budget;
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© TM queried whether a scaled up CIU team was part of path clearing and NBIT
preparation. ZM replied that the additional resource in the CIU team required for NBIT
should be charged to NBIT. JB contributed that it was not simply an issue of scaling up
the team, it was a matter of matching resource to task;
e JBraised a concern around fairness to Postmasters in relation to the capacity of CIU, for
example, suspended Postmasters would remain suspended until CIU had capacity to
address the case;
* ACTION KS noted similar requests for additional funding that had been and were coming
to the Group Executive and advised that the Group Executive needed to devise a process
to deal with these requests as the year went on. KS advised she was happy to take an
action to think about the best way to process these requests.
The GE RESOLVED:
(i) that the priorities for CIU for FY23/24 and FY24/25 as set out in the paper be and are
hereby APPROVED; and
(ii) in order to prepare for and manage anticipated pre-NBIT rollout branch audit
matters additional funding in the amount of £360k to provide the resource as set out
in the paper be and is hereby APPROVED.
The GE declined to approve the other additional funding requests in the paper at this time.
SG and JB left the meeting at 15:47.
Project Darwin Drawdown
The GE RESOLVED to APPROVE the paper for onward forwarding to the Board.
Project Columbus
The GE NOTED the paper and RESOLVED to APPROVE the recommendation as set out in the
paper.
Modern Slavery Act Statement
KS advised that there had been some issues raised on the proposed form of the Statement at RCC
yesterday. ACTION NR requested that the proposed form of the Statement be returned to GE
next week once the issues raised had been addressed.
Copper Stop Sell
Zdravko Mladenov
Key discussion points were as follows:
e ZMspoke to the paper, advising that since project commencement a number of
additional costs had been identified, which related to a set of known risks which had now
crystallised;
* There was discussion regarding the need for sophisticated centralizing of information
collected from this project, such as contact details for all Postmasters, which would also
be relevant for the PED project and ultimately in relation to the NBIT rollout. ZM noted
that Verizon was running the control centre and that there was a project to co-ordinate
all this information;
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* TM noted the situation where an engineer was scheduled to visit a branch and the
engineer was then turned away by the Postmaster on arrival. TM queried responsibility
for the costs of this. ME replied that this was an issue;
¢ ACTION SG queried whether the contract would need to be varied given the proposed
additional spend and asked whether LC had been engaged. KS advised that she would KS
check these points.
Noting Items
Health & Safety Report
The Health and Safety Report was NOTED. SG advised that she had a query regarding the
evacuation of less able people and would pick this up direct with M Hopcroft.
Monthly Whistleblowing MI
The Whistleblowing report was NOTED.
Freedom of Information tracker
The Freedom of Information tracker was NOTED. Key discussion points were as follows:
¢ TMcommented on the form of the FOI tracker advising that it was not clear to TM as to
which FOI requests were new. Also the tracker did not provide any information as to the
risk profile around the FOI requests. TM shared his view that what the tracker needed to
achieve was surfacing the FOI requests and responses that were material. ACTION SG SG
advised that she would raise these points with the FOIA team and that a revised
template would be returned to GE;
© KS advised that she would like some statistics on the number of requests and the
requests that had been attended to, as well as details the themes that the requests
related to;
¢ Capacity issues of the FOIA team were discussed.
Contractual Arrangements with POMS
The paper was NOTED.
Inhouse Legal Team Independence
SG spoke to the paper referencing lawyers regulatory duties and advising that it was likely that
the SRA would issue revisions in the next 6 months.
The GE APPROVED the paper for onward forwarding to the Board.
Draft Board Agenda 11 July 2023
The draft Board Agenda was NOTED with some suggested amendments being provided to RS.
Governance Items
Minutes of Meeting 17 May 2023
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Approval of the minutes was deferred to the next monthly GE meeting.
11. Any other Business
There being no further business the meeting closed at 16:13.
12. Date of next scheduled meeting
26 July 2023.
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