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Agenda
Post Office Board Agenda
27 September 2022 13:00 - 17:25 hrs Finsbury Dials, 20 Finsbury
Street, London EC2Y 9AQ
Tim Parker (Chairman) Brian Gaunt (NED) Rachel Scarrabelotti Zdravko Mladenov (Group Chief Digital
(Company Secretary) Information Officer)
© Nick Read (CEO) © Carla Stent (NED) © Roshana Arasaratnam ‘* Simon Recladin (Historical Matters
(Observer - UKGI) Director)
© Saf Ismail (NED) ‘© Alisdair Cameron ‘© Tim Mclnnes (Strategy and _I e Fintan Canavan (Inquiry Director)
(CFO) Transformation Director)
Ben Tidswell (NED) © Lisa Harrington (NED) I * Owen Woodley (Group ‘© Ben Foat (Group General Counsel)
Chief Commercial Officer)
© Zarin Patel (SID) © Elliot Jacobs (NED) © Max Jacobi (Finance ‘* Kate Gallafent QC (Inquiry Counsel)
Director Retail)
‘Apologies: Tom Cooper (NED) ‘* Navin Batra (Strategic ‘* Liam Carroll (Procurement Director)
Financial Planning &
Analysis Director)
‘© Jeff Smyth (Enterprise Cloud I ¢ Stephen Smith (Category Manager —
& Data Transformation Procurement)
Director)
‘© Steve Norris (Head of ‘© Neill O'Sullivan (Managing Director
Property, Equipment & Parcels and Mails)
Security)
a. Welcome and Conflicts of Interest Noting Chairman
2. Minutes Approval ‘Chairman/CoSec
(i) 12 July 2022
(ii) 13 July 2022 (Strategy) 13:00 - 13:05 hrs
(iii) 18 August 2022
Matters Arising Noting
* ATM Banking Strategy Programme: Lessons Noting char Waddie
Learnt and AEI Assurance Review
% Committee reports (verbal) Noting
© Remuneration Committee Usa Harrington
* Historical Remediation Committee Bereicewell 13:05 — 1385 his
iam " Chairman
* Nomination Committee
—— " p Carla Stent
© Audit, Risk and Compliance Committee
4. CEO Report Noting & Input Nick Read 13:35 — 14:00 hrs
Break 14:00 — 14:05 hrs
5. Finance Al Cameron/ Max 14:05 — 14:35 hrs
© Financial Performance Report Noting & Input Jacobi/ Navin Batra
‘© Working Capital Facility Increase Approval
6. Three Year Strategic Plan Overview and Risk Noting & Input Al Cameron/ Tim 14:35 — 15:20 hrs
Tolerance Considerations McInnes/ Navin
Batra/
7. Mails 3YP Noting Owen Woodley/ 15:20 - 15:50 hrs
Neill O'Sullivan
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8. Belfast Exit Approval Zdravko Mladenov I 15:50 - 16:00 hrs
9. Historical Matters Ben Foat/ Simon 16:00 - 16:30 hrs
HMU Update Noting Recaldin
© Inquiry Update and Funding Request Fintan Canavan/
- i Noting & Approval
© Inquiry — Opening Statement Approval Kate Gallafent QC
10. Approval Requests 16:30 - 17:00 hrs
e Fujitsu Contract Extension Approval Jeff Smyth
* SPMP Funding Request Zdravko Mladenov
Procurement Liam Carroll/
Stephen Smith/
Steve Norris
11. Noting Papers with no Presentation
¢ Health and Safety Report Noting
© POL Control Framework
© IDG Update
« Pensions — Augmentations to RMPP
© ClJ/ HU Dashboard
© Investigations
m4, Noting and Governance Items 17:00 - 17:25 hrs
© Officer Changes Approval
Committee Memberships Approval
© Sealings Report na
lotin,
e Future Meeting Dates N g
Joting
© Forward Agenda
13. Any Other Business
Feedback on papers Noting
14. Date of next scheduled meeting: Noting Chairman
Board Meeting — 1 November 2022 10:00 — 14:25
hrs
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Tab 2.1 Minutes from 12 July 2022
®
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON TUESDAY 12 JULY
2022 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 13:00 PM
Present: Tim Parker Chairman (TP)
Tom Cooper Non-Executive Director (TC)
Carla Stent Non-Executive Director (CS)
Zarin Patel Senior Independent Director (ZP)
Lisa Harrington Non-Executive Director (LH)
Saf Ismail Non-Executive Director (SI)
Elliot Jacobs Non-Executive Director (EJ)
Ben Tidswell Non-Executive Director (BT)
Brian Gaunt Non-Executive Director (BG)
Nick Read Group Chief Executive Officer (NR)
Alisdair Cameron Group Chief Finance Officer (AC)
In attendance: Rachel Scarrabelotti Company Secretary (RS)
Dan Zinner Inquiry Improvement Delivery Chair (DZ) (Item 5)
Max Jacobi Finance Director — Retail (MJ) (Items 6 & 7)
Navin Batra Strategic Financial Planning & Analysis Director (NB) (Items
6&7)
Tom Lee Group Financial Controller (TL) (Items 8 & 9)
Tim McInnes Strategy and Transformation Director (TM) (Item 10)
Martin Roberts Group Chief Retail Officer (MR) (Item 10)
Martin Edwards Network Strategy & Delivery Director (ME) (item 10)
Ben Foat Group General Counsel (BF) (Item 11)
Simon Recaldin Historical Matters Director (SR) (Item 11)
Jeff Smyth Enterprise Cloud & Data Transformation Director (JS) (Item
12)
Russell Hancock Supply Chain Director (RH) (Item 13)
William Porter Senior Category Manager, Procurement (WP) (Item 13)
Andrew Stevens Head of Stock Operations (AS) (Item 13)
Martin Kearsley Product Portfolio Director (MK) (item 13)
Apologies: N/A
Action
1. Welcome and Conflicts of Interest
A quorum being present, the Chairman opened the meeting. The Chairman called for the
Directors to disclose any conflicts of interest. The Directors declared that they had no
conflicts of interest in the matters to be considered at the meeting in accordance with the
requirements of section 177 of the Companies Act 2006 and the Company’s Articles of
Association.
2. Minutes and Matters Arising
TABLED and NOTED were draft Minutes from the Board Meetings of 22 February and 7
June 2022. The Board RESOLVED that the Minutes of the Meeting held on 22 February
2022 be APPROVED as a correct record of that Meeting and be signed by the Chair.
In relation to the Minutes of the Meeting held on 7 June 2022, subject to the Chairman
sighting BT’s comments, the Board RESOLVED that the Minutes be APPROVED as a correct
record of that Meeting and be signed by the Chair.
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The Board NOTED the action log and status of the actions shown.
Committee Reports (verbal)
Remuneration Committee
The Chair invited LH to update the Board on the work of the Remuneration Committee. LH
advised:
¢ The Remuneration Committee had met the proceeding week and covered a
fulsome agenda, considering:
the STIP and MIP for 2021-2022 and the LTIP outturn for 2019-2022. Although
these matters were close to being approved the Committee needed to decide
on the application of the multiplier, specifically whether the personal
multiplier applied to the Individual measures (20% weighting) and/ or the
Company measures (80% weighting). Management were reviewing the
approach taken over the previous few years, and checking that the personal
multiplier approach had been accrued for sufficiently in the event that the
Committee determined that that was the correct approach;
the future pay framework in terms of the 2022-23 STIP metrics and the 2022-
25 LTIP metrics. A good debate had ensued, and the targets had been refined
to distil these down to the critical elements, with targets divided across the
key business priorities. The Financial metric of the STIP for 2022-23 remained
to be resolved. LH advised that consideration was being given to moving to a
partly cash flow type target;
The Committee would reconvene on the above items at the end of July;
LH had met with the Chair of the Audit, Risk and Compliance Committee to
confirm the computation of the Company’s EBITAS number, for the purpose of
the 2021-21 STIP and 2019-2022 LTIP outturn;
In terms of outturns, these would always need to be set as a minimum against
the baseline from the previous year;
ACTION Assistance was required from R Taylor and his team to finalise the
Director's Remuneration Report. The Committee had considered the draft
however this required further editing. NR advised that R Taylor had been on R Taylor
leave however was due to return shortly and could assist;
The benchmarking exercise in terms of identifying a future peer group for the
GE remained ongoing, and the Committee’s remuneration consultants were
due to return this item to the Committee come September. LH suggested that
this work be shared with the Board once it had been further considered by the
Committee;
The Committee’s remuneration consultants had also undertaken
benchmarking work on non-executive director fees. No changes to non-
executive fees were proposed at present;
The Company's Articles of Association contained a cap on the aggregate
remuneration for non-executive director fees. If this was exceeded with the
appointment of the new chair, a proposal would be returned to the Board to
raise the cap;
The Committee had considered targets for Z Mladenov and J Smyth;
The Committee had considered the Committee’s Annual Evaluation Report;
© The Committee was due to re-convene before the end of July in a bid to resolve
outstanding issues.
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3.2 Historical Remediation Committee
The Chair invited BT to update the Board on the work of the Historical Remediation
Committee. BT advised as follows:
* On the Criminal Appeal Cases side, 5 more appeals were set to be heard by the
CACD on 28 July 2022; these were undisputed;
© Alot of work in respect of cautioned Postmasters was ongoing, in terms of
ascertaining the potential size of the group and what the claims might be. The
Chair queried the potential number of Postmasters involved. BT replied that the
Company had issued cautions to about 100 individuals. Any civil liability in these
cases was likely to be significantly less as against those who had been convicted;
In terms of late applications received since the HSS scheme closed, the Committee
had considered this matter in their meeting yesterday, and determined to allow
the late applicants, using the HSS ‘exceptions process’. The financial
consequences of this decision were estimated to be in the vicinity of around
£40M, with the expense to be sourced from within the existing HSS financial
envelope;
© The ENE process was set to commence Monday. Lord Dyson had agreed to act,
and an outcome was anticipated by the end of July. BT shared his view that he
was hopeful that this could assist to progress the OHC workstream and this could
be a very useful process. The Inquiry had considered progress on the OHC
workstream;
¢ In respect of Postmaster detriment (detriment 1 suspension payments) a funding
request decision was awaited from TAPP. TC advised that TAPP had not convened
yet, as PICC had not made a decision. If the PICC decision could be resolved, then
we were hopeful that the TAPP decision could similarly be made;
© On the rest of Postmaster detriment (detriment 2 aged balanced) the GE had
made a decision to pause re-payments, subject to agreeing what the
communications would be. This was a very sensitive point; progress in this area
felt slow and difficult;
* anumber of significant issues remained to be progressed and most of these
carried reputational risk to the Company. Additionally, BT was concerned that the
Government might move to rejecting funding requests so the Company could be
left in a situation where we did not have funding for certain claims. CS shared that
she was concerned regarding this also. NR noted that BEIS were at the Inquiry
today and thought that their experience there could be quite important, as it was
anticipated that they may be criticised quite heavily. This experience could then
drive BEIS behaviour. The Chair was in agreement with NR: once noise was
created this could prompt BEIS to move. TC advised that the item that concerned
TC was the second detriment area, which was much less visible, and where the
Company could be left without funding. EJ referenced an article in the Times from
last weekend regarding a Postmaster who had their conviction quashed. BT
advised that in this case the Company had conceded, however we had not
conceded that the conviction was unsafe. NR noted that the article was
disappointing. EJ queried whether the Company had a sufficient PR response in
place. NR replied that the Company did, and that corrections had been published
on occasion. EJ advised that he was concerned that bad press was continuing even
when the Company was taking positive steps. BT noted that the Company’s
approach had been considered in the Inquiry and that the Inquiry’s interim report
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could help the Company to make this point. NR noted that media made no
distinction between the Government and the Company, and that this contributed
to negative perception.
3.3 Nominations Committee
The Chairman, also being the Chair of the Nominations Committee, updated the Board on
the work of the Nominations Committee as follows:
The Committee had reviewed the results of the Annual Committee Evaluation
process and the Committee had considered the extent to which the Committee
should consider succession below the Board and GE level. ACTION The Committee
had determined that given the significance of the issue a general discussion on
succession should be had at the Board every 6 months;
Extensions to ZP and LH’s terms had been achieved;
In terms of NED recruitment, successors to ZP and LH were to be recruited, along
with a third candidate to succeed CS.
AWilliams
3.4 Audit, Risk and Compliance Committee
The Chair passed to CS and invited CS to update the Board on the work of the Audit, Risk
and Compliance Committee. CS advised as follows:
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The Committee had spent some time reviewing the draft Company Annual Report
and Accounts FY2021/22 (‘ARA’) when the Committee met earlier that day.
ACTION CS undertook to send a full report to the Board on the central items the
Committee had considered, especially in relation to the Committee’s approach to
provisions [CS emailed the Board this report 12 July 2022 at 23:22];
The Company’s reduction in funding translated to a reduction in workstreams in
some areas, moving the Company outside of risk appetite on some cases;
The IA on the HU Improvement Program Phase 2 had been considered;
In relation to Cyber security, the Committee had requested that a play book be
produced for responding to an attack, and similarly in relation to Ransomware;
Despite the reduction in funding, an area that the Committee had advised that
they were not willing to compromise on was anything in relation Health and
Safety. Similarly, the Committee had also requested that the integrity of soft and
physical data not be compromised on; CS outlined the recent incidents which had
resulted in ICO notifications;
a deep dive on HMU Risks had been undertaken. It had been raised that the HRC
was so involved in the transactional workstreams, so was there enough on the
dashboard on the operational side. In reviewing risks identified in the high-risk
category, it was thought that there were some entries there where mitigating
actions could be taken;
there had also been a deep dive on IT controls. Z Mladenov had presented and
advised that whilst there was more to do in this space, IT controls were currently
sufficient;
looking at the draft ARA:
- management had done great work to get to this position;
- Financial controls seemed to be operating very well;
- On the question of when the accounts would be published — the current
thinking that the accounts could be signed towards the end of July however it
was not clear as to when these would be published given wider sensitivities
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such as the prospect of Industrial Action and the commencement of the
Inquiry. There was a risk that if the Company delayed overly between signing
the ARA and publishing the ARA that we may need to re-open the accounts.
LH advised that she was comfortable with the accounts being published
sooner rather than later, however noted the intention to bonuses whilst the
Company was in the midst of a pay dispute. CS agreed that this was a very
sensitive issue however shared her view that the Company would need to
proceed to publish in good time regardless. AC noted that there was a
reasonably short period between Parliament returning from the summer
recess and then going into party conferences however, and that the executive
were anxious about publishing the ARA. The Chair asked when it was
anticipated that the ARA would be publish then. NR advised that the Company
was going to ACAS in the middle of August, and that mediation would be
ongoing. Receipting bonuses would be important for employees and how they
felt. The second phase of the Inquiry was due to commence in September; it
could be good to publish the ARA ahead of this. ACTION LH shared her view
that there was likely to be no good time for the accounts to be laid, and
requested that management be ready and front footed to respond to
reactions on the ARA, especially in relation to comments on remuneration. EJ
queried whether there was any possibility of settlement of the pay disputes
before October. NR advised that management simply did not know. NR
advised further that he had attended a DMB conference last week and had
spoken on the pay rise for the previous year and detailed that there were
simply no monies to fund a pay rise. NR had been approached following the
conference and there was an understanding of this position, whereas
previously there had not been;
- achange in prior year accounting treatment and a restatement for the prior
year in respect of HSS funding was required. Careful thought was going into
the correct disclosures around this;
- Pay Zone represented a significant debtor for the Company, and it had been
queried whether more of a provision was required for this. ACTION EJ
questioned whether it was intended to move Pay Zone to NBIT. AC advised O Woodley
that management were working towards a conclusion on this and the general
viability of the entity, and O Woodley was leading on this;
- The going concern treatment was critical and obtaining a correctly worded
letter of comfort from BEIS was crucial to support this. The draft letter of
comfort to be requested from BEIS would be circulated to the Board and
would seek assurance on a number of items including general assurances (in
line with last year), assurances over Remediation (in line with last year), the
continuity of the NSP or if the NSP isn’t forthcoming in future years, the
Company would not be held to delivering the linked Network requirements, on
HSS assurances that the late applicants would be funded, via the current
envelope or a new business case, and in respect of OHC and HSS tax,
assurance that should the Company be liable to corporations tax payments
then BEIS would fund these;
- It was proposed a Board sub-committee be established to oversee the items
above and to approve any non-material amendments to the draft accounts
with the sub-committee members to comprise CS, NR, AC, and TC.
RTaylor
4. CEO Report
TABLED and NOTED was the CEO report.
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NR advised as follows:
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NR would start with good news - we had had a very good first quarter trading
result. Banking had been exceptionally good — we were seeing an increase in the
closures of bank branches and banking deposits were up. Banking deposits had
performed very well over the last 3 months and showed no evidence of slowing
down. The travel business had also been performing very well; the advertising at
Stanstead Airport in this respect had been very good, as at Liverpool Street station.
The bundling on products had been great; although we had offered a discount, we
had provided the message that the Post Office made it easier — for example by
assisting across passports, insurance, and travel money. The Company held a circa
25% share in foreign currency pre-pandemic, this was now over 33%. NR had tried
to enthuse everyone at the 10 at 10 meets in respect of this performance;
The Mails business had been mixed. There was real concern regarding the
behaviour of RMG to drive customers online, so our high value customers were
being disintermediated. The International mails market was in steep decline;
There were some headwinds — we had always just about been able to run; we had
struggled to implement change, however. Issues were appearing as we tightened
everything given our funding position and there had been a number of critical
issues;
Some headway with Post Office printers had been made, although significant work
remained in this space. There were 1000 printers we would replace with new
printers. We were still experiencing issues with incorrect printer ink being used in
the network, the message had not landed with Postmasters and would be
reiterated by M Roberts. We had taken the IT support centre out of the service
centre and were mobilising to have additional resource brought in to support. The
collaboration between M Roberts and Z Mladenov was good. M Roberts had
approached the printer issue very much as a retailer, by arranging for area
managers to get on the ground with printers in the back of their vans and assisting
to clean printers. M Roberts had brought a different approach to how we would
have dealt with these issues previously;
operational change was the thing that concerned NR the most — particularly in
light of the operational change that was due to be delivered over the coming
months. LH agreed, noting that the problem seemed to be that we had so much
change coming. EJ noted M Robert's response to the printers issue, and that this
demonstrated that if we were nimble and had a plan to react in a less corporatized
fashion then it was much more likely that the issue could be overcome. EJ
stressed that as the Company moved forward with change, we needed to be
cognisant of implementing change in a way to resolve potential issues with ease,
rather than continually calling on technical expertise. SI requested that more
stickers be produced and sent out for Postmasters to apply to printers, as the
messages issued had not landed. NR replied that this raised the issue of messages
to Postmasters and whilst we thought we were we quite clear on what was
required we would need to continue to blast the airways with communications.
LH observed that the business did not seem great at testing things, and that her
response would be similar to M Roberts — to protect the network like a fierce
mother. NR agreed with LH’s sentiments on testing, however noted that at the
recent DMB conference that employees were putting up their hands to be
involved in testing;
there were operational challenges and it had taken time to get the IT and the
Retail structures right. The north and south area managers were to be moved
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around and we were going from 9 regions to 12. Management had looked very
closely at the regional managers we had, and a decision had been made to bring in
some new talent. NR advised that he was very surprised at the number of area
managers that did not live in their region. NR shared that his experience was to
move to the region he would be covering. An SLG face to face meeting was
scheduled for later in the week where we were having an NBIT session to reinforce
that the change needed to be a business wide issue;
with the restricted funding we had competing priorities and were balancing the
need to complete change, and what we needed to do to sustain the business. We
were overspent on some of our bigger projects including PCI and Belfast Exit and a
change of leadership may be required on these projects. The Chair commented
that the Belfast Exit project equated to a huge expense for the Company. EJ
queried whether the costs on Project Belfast could reach £100M. NR replied that
they may, however there was recognition that we needed to change the approach
here. ZP had provided a useful steer to management in suggesting that external
resource be brought in to help to manage the project. NR advised that Project
Belfast was the one thing that was genuinely keeping NR up at night; particularly
the uncertainty and the unknowns involved in the project;
¢ Postmaster’s average remuneration was up for June. NR noted that it was unclear
what the pattern of remuneration would look like post the end of the travel
period, however we would then be heading into peak period so trading may stay
reasonably resilient;
¢ Implementing cultural change was very important at present; A Williams had
provided significant drive on the Leading to Serve training and bringing the cultural
change required to life. Postmaster centricity was evident in how employees were
acting and behaving and there were cultural changes in terms of the SLG and GE.
The cultural change was quite material and would be important as we progressed
through the Inquiry.
The Chair called for questions.
CS queried whether NR could touch on banking hubs at all. NR advised that the committed
number of banking hubs remained at 2 plus 5. We are still in the gift of LINK who would
decide. NR advised that the issue of banking hubs and branch format would be discussed
in detail at the Board Strategy Away Day tomorrow.
BT queried the status of the NFSP Grant Fund Agreement. NR advised that the NFSP had
not brought the agreement back as yet. ACTION NR agreed to update the Board and NR
provide a note once the NFSP Grant Fund Agreement had been settled.
SI shared his view that on international mail, it was not just a customs issue that was
causing decline. SI advised that he had lost customers to other providers such as Evri. In
relation to Postmaster remuneration for the month of June, Si queried where the increase
had come from. NR advised that the increase came directly from trading and represented
a trading profit distribution. AC contributed that whilst international mails performance
was down, performance on home shopping returns and special deliveries had been good,
and these netted out and meant that there was higher Postmaster remuneration. NR
noted that special was where the margin was, however when we mystery shopped, we did
not observe Special being promoted. NR advised that there was an opportunity there. EJ
referenced Branch Hub and advised that he could now see the individual performance of
employees, which he had been unable to do previously. The information now available on
Branch Hub allowed Postmasters to do targeted training of employees. NR took the point
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and referenced the value in having evidence-based conversations so Postmaster could
train employees as required, and tailor their conversations with employees. NR advised
that he was engaged in ongoing conversations with M Roberts around how this tool was
operationalised.
BG referenced Project Darwin and advised that he had not seen the terms of reference for
the Steering Committee established to oversee this project. BG advised that he had run
outsourced businesses previously and would gladly put his hand up to be involved.
TC referenced the section in the CEO Report detailing that BO! wished to change their IT
platform. NR advised that the issue was that BOI wished to do this at the same time as the
Company. A compromise would need to be found.
The Chair called for further questions. There were no further questions.
Improvement Development Group Update
TABLED and NOTED was a paper, ‘IDG Update’.
DZ joined the meeting at 14:03 and provided an overview of the paper. Key discussion
points were as follows:
© Of the 56 items IDG were tracking to complete, over 70% were ClJ related, and of
those about half are ‘Red/ Oxblood Red’ in terms of impact, primarily around
detriment or aged balances;
¢ In relation to HiJ the focus for the team was taking stock of what we had been
achieved, assessing sustained conformance and considering the narrative as this
would be required for the Inquiry;
¢ In moving to achieve conformance we needed be very thoughtful about the areas
that we focused on. For example, it was not feasible to do too much more IT
change;
*® Work was underway to obtain independent assurance on HU improvements. It
was incredibly important to track this, on an evidential basis, and by themes;
© Operational dash boards had been prepared to ensure that the GE received
appropriate oversight;
© Areview of all current manual controls to monitor improvement compliance was
underway. A team was in place to map current controls back to new processes and
risks identified in the Postmaster support policies while identifying gaps and
removing controls that do not add value. Relevant controls would be added to
ServiceNow.
DZ paused and called for questions. LH queried the point at which rebuilding on Horizon
was ceased, given the Company was moving to NBIT. DZ agreed that this was an issue; the
more change implemented on Horizon the more change required on NBIT, and
Postmaster’s ultimately had to shoulder this change.
The Chair noted the huge amount of progress made, however queried whether we were
trying to shoot every possible light out which would make things more difficult in the IT
arena. The Chair shared his view that of the tracked improvements that there were a few
things that mattered much more than others, for example, being able to demonstrate that
if there was a dispute with a Postmaster that we had a robust mechanism in place to
resolve this. The Chair cautioned that not every element of the CJ was of equal
importance and that this needed to be considered. DZ replied that the improvements
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were aimed at achieving compliance, being confident that the business was operating
legally, and to assist Postmasters.
DZ advised that there were areas identified that may have caused detriment and these
were being investigated. CS advised that it was difficult to tell the potential quantum of
the possible items of detriment from Appendix 1 of the paper.
In terms of the narrative that would go to the Inquiry on HU and CJ improvements, the
Chair queried who specifically in the Inquiry secretariat would review this. TC advised that
the Inquiry had engaged an IT expert. AC shared his view that the IT expert for the Inquiry
would look at the HU and ClJ improvement lists to assess matters that had not been fixed
or finished. LH noted that for items that had not been completed that the narrative
provided by the Company around this would be very important. AC advised that work on
joining up the narrative by the end of the month was underway, as the Company was due
to provide a reply to S Munby on the status of HlJ and ClJ improvements and assurance
over the improvements. The Chair shared his view that the tone of the letter needed to be
struck correctly; it didn’t need to be too apologetic given a lot of issues were not capable
of resolution within the time frames. A huge amount of work had been undertaken and
there had been a cultural shift, we should not be under selling ourselves. TC agreed with
this, however advised that he remained concerned about remote access. NR replied that
management were very conscious about preparing this narrative; whilst we wished to
complete all items the Company simply could not afford it, and we needed to make some
difficult decisions.
AC raised the issues of the controls around remote access, and that the Company relied on
Fujitsu to advise us on instances of remote access. TC advised that he shared this concern
given the history of remote access. AC noted the third-party assurance exercise that was
to be undertaken here, focusing on remote and privileged access, to conclude work on HU
improvements in this area.
TC queried the items that were outstanding from an Oxblood red perspective. DZ directed
TC to the section of the paper detailing the relevant ClJ items and noted that the
outstanding HJ items were not in paper and were still being progressed.
BT raised the issue of potential Postmaster detriment as further identified by the business
and commented that it appeared that legal reviews would be concluded by the end of
August. DZ advised that a review with legal was scheduled for 22 July. BT observed that
the identification of possible items of Postmaster detriment was almost becoming a
business-as-usual exercise and queried when we needed to say this is a business-as-usual
activity, and no longer sitting within IDG. DZ replied that management was concerned to
keep this issue in IDG to ensure sustained focus to resolve. NR advised that he wished for
this item to remain with DZ whilst the Inquiry was ongoing and for DZ to continue to own
this. Once the Inquiry concluded this would be a business-as-usual activity.
The Chair called for further questions. There being no further questions DZ left the
meeting at 14:30.
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6. Finance
Financial Performance Report
TABLED and NOTED was a report, ‘May 2022 (P2) ~ Performance Overview’. MJ and NB
joined the Meeting at 14:31.
AC spoke to the paper, providing an overview as follows:
The Company’s JV with BO! was performing well, and a good distribution was
anticipated for January 2023;
¢ The network had sustained 2 high loss incidents. Part of the problem was
Postmasters not following processes; management were trying very hard to
convey to Postmasters the utmost importance of following due process;
© Overall trading in P2 was positive;
Security headroom was positive as against plans;
* The Network was proving very resolute with just under 11, 600 branches open.
We were not seeing the wave of resignations we feared;
© Postmaster renumeration was up as against budget.
The Chair observed that this may be the only time he could remember that the Company
had all the non-mails businesses performing well, a full cast so to speak. AC noted this and
advised that this highlighted the volatility of the Company's trading. The current statistics
were not normal; there was so much change post covid.
The Chair advised that the item that troubled him was the year on year 11% dip in the
performance of mails; the performance of other products were all explicable. The
statistics on acceptance were very difficult; our main partner had made a number of
adjustments to pricing and were attempting to disintermediate the Company. The Chair
further advised that he was loathe to make any conclusions as to how the financial year
would play out: would the Company's declining main element of mails be made up for by
cash and banking? EJ shared his view that Postmasters were working harder than ever,
however were earning less. The Chair advised that understanding volume and value was
essential. EJ referenced the Council pay-out scheme and that for 20 pence per transaction
Postmasters needed to check a customer's identity documentation and then undertake
the pay-out transaction. This was labour intensive and, in some branches, resulted in
queues out the door and normal customers avoiding coming in. AC advised that mails was
the conversation management were most focused on and that a significant part of the
Board Away Day was centred on the mails business. In terms of value and volume, MJ
advised that we had seen some of the volumes go up, however we had not seen the trends
displayed completely due to the price change. The Chair noted that revenue from stamps
was quite small. AC noted that there was a shift to second class. MJ contributed that the
customs issue was looming quite large. The Chair observed that all of these items were
quite important — certain elements of the mails business were down, however when
measured in terms of volume the impact did not appear as significant. The Chair queried
whether we were facing a business that was in a secular decline or was it that the average
transaction value would be lower, and competition could mean values would be driven
down. AC noted that previously new revenue from mails did less well than the historical
elements. In relation to pay-outs, AC advised that EJ and SI’s comments as provided in the
previous Board Meeting had been taken back to the network team; their response was
that they had not received any complaints from other Postmasters on this and that
Postmaster’s were pleased with the pay-out arrangements. The Chair queried whether the
need to disburse cash might come up again. NR advised that it would. ACTION SI
requested a session be arranged between SI and EJ with A Goddard to review what wasin A Goddard
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the pipeline. The Chair cautioned that any review needed to be conducted via a cross
section of Postmasters and needed to be balanced; SI and EJ should be careful not to bring
only their own experience to this. LH queried whether the pay-outs were useful for
bringing in footfall. SI replied that in his experience the pay-outs were not. LH asked
whether the exercise could be looked at from the opposite direction, to determine how
much such an exercise would cost Postmasters and then to build a model so this could go
into the negotiation.
7. Draft Strategic Plan and Options Review
TABLED and NOTED was a paper, ‘3 Year Strategic Plan’.
AC spoke to the paper advising that based on current trajectories year 3 looked financially
very difficult for the Company and Postmasters. The decline in mails had been straight
lined for the 3 years; the finance team were working through whether this was the correct
approach. There were positives in other products that to some extent were expected to
off-set the decline in mails, and some other items that would help maintain Postmaster
remuneration. When all the items were added up however, we still needed additional
work on mails, and over the three years a material gap was anticipated to develop. The
finance team were looking at all components for the next 3 years and testing where the
Company could push in areas such as head room and/or trading or challenge the trajectory
on mails.
ACTION AC advised that the paper represented the initial work that had been undertaken
by the finance team and that the paper would be returned to the Board in September with
a recommended way forward.
AC
EJ queried whether any changes to the mails strategy were overlaid as against the Draft
Strategic Plan. NR advised that the effects amy changes to the mail’s meses had not
IRRELEVANT _
The Chair shared his view that this could come back as a matter for the shareholder as to
how it planned to fund the Company. The issue was that the Company did not receive
from Government a subsidy which reflected the true cost of the network. The Chair
queried whether additional funding should be requested now, in order to avoid the
financial challenges towards the end of the 3-year period, although observed that the
revenue line was hard to predict at the moment. AC shared his view that as the Funding
Agreement was only signed 3 months ago now was not the time to go and seek additional
funding. If we needed additional funding in the next funding review, then we needed a
permanent statement on the subsidy, and we needed this in the network policy review. T
Melnnes was looking at different funding avenues. Discussions were being had with
Several banks to see if we could: IRRELEVANT
‘business case, third parties steered cautious on this opportunity. AC suggested that if the
Company transacted with WHS on something like 6 branches it could bring other
interested parties onto the pitch. In relation to borrowing generally, we needed to be
cautious as borrowing typically required shareholder approval, so we would need to work
through any proposals very carefully. The other opportunity was automation. LH advised
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that this was an area that worried LH, and LH queried how the Company could look to
undertake and deliver this on top of everything else. AC advised that he took the point,
and in any event the Company did not have the funding. AC reiterated that we needed to
take £80 - £100M out of the business to make it work. The Chair advised that he would
like to leave this as a legacy — the re-configuration of the Post Office — as the Company
needed to change the fundamental nature of what it was doing so, we had the makings of
something that was sustainable.
AC advised that in terms of automating for Postmaster’s in mains branches that there was
demonstrable value there, and we were a step behind. A team was being assembled to
see whether we could fund Postmaster automation by way of providing bank loans or
guarantees as it did not appear that funding an automation project was feasible for the
Company. On the recoverability side however, the risk was that we didn’t know which
Postmaster’s might be in difficulty and default. AC advised that the Postmaster
automation project might cover one or two thousand branches; it would not be every
branch. EJ advised that Postmaster’s moving to elements of automation may need to
physically reconfigure their branches too, and funding would be required for that. AC
replied that the Company would likely advise that it would be up to Postmasters to fund
this. EJ accepted this and noted that there would be branch standards for Postmasters to
build to.
LH queried what the thinking was on items such as Pay Zone and lottery which weren’t
earning the Company significant revenue. AC advised that decisions on these items were
being forced by the move to NBIT. AC advised that the finance team had just refreshed
the analysis on product profitability so could see that all products were contributing. In
terms of lottery, AC shared his view that this product offering should cease, and not be
built onto NBIT. If individual Postmasters wanted a lottery product, it was open to them to
secure this themselves. The network team would say however there would be branches
that close if lottery was taken away. AC advised that management wished to put this item
on the table to discuss. NR noted that lottery did drive enormous foot fall, however. NR
questioned whether we wanted to go through the complexity of moving lottery onto NBIT,
or would the decision be that we advised Postmasters to interact with the lottery supplier
direct. The Chair queried the overall extent to which lottery transactions delivered to the
Postmaster and cautioned that any decision on lottery needed to be looked at in the
round. That said, taking a product out that delivered little contribution was always a
winner.
The Chair advised that the return on investment lay somewhere in the configuration of
branches and that the Company needed to somehow get the best out of each town that it
operated in. For example, was it a matter of having a Post Office in the centre where there
was peak demand, then having a number of satellites around this where homes were
concentrated. The Chair further advised that he thought there was work that could be
undertaken around the best network geography. AC replied that the thing that worried AC
was the volatility on this issue: 2 years ago, it was mains who were in difficulty not the
locals, and now the position had reversed. Given this AC advised that he was concerned
about following a model developed at a point in time and felt that we needed to be
cautious on this.
TC pointed to the decline in mails and asked what the cumulative reduction figure was. AC
advised that management were not in a position to give this detail at present. TC
observed that if the Company needed to take out £80 - £100M in costs we would be
effectively left standing still. In relation to automation, if labour costs were removed how
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much would a Postmaster be saving? If this was for example £15k, the Postmaster could
then pay for additional kit with these monies. EJ noted that there were a number of family
run branches, so costs in these branches would not necessarily go down as family
members would continue to work in branch. In the larger branches however, automation
could reduce staff levels. CS queried what automation would look like. EJ advised that it
could take many forms, such as Tesco where the ratio of self-service counters to manned
counters was 8:1. EJ queried whether we could automate all returns and estimated that
this would take out 1 and a half persons. CS advised that she could see the benefit for
Postmasters in automation however the business case for Post Office was less clear. LH
advised that if automation for Postmasters was to occur then it was essential that it was
kept simple.
The Chair asked whether it was possible to put together model post offices of various sizes
to ascertain what the very best way to operate was and queried how simple we could
make the operation to run the franchises. The Chair advised that he had always been keen
to have a set of processes for Postmasters to materially improve their businesses. EJ
advised that the area teams could be trained up on these. In terms of business
improvement, LH shared an experience from previous employment where management
used to have ‘hot houses’: this involved inviting people in on an initial no fee basis and
pitching ideas. The Chair observed that the dialogue showed quite a few relatable topics
and that the Board would need to see a range of possibilities.
MJ and NB left the Meeting at 15:25.
8. Annual Report & Accounts FY 2021-22
TABLED and NOTED were the following materials:
(i) A paper, ‘FY21/22 ARA Cover Note’;
(i) A paper, ‘Going Concern Review’;
(iii) PwC Audit and Risk Committee Report for the year ended 27 March 2022;
(iv) The Company's draft Annual Report and Consolidated Financial Statements
2021/22;
(v) Draft Auditor’s Opinion; and
(vi) Draft Management Representation Letter to PwC from the Company.
TL joined the Meeting at 15:27.
AC noted that TL had done an excellent job, and that CS had earlier in the Meeting
outlined next steps. CS advised that the Audit, Risk and Compliance Committee had met
earlier, and that the Committee had resolved to recommend to the Board the approval
and signing of the Company's Annual Report and Consolidated Financial Statements
2021/22 and proposed the formation of a sub-committee of the Board to finalise any non-
material changes required to the Company’s draft Annual Report and Accounts.
The Chair called for questions. There were no questions.
After due consideration, it was RESOLVED that:
(i) The Company’s Annual Report and Consolidated Financial Statements 2021/22 in
the form produced to the Meeting be and are hereby APPROVED;
(ii) a Board ARA Committee be formed comprising NR, AC, CS and TC with authority
DELEGATED to:
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- approve any minor amendments, variations or additions to the Company’s
Annual Report and Consolidated Financial Statements 2021/22 as against the
form tabled which the ARA Committee considers in its absolute discretion are
appropriate;
- approve any minor amendments, variations or additions to the Management
Representation Letter as against the form tabled, which the ARA Committee
considers in its absolute discretion are appropriate;
- direct management as to the date for laying the Annual Report and
Consolidated Financial Statements 2021/22 in Parliament;
(iii) The Chair of the Board be and is hereby authorised to sign the Chairman’s
Statement;
(iv) N Read be and is hereby authorised to sign the Chief Executive Officer’s
Statement;
(v) Any one Director be and is hereby authorised to sign the Strategic Report;
(vi) The Chair of the Remuneration Committee be and is hereby authorised to sign the
Remuneration Report;
(vii) Any one Director or the Company Secretary be and is hereby authorised to sign
the Director’s Report;
(viii) Any one Director be and is hereby authorised to sign the Consolidated Balance
Sheet;
(ix) Any one Director be and is hereby authorised to sign the Company Balance Sheet;
(x) the Company Secretary be authorised to arrange for the Company’s Annual
Report and Consolidated Financial Statements 2021/22 to be filed at Companies
House;
(xi) The Management Representation Letter in the form produced to the Meeting be
and is hereby APPROVED;
(xii) Any one Director be and is hereby authorised to sign and issue the Letter of
Representation to PwC on behalf of the Company.
TL left the Meeting at 15:33.
Appointment of External Auditors
The Chair invited AC to speak on the appointment of the Company's external auditors.
AC advised that the Audit, Risk and Compliance Committee had resolved earlier to
recommend to the Board the re-appointment of PwC as external auditors for the 2022/23
financial year. AC advised that it was a difficult market to go to tender in, and that the
market would be more likely to participate in a year or two. Firms had indicated that they
could consider the po of participating in a tender then, and that they could look
ahead to think about conflict issues and staffing.
BT queried long had PwC had been appointed as external auditors for the Company. AC
advised that PwC had been appointed for approximately the last 3 years. The Chair
queried whether there was a Government list setting out approved external auditors for
engagement. AC advised that there was not.
It was RESOLVED that PwC be appointed as external auditors for the Company for the
2022/23 financial year, subject to the Board receiving a further recommendation from the
Audit, Risk and Compliance Committee on PwC's fees, scope, and terms of engagement. Thee
Pre-Away Day Discussion: Future Network Shape and Ministerial Visit Preparation
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TABLED and NOTED were the following materials:
(i) A paper, ‘Board Away Day: Ministerial Engagement’;
(ii) A paper, ‘Post Office Board Strategy Away Day’.
TM, MR and ME joined the Meeting.
NR outlined the session, in terms of what we were trying to achieve tomorrow, who was
going to engage, and how the process flowed from there.
The Chair queried what was known about the newly appointed Minister J Hunt. TM
replied that he did not know much about Minister Hunt, however recounted the details of
Minister Hunt’s career which he had been able to establish. In looking at Hansard,
Minister Hunt had not said a lot since she was originally elected, however when she had
spoken it was regarding matters in her local community. TM did not think that there were
any constituents in her electorate effected by historical matters. Minister Hunt was
appointed on Friday. TC thought that the Minister would have had a half hour briefing on
the Post Office only. TM advised that he would take it as a positive that the Minister being
so newly appointed still wished to attend. BG queried whether Minister Hunt was a career
politician. TM advised that Minister Hunt had previously been a local councillor.
TM advised that the Minister was due to arrive with her private secretary around 9:30
tomorrow morning. A number of Area Managers were attending to meet the Minister,
and one of them was the area manager for the Minister’s constituency.
TM spoke to the paper and outlined the proposed objectives for the policy review, which
would help the Company to determine the approach, then whilst the review was ongoing
to track progress. TM advised that an evidence-based policy should be pursued with the
shareholder, so as to understand what the shareholder wished to achieve and why, as
against the factual matrix. It had been a significant period since the last policy review, and
it was felt that the shareholder had lost sight of what they wanted to achieve. The policy
review represented a good opportunity to work closely with BEIS and to enable them to
understand the Company, the network and Postmasters. We were in the process of
setting up branch visits and workshops for BEIS over the next 6 months.
TM continued to outline the Company's proposed objectives for the policy review as
against how concerned the Government was likely to be about different aspects of the
business. In terms of access to postal services, the importance of this had come down.
Universal access to basic cash and banking facilities in contrast was high on the agenda for
Government. Bill payments and Government services were neither more nor less
important than previously. The Chair noted that BEIS had been speaking about the
number of branches, however queried what BEIS wanted in terms of services and the sort
of network that would result in. ME advised that the Board would be taken through this in
ised that a more optim
- IRRELEVAN
E replied that this had very much informed the thinking in terms of paying
Customers. LH replied that she had not seen the client perspective in the client deck for
tomorrow. ME took the point.
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TM requested that the Board focus on the choreography for tomorrow, and the key
messages that we wished to land with the Minister. In terms of the policy review, the
message was that we had been working on this for about 2 months and there had been
very little progress. So, we wished for the review to get underway very soon and to see
faster progress. Additionally, the shareholder would need a team to deliver the policy
review and they needed to think about the calibre of the team required and the extent to
which they would like to bring in external resource. Creative thinking on funding options
for the policy was also required. Talking about the pressures Postmaster’s were under
needed to be discussed also. TM noted that BEIS had expressed a desire to give us less
funding; one way that could be achieved was by taking costs out. Attempts had been
made to engage BEIS on this last year and unfortunately the issue did not get traction. It
would be useful however if this was on the Minister’s radar. TM advised that he thought
the Company should lead the briefing, given the Minister had only received a Minister’s
briefing. TM cautioned that it was important to be supportive and not too challenging as
we did not want defences to go up. When talking about messages we wished to land we
were not looking for commitments. The Minister may only be in the position for a matter
of weeks or may be in situ for 2 and a half years. TC advised that the Board Away Day
tomorrow would be when he met the Minister for the first time. TC noted that there was
only one junior minister appointed at BEIS at the moment so the Minister would be
managing a lot at present. TC further noted that in many ways C Creswell and J Murphy
were the audience here, and this represented an opportunity to land some of these
important basic things with them. TC advised that he would echo TM’s comments on the
importance of tone. The Chair shared his view that he thought it was inconceivable that
the Minister would do much more than form an initial view.
TM advised that the key messages would continue to be delivered via the Minister’s
monthly 1:1 with NR, branch visits, and deep dive briefings. CS queried what initial things
the Minister was likely to focus on. NR replied the quick delivery of compensation. The
Chair suggested that he say at the commencement that there were significant historical
issues that the Company was working on however that we did not wish the focus of the
session to be on historical matters. The Chair shared his view that we wanted the Minister
to go away thinking that this was overall a really good business with a really committed
board. EJ queried whether we had enough of a play in the slides around community. NR
and TM took this point on board. TM advised that the Q and A session would be a good
opportunity to put things on the Minister’s radar. EJ queried what other parts of BEIS the
Minister would be covering. TM advised consumer affairs and labour. TM advised that in
his view the biggest challenge the BEIS team had on the policy review was thinking about
the follow-on changes. TC advised that this was why BEIS needed external help; otherwise
BEIS would look at this from a very high-level basis and the risk was that we would be in
the feedback loop — BEIS would undertake the policy piece — then work through the
commercial loop, then get stuck. The Chair shared his view that the approach almost
needed to be the other way around; the controversial part would likely be the number of
branches in the network. TC suggested that on the question of network size a fig leaf to
offer was stating that it was about the format of the branches in the network, given BEIS’
obsession with the number of branches.
TM, MR and ME left the Meeting.
Historical Matters
Historical Matters Unit Update
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TABLED and NOTED was a paper, ‘Historical Matters Board Report’. SR and BF joined the
Meeting at 16:28.
SR spoke to the paper with key discussion points as follows:
© The Inquiry had consumed a significant amount of resource the past few weeks.
Our QC had performed very well and dealt with all the pressing issues very
competently. BEIS were due in the Inquiry tomorrow;
© OnHSS the target of 70% of offers issued as at the end of June had been achieved;
¢ The ENE process was due to commence the week of 18 July and the team were
optimistic of obtaining an outcome. Planning was underway for when the decision
was issued, including the internal and shareholder governance journeys. TC
advised that BEIS were geared up to approve this very quicky. C Creswell was
under pressure to get funding issued.
The Chair queried
whether once the ENE process was complete if this would result in a steady flow of
offers. SR advised that presently the Company had received 6 claims. The Chair
queried whether the other claimants were waiting on the outcome. SR replied
that he thought that they were. BT advised that he thought Hudgells had some
resource issues. TC pointed out that the ENE process dealt with the non-pecuniary
side and that interim payments could be made at the same time;
© We required a decision for funding of suspension payments. BEIS were not saying
that they needed more information. Operationally SR would be ready in the first
week of August. Detriment 2 was on SR’s worry list; a letter was in circulation with
GE Members. BT queried whether the HRC would sight this. BF advised that the
HRC would; once the GE had provided comments it would come to HRC for
consideration.
The Chair called for questions. There were no questions.
11.2 HMU — Funding Requests
TABLED and NOTED was a paper, ‘Overturned Historical Convictions (OHC) Interim
Funding to 31-Oct-22’.
SR spoke briefly to the paper, advising that the Board in March 2022 had approved a
drawdown to fund activities until August. Although significant work around cost savings
and efficiencies had been identified, the current funding approval would not sustain
activities, and a further drawdown was requested to fund through to the end of October.
The Board RESOLVED to APPROVE an additional drawdown in the amount of £1.285m
(including iVAT) to maintain ongoing OHC activities until 31 October 2022.
TABLED and NOTED was a paper, ‘Disclosure, Governance & Appeals (CCRC) Interim
Funding to 30 September 2022’.
SR spoke briefly to the paper.
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The Board RESOLVED to APPROVE an additional drawdown for £2.552m (including iVAT)
to maintain ongoing DGA (CCRC) activities until 30 September 2022.
TC noted that the overall budget included a £15M HMU cost challenge and queried how
that was progressing. SR replied that this was one of the targets the HMU team had
identified to be achieved, and this brought SR on to the potential further NBW
engagement and how some efficiencies could be delivered. SR noted that the ENE process
would hopefully produce parameters for payments to OHC claimants. The issue however
was how this was then operationalised, and this was the exercise the team from NBW had
been undertaking, as HSF could but did not necessarily need to do this. SR advised that a
proposal to further engage NBW was due to be presented to the HMC on 22 July.
However, the further engagement of NBW required a procurement competitive bid
process, as requested by HRC, which had commenced upon their initial appointment. The
difficulty was that the procurement process could take some time and the work of NBW.
would need to be paused during this time. LH queried why we couldn’t make the
procurement process proceed quicker. AC advised that the best we could get the
procurement process down to was 3 months. The problem was that if we conducted a
competitive tender, we would lose approximately £2M in cost savings. There had been
considerable debate as to how to classify the procurement risk, given there had never
been a challenge under the HTE framework. LH queried who would be likely to challenge
any award and whether this could be HSF. BT replied that it would not be HSF.
it was a risk appetite point. TC advised that he had 2 questions: firstly, was the
procurement lawful, and secondly was the proposed engagement the best value for
money. TC shared his view that the Company were potentially very exposed on this if
challenged. AC contributed that the proposed fees of NBW had been reviewed and the
view was that these represented good value for money. AC advised that to conduct the
tender process would cost the Company additional funds; we kept saying to employees
that we needed to save costs — if we don’t do this then that sends the wrong message. BT
queried when the second proposed phase of NBW’s work would commence. SR advised
that if NBW were appointed under the HD Framework then they could commence by the
end of August. BT replied that in reality it would be a bit further down the track that we
implemented. SR responded that it would depend on when the claims were receipted and
that a discussion with BEIS around the process would be required. The Chair advised that
he thought this was a decision that needed to be laid out in 2 parts detailing firstly the
proposed costs and secondly the benefits. ACTION The Chair requested that the HMU
team prepare a recommendation in relation to the second phase of the proposed NBW
engagement and that this be circulated by way of written resolution for consideration.
The Chair requested that if TC had an issue with the proposed approach that he discuss
this with the Chair. TC advised that he recalled the last Board discussion on NBW where
the need for competitive tension had been raised, and that CS had agreed to this. The
Chair advised that the matter needed to be resolved and reiterated his request for a
recommendation to be made.
SR
Public Inquiry Update and Funding Request
TABLED and NOTED was a paper, ‘Post Office Horizon IT Inquiry: Update and Funding
Request’.
BF outlined the paper, advising as follows:
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The Board RESOLVED to APPROVE funding for continued activity through August and
September in the amount of £3.6m for Rule 9 submissions, opening statement
preparation, counsel briefing and witness preparations for phases 2 and 3 as well as
attendance at the Inquiry hearing days in September.
BF and SR left the Meeting at 17:03.
Approval Requests
Belfast Exit Funding
TABLED and NOTED was a paper, ‘Belfast Exit Programme’.
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JS joined the meeting at 17:05. The Chair invited JS to speak to the paper. JS advised as
follows:
* Atechnical issue had been encountered recently in that records were being
duplicated when moving old data into the new cloud record. The reason for this
occurring was due to an odd way that Fujitsu configured the data base. The team
had been working with AWS to see if this could be corrected. AWS had advised
that they had a solution however the team needed to test and validate this;
© we had been expecting to migrate branches into the cloud this year over the
summer ahead of peak trading; given the technical issue the migration would need
to be conducted next year after peak trading. This would result in an overall
consequential delay, which was why the cost was greater;
© commercial discussions were ongoing with AWS; AWS had indicated that they
were prepared to forego all their technical costs in relation to the data migration.
JS had asked AWS to accept some additional scope to reduce what we would have
otherwise had to instruct and pay Fujitsu to complete. One part of the additional
scope was in relation to client files, which needed to be re-written. Another part
of the additional scope was in relation to APOP. If AWS accepted these additions
to scope and did not charge costs to host, the likely costs all up were in the vicinity
of £9M, and JS anticipated that this could be improved on, although AWS’ current
position was that they would subsume their own costs in relation to the technical
issue, and no-one else’s;
© before a solution had been identified with AWS the team had looked at other
technical solutions. One of these was having 2 clouds. This would involve moving
to an Oracle cloud data base. JS shared his view that he did not think that it would
deliver any quicker for any less money however it was a fall-back option. The
other option was to stay in Belfast. This was not a risk free nor cost free option.
The actual data centres and plant were old, and we did not know what the shelf
life of the plant was. There were lots and lots of storage arrays which had limited
longevity. Additionally, there was a diminishing knowledge pool at Fujitsu. This
option carried risks that were difficult to fully articulate.
The Chair asked JS what his recommendation was. JS replied that his recommendation
was to give AWS the opportunity to rectify the technical issue, however advised that
channels needed to be kept open with Oracle. JS further recommend that higher
executive level contact was made by the Company and AWS and suggested a meeting
between the AWS CEO and CFO, and NR and AC and BEIS. LH advised that she could assist
with introductions if required. CS shared her experience of working with AWS in another
organisation. NR thanked LH and CS and advised that he would be please to work with
them on the approach to engaging with AWS.
The Chair queried when management would be able to say confidently what the Project in
its totality might cost. JS advised that the team should be able to return to the September
Board with a revised set of assumptions; and thought that we could achieve AWS assuming
the costs of the technical issue on an uncapped basis. JS advised that he was concerned
about Fujitsu; whilst their behaviour was not malevolent, they simply did not have the
resource required to conclude the Project. ACTION CS queried whether we could arrange
for AWS to take Fujitsu’s elements of the Project. JS advised that this had been tried
previously however JS would pursue this. JS advised that the team was physically with Js
AWS 2-3 days a week.
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TC queried what the spend proposed between now and September was. JS replied that
this was £9.51M. EJ compared the amount of the funding request to the percentage
impact the same funds would have on Postmaster remuneration and expressed deep
concern on the level of costs. The Chair noted EJ’s sentiment however pointed out that if
the project was not concluded then the Company would not be able to operate Horizon
and Postmaster’s would not be in a position to earn any remuneration. The Chair advised
that the sooner that the Board could get an understanding of the totality of the costs to
conclude the Project the better. ACTION The Chair requested that JS return to the
September Board to report on the technical solution and on overall Project costs.
The Board RESOLVED to:
(i) APPROVE additional programme funding in the amount of £9.51m; and
(ii) APPROVE the DELEGATION of authority to the Investment Approvals and
Delivery Group to release funding up to the maximum amount of £9.51m.
JS and SI left the Meeting at 17:27.
13. Procurement/ Approval Requests
TABLED and NOTED was a paper, ‘Darwin’. RH, WP and AS proceeded to join the meeting.
RH introduced the paper advising that the current stock provisions operate from an aged
and oversized unit in Swindon, with 5 legacy IT systems that carried the risk of significant
failures. RH advised that further funding was requested to enable the site to be taken to
market. RH advised that he did think that the proposal to then outsource the operation to
a third-party logistics provider was the right thing to do for Postmasters. Stock requests
could be linked into the EPOS and there were plans to launch Post Office Prime so
Postmasters could order and receive their stock requests swiftly.
The Chair called for questions. CS observed that the financial benefits appeared marginal,
so the decision was more around addressing risk. RH agreed with this, the infrastructure
was starting to fail regularly, there were 2 IT systems that were no longer supported, and
the building itself was old. The proposal if approved would help to mitigate risk and
improve service to Postmasters. LH queried whether there would be any TUPE issues. RH
advised that a bid cap for TUPE would be included in the procurement. BG queried the
proposed procurement approach and terms to which WP replied. ACTION AC noted that
BG was very experienced in third party logistics so suggested that RH and WP meet with BG/RH/WP
BG. BG advised that he was familiar with all the main players in the market, however
thought that perhaps the golden triangle location was not the best given the competition
for labour.
The Board RESOLVED to:
(i) APPROVE further project funding in the amount of £614,598 (to end March
2023) to complete marketing the stock centre site at Swindon, commence the
contractual sale process, start solution design, but only for internal changes
that support 3PL integration;
(ii) APPROVE an FTS Restricted Procedure procurement be conducted to select an
outsource partner for stock centre operations; and
(iii) APPROVE DELEGATION of the contract award decision to the Chief Retail
Officer.
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TABLED and NOTED was a paper, ‘PCI Programme’.
AC spoke briefly to the paper, advising that in the Belfast Exit Plan we had intended to
deliver the PCI testing. The proposal now however was that the scope be transferred from
the Belfast Exit Plan and included within the PCI Programme, and that accompanying
funding be approved to enable this.
ACTION TC advised that he may have misread the appendix to the paper, however queried
whether the request was outside the original estimated programme total cost envelope.
CS advised that she thought the initial approval was under the amount quoted in the
paper. AC advised that he would arrange for this to be checked.
The Board RESOLVED to:
{i) APPROVE a revised estimated programme total cost envelope of £24.90m;
(ii) APPROVE additional funding of £2.57m to allow Payment Card Industry
Programme to accept the transfer of scope from the Belfast Exit Programme;
(iii) NOTE that £1.11m of the funding request relates to Fujitsu delivery costs that
are based on Change Work Order/General approximation of cost (ROM) and
APPROVE the DELEGATION of authority to the Investment Approval and
Delivery Group to approve a cost increase up to 10% of the £1.11m for
contracting on a fixed cost basis, with any increased cost however to remain
within the revised estimated programme total cost envelope.
Strategic Platform Modernisation Funding
TABLED and NOTED was a paper, ‘SPMP July, August and September 2022 Funding
drawdown’.
The Board RESOLVED to APPROVE the deliverables and additional funding drawdown of
£10.414m (£4.455m Capex and £5.959m Exceptional) for the SPMP.
FRES Facility Extension
TABLED and NOTED was a paper, ‘FRES facility extension with BOI’.
AC spoke briefly to the paper, advising that FRES were looking for additional head room
given the current travel spike. TC queried whether we were back to pre-covid levels in
terms of market share of foreign currency. NR advised that we had exceeded pre-covid
levels of market share, now holding approximately one third of the market.
The Board is RESOLVED to:
(i) APPROVE FRESH’s proceeding to provide a new guarantee to BO!
(ii)
» IRRELEVANT I
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LH left the Meeting at 17:45.
Approvals with no Presentation
Modern Slavery Statement
NOTED and TABLED were the following materials:
(i) A paper, ‘Modern Slavery Act Statement’ and
(ii) Draft Modern Slavery Statement 2022/23.
NOTING the recommendation provided by the Company’s Audit, Risk and Compliance
Committee, the Board RESOLVED to APPROVE:
(i) the Company's 2022/23 Modern Slavery Statement in the form tabled;
(ii) publication of the Company's 2022/23 Modern Slavery Statement;
(iii) signing of the Company’s 2022/23 Modern Slavery Statement by any executive
director.
Noting Papers with no Presentation
ATM Banking Strategy Programme: Lessons Learnt and AEI Assurance Review
TABLED and NOTED was a paper, ‘ATM/ AEI Post Implementation Reviews’.
ACTION EJ shared his view that he did not think that the paper captured how badly the
programme went and did not present a fair appraisal of the situation. NR advised that
management could take the paper away and bring the item back for discussion to the
September Board Meeting. The Chair requested that this item be included as an early item
for discussion on the Agenda for September.
NR/TM
ATM Lot 4 Procurement
TABLED and NOTED was a paper, ‘Banking Automation Deposit Devices (Lot 4)’.
The Board NOTED the decision to award a contract to Cennox Limited for the provision of
Self-Service Cash Deposit Machines (CDMs) and associated Managed Services to support the
Banking Automation project.
Noting and Governance Items
Health & Safety Report
TABLED and NOTED was the Health & Safety Monthly Report.
AC spoke to the paper advising that robberies were increasing, and this could be due to
the cost-of-living crisis. EJ noted that £400k had been taken in robberies and commented
that this was the downside of taking more cash in branch. The issue however was that
safes were not being locked. AC advised that area managers had been requested to ask
the basic question of whether a safe was open when they were in branch; the issue was
that Postmasters were not following correct procedures. NR commented that he did not
think that the franchisee relationship was where it needed to be at. Today there had been
some issues on this, where procedures had not been followed.
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ACTION EJ advised that the branch robbery stories should be shared and suggested that
MR do this in his weekly update to Postmasters.
MR
Nomination Committee - Terms of Reference and Matters Reserved for the Board
The Board RESOLVED to:
(i) APPROVE the revised Terms of Reference for the Nominations Committee in
the form tabled; and
(ii) APPROVE consequential changes required to the Matters Reserved for the
Board in the form tabled.
Future Meeting Dates
The future meeting dates were NOTED.
Forward Agenda
The forward agenda was NOTED.
Any Other Business
There being no further business the Chairman declared the meeting closed at 17:52.
Date of next scheduled meeting
Board Meeting 27 September 2022 13:00 — 17:30 hrs
Chairman
Date
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MINUTES OF A STRATEGY SESSION OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON
WEDNESDAY 12 JULY 2022 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 08:55 AM
Present: Tim Parker Chairman (TP)
Tom Cooper Non-Executive Director (TC)
Carla Stent Non-Executive Director (CS)
Zarin Patel Senior Independent Director (ZP)
Lisa Harrington Non-Executive Director (LH)
Saf Ismail Non-Executive Director (SI)
Elliot Jacobs Non-Executive Director (EJ)
Ben Tidswell Non-Executive Director (BT)
Brian Gaunt Non-Executive Director (BG)
Nick Read Group Chief Executive Officer (NR)
Alisdair Cameron Group Chief Finance Officer (AC)
In attendance: Rachel Scarrabelotti Company Secretary (RS)
Tim McInnes Strategy and Transformation Director (TM) (Item 2.)
Owen Woodley Group Chief Commercial Officer (OW) (Items 3 & 4.)
Chrysanthy Pispinis Commercial Strategy & Planning Director (CP) (Items 3 &
4)
Neill O'Sullivan Managing Director Parcels and Mails (NO’S) (Item 3.)
Martin Roberts Group Chief Retail Officer (MR) (Items 4 & 5.)
Martin Edwards Network Strategy & Delivery Director (ME) (Items 4 & 5.)
Apologies: N/A
Action
Le Welcome and Conflicts of Interest
A quorum being present, the Chairman opened the meeting. The Chair called for Conflicts of
Interest. The Directors declared that they had no conflicts of interest in the matters to be
considered at the meeting in accordance with the requirements of section 177 of the
Companies Act 2006 and the Company's Articles of Association.
2. Session I: BEIS Policy Review
TABLED and NOTED was a paper, ‘BEIS Policy Review Pre-Briefing’.
Minister Hunt and the Minister’s personal secretary joined the meeting at 9:07. The Chair
proceeded to welcome the Minister and outlined the proposed issues for discussion with
the Minister, advising that the desire was not to focus on historical matters, however, to
speak about the future of the Company which represented a great and very unique
business. The Minister advised that she was in the Board’s hands as to issues raised,
however that she would like to hear of areas of challenge within the business and receive an
update on potential industrial action.
TM commenced presenting, outlining macro-economic conditions and how these could be
brought together with the BEIS policy review. TM noted that whilst a spending review was
conducted every 3 years the Company was looking at the possibility of other creative
funding options. TM further noted that the Minister was scheduled to have a 1:1 with NR
come Monday, and that we wished to arrange branch visits (the Minister was agreeable),
deep dive briefings, and ensure frequent interactions between the Company and UKGI and
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BEIS. The Minister advised that in respect of alternative funding options she would like to
understand what the options were and that she would particularly like to visit one of the
more obscure Post Offices.
The Chairman noted that the Company mixed together commercial business as well as being
a social enterprise; being more explicit about our social enterprise and funding this purpose
could assist in solving some challenges. NR agreed that the question of social purpose was
very interesting and noted that the Company received funding to sustain a number of
branches. Beyond this however, it was up to Postmasters to decide what their contribution
was. This was an area that would benefit from some clarity.
C Creswell and J Murphy joined the meeting at 9:15.
EJ advised that he ran a number of Post Offices, however that these were proving not
profitable. EJ noted that Postmasters needed to pay their staff significantly more than
minimum rates, train their staff well, then work to retain their staff. The vast majority of
Post Offices provided something additional for the communities in which they were situated
however Postmasters were not specifically reimbursed for this. The profitability of Post
Offices needed to be altered, otherwise they would shortly shift to be loss making. TM
advised that information was being shared with C Creswell and J Murphy on this; on the face
of it Postmaster remuneration may look solid however it was crucial to look at the costs of
running a Post Office. The Minister agreed with this point.
The Chairman advised that the network needed to be smaller than the current size. This
was a challenge that the Company had tried to manage by changing the definition of Post
Offices, and by thinning down the product set. Every time the Company looked at what
drove the economics of the Post Office the network number was below 11,500, with the
thinking that the optimum network number was around 8,000 or 9,000. The Company was
significantly underfunded for the non-competitive parts of the network. AC advised that the
Company received a subsidy of £50M, however the cost of funding the loss-making parts of
the network was in the region of £100M. TM noted that these costs were rising each year
and that the Company and Postmasters were working harder to stand still. J Murphy
queried management of costs through churn. TM replied that as part of controlling costs
the Company could establish which branches to close; with churn this was something that
the Company had limited ability to control.
NR provided the Minister with an update on the potential Industrial Action, advising that
there appeared to be a slightly weary feeling in the branches, however more energy in the
supply chain where things were slightly more unionised. NR advised that contingency
measures had been put in place in the event that Industrial Action proceeded. NR further
advised the level of pay increase and lump sum offered, noting that this offer had been
rejected and that the Company was continuing to work through the process via ACAS. The
Minister queried whether the Company was a victim of a summer of discontent. NR replied
that the Company’s position was difficult as against other pay awards taking place and
advised that he did not wish the Company to be bundled in with the RMG. AC advised that
it was very difficult as there were significant challenges coming on the costs of living front
however the Company simply could not afford significant pay increases. What would be
difficult for the Company was if other parts of the public sector pay increases were more
than that proposed by the Company.
J Murphy queried what work was being undertaken on the use of the subsidy and noted that
a large subsidy was being paid to the Mayfair branch. TM replied that significant work was
undertaken in this space, however the application of the subsidy went directly back to
shareholder requirements as the Company was mandated to deliver as against the access
criteria.
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The Minister noted that she was also Minister for consumers and that the Post Office was
brilliant for providing access to cash and allowing budgeting in the current conditions. The
Minister raised the issue of Post Office opening hours and advised that she was aware of
complaints of branches closing at 5:00pm. This particularly affected people who went to the
Post Office at the end of their working day. The Minister shared her view that she thought
Post Offices could offer a better level of service via extended opening hours in some cases
and that operating hours seemed to have changed for a lot of businesses however not for
the Post Office. NR replied that that was not quite right. AC advised that the Company had
more 24/7 operators than any other retailers. DMB’s however did operate on restricted
hours, although Postmasters operated according to the hours that they thought were
correct for their communities.
AC referenced the Minister's earlier request for details of where the Board saw challenges
for the Company and advised that £100M had been taken out of the cost base previously,
and to be more viable, we may need to do this again. C Stent touched on the need to obtain
funding from other sources, for example, by bringing somebody in to help the Company
automate.
The Session concluded and the Minister, the Minister’s personal secretary, C Creswell and J
Murphy left the meeting at approximately 9:57.
TM noted the point raised in respect of the subsidy of the Mayfair branch and observed that
the Company did not receive sufficient income to make these exceptional payments viable.
It seemed that a conversation with the shareholder around the access criteria would be
useful and the use of other products such as Drop and Go's to satisfy the access criteria.
The Chairman agreed that a different approach to maintaining a different service needed to
be contemplated. Consumers needed the ability to go around the corner to pick up
groceries and purchase a service. TC shared his view that HMT would be unlikely to provide
any additional funding at this point.
The Chairman advised that he thought the information in relation to international
approaches in the pack was not adequate. The Chairman further advised that when joining
a business his approach had been to travel internationally to see what the comparatives
were. TC noted that whilst there was a slide in the pack on international comparatives it
was very skeletal. TM replied that market research reports had been prepared and that
perhaps this item could be picked up on later in the session on mails. The Chairman shared
his view that he thought we would obtain a lot of useful information by way of analysing the
approach of international comparatives.
LH advised that the Company needed to focus on segmenting, and that we needed to get
underneath how we were segmenting our customer base so we could be much more
targeted in our approach. C Stent agreed with this and asked the group to think about what
consumers were going to need in the next 5 — 10 years and why they might be going into a
bricks and mortar store.
The Chairman shared his view that the Company needed to focus on answering the question
of how we could make the franchise more attractive. SI agreed with this and commented
that he thought that the Company was not giving Postmaster’s sufficient support in this
regard. EJ commented on footfall; the more that could be done to induce customers into
store the better.
IRRELEVANT
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Session II: Deciding the Way Forward on Mails and Strategic Commercial Considerations
OW, CP, NO, MR and ME joined the meeting.
TABLED and NOTED was a paper, ‘Deciding the way forward on mails.
NR asked MR to speak about his interaction with the Minister, which had occurred
immediately after the Board met the Minister. MR advised that the Minister had suggested
that MR, his team, and the Area Managers didn’t use the term Minister when addressing the
Minister, however called the Minister by her first name, Jane. MR advised that this had
settled the Area Managers immediately. ACTION The Minister had advised that she wished
to spend some time in branches and further afield. MR and his team would facilitate these
visits. MR further advised that the Minister was interested to understand the retail blend in
Post Offices, and that the Minister thought there could be opportunities for the Company to
develop the retail aspect of the business.
The Chair passed to OW to present. OW proceeded to outline the paper and the work that
the Mails team had been undertaking, advising that for the past 18 months the Mails team
had been progressing the mail strategy on two limbs. The mails business however was
facing 3 challenges, the first being rapid structural change across the market; the Company
had an analogue model around people who wanted services face to face, and this was out of
step with wider market changes with the move to online for marketplace sellers. Secondly,
the Company was losing volume to RMG, and RMG were in turn losing out to competition
and were having an increasingly difficult time. Thirdly, Brexit was causing all sorts of
problems in the Mails market. OW shared his view that he thought that these challenges
were existential for the organisation. Without intervention Mails trade and PM
remuneration were going to continue to decrease. The anticipated recession was going to
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reduce customer spend, and lead to a contraction of the parcels business. The vast majority
of parcel transactions were going online. Price was the key driver.
It was important that the Company maintained their relationship with RMG however we
needed to stop trying to ride on their back. The Mails team were recommending
implementing the Mails strategy via 2 limbs. Firstly, to evolve the Company into a
ubiquitous channel and secondly to make the Company the retailer and the channel of
choice. OW advised that many international equivalents to the Company were taking this
approach and cited the examples of Australia Post and Post Italia — the Mails team were not
proposing something that was novel. OW further advised that he was of the view that the
Company needed to take action now.
OW passed to CP to present. CP advised that the space the Company was operating in was
an old type world where most parcel transactions were the product of the relationship with
RMG and Parcelforce. The Company needed to move into the space where parcels were not
just collected but also returned. In terms of in branch sales, the Mails team wished to
diversify the number of carriers. The Mails team also recommended that the Company start
to establish an online presence in conjunction with different aggregators. On the issue of
cannibalisation, working with RMG alone made the Company more vulnerable. The
Company needed to move to providing customers and PMs with more choice. The Mails
team were of the view that a strategic partnership with Evri was the way forward, and that
this would assist in reducing our reliance on RMG. The Mails team had been focused on
considering operationally how this could be brought to life and were examining how quickly
we could get to market. If the Company took the option of having Evri in branch this raised
the question of whether the Company would wish to make changes on Horizon to
accommodate the Evri offering. Alternatively, we could use Evri’s terminals however it was
queried whether this would be ideal from the PM’s perspective.
CP advised that the Mails team thought that the Company did need to be ambitious in
respect of the Mails business, however that this ambition needed to be placed carefully as.
against the restrictions on funding. CP further advised that the Mails team implementation
plans reflected the funding constraints.
CP passed to NO to contribute. NO referenced OW’s introduction and the 3 challenges
identified. NO advised that he wished to provide some more detail around these challenges
and the intelligence that the Mails team had received in relation to these. Retailers were
currently driving a lot of the demand for carriers, and retailers were looking to differentiate
themselves through their delivery performance. In addition, retailers were demanding that
carriers evolved, innovated, and offered new solutions. Carriers were competing in the
space of green and sustainable solutions and inflight options. Market share was being
heavily contested and carriers were looking to get share in every corner of the market.
Carriers viewed the Company’s network as a very creditable option. When NO had met with
retailers over the last few months, they had expressed a need to find solutions to meet
customer demand and saw the Company’s network as being something that could meet that
objective. PMs in turn wanted more products and more services. NO advised that the Mails
team could go back to retailers looking at the opportunity and position the Company as a
network solution.
In terms of conversations in the market, NO advised that the Company would need to work
collaboratively on implementation with carriers and partners. Where we could we would
use Post Office solutions, otherwise we would use carrier’s tools. For example, we were
using Amazon handsets yet had DPD on horizon. In all of this, it was extremely important
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that we focused on the multipliers that would help the Company the most. The Mails team
had been in discussions with Evri, and the intention was to provide an online aggregator
site. rovided great technology that we could work with, and the experience of
Australia Post adopting this technology provided a good example of what could be achieved.
OW advised that the Mails team had had some conversations with}==seand thati=
very interested to work with the Company. Against forming commercial relationships direct
with retailers we needed to continue to work respectfully with RMG, even though they
would continue to
In relation to Evri, the Mails team had undertaken positive work there on the commercial
front, and there had been some good conversations with Evri the last few days. NO shared
his view that he was confident that the Mails team could get to the correct solution for the
Company with Evri.
NO noted that there was clearly significant work to be undertaken and turned to detailing
what the next 18 months could look like. NO advised that the Mails team would continue to
work closely with the retail team to see that change was managed correctly with PM’s. The
Mails team would look to implement by starting with some pilots and with an approach that
was pragmatic where we would start small but the scale quickly. It would be important to
demonstrate momentum to show the whole business we had the ability to deliver changes.
The window of opportunity to commence implementation was small and the Mails team
would need the support of the whole business to successfully deliver.
NO turned to the question of whether the Company had the capabilities to deliver the
strategy. NO advised that as at today we did not, however the capabilities were available in
the market. For example, we could outsource the building of an online aggregator to get the
right online product. NO advised that he also thought delivery of the Mails strategy would
require different structuring in other parts of the business, and that we would need a team
to manage the different commercial relationships who would focus on delivering sales.
OW returned to presenting and summarised the proposals that the Company:
1. Open up branch channels to non RMG carriers;
2. Develop an online aggregator presence; and
3. Start building a retailer returns proposition.
OW advised that the Mails team were clear as to what was required, however the how was
more difficult. Particularly, the mails team were of the view that the Company could not
wait whilst other areas of change were affected in the business.
LH queried the sequence of the proposals and shared her view that the most lucrative thing
for the Company to do at this point in time was to move online. CP replied that the Mails
team had held the same view initially, however this was before the Evri opportunity came
up, and the view of the Mails team was that a commercial arrangement with Evri should be
affected first. Additionally, from a timing perspective, the online piece might take the
Company longer to implement. In this respect, OW advised that the Mails team had
initiated the conversations and would need to work through procurement, which would not
be immediate or straight forward.
TC asked that the Board please discuss each element in detail. CS queried what was
proposed in relation to managing the Company's relationship with RMG on all of these items
and requested that this be touched on as the Board worked through each item proposed.
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The Chair agreed with this approach to frame the discussion and suggested that the Board
needed to look at the worst possible reaction of RMG on all the proposals and be satisfied
that RMG’s reactions were going to occur anyway. The Chair advised that the Board needed
to consider whether the proposals would provoke a response from RMG and what the effect
proposals quickly enough, I.
had looked at options that were open to RMG; one of these was to try to build new routes
to market!
they could try to
The Chair
picked up this point: we could see the way the market was going online — we could not go
against the consumer — we would like RMG to close the difference between online cost and
the in-branch cost with a view to trying to align these costs to assist in the start of our online
journey. TC replied that from RMG’s perspective they had an online platform, and they also
had the bricks and mortar presence via the Company. TC was of the view that we would be
pushing at a closed door to try to narrow the costs gap from this perspective. OW and NR
had met with RMG and had this conversation a couple of months ago. The response of RMG
had been that whilst we had a business relationship, that whoever pursued the customer
the hardest would win. OW advised that he thought this issue had already been considered
at the time when MDA2 was negotiated, and that when we announced Amazon to RMG
they were not surprised. OW further advised however that if there was the option of a fresh
contractual conversation to be had with RMG — that was sustainable for both parties — we
could be open to this and it was possible that RMG may not be so aggressive given
everything else they currently had to deal with.
TC queried what would happen if RGM could secure a better deal with another carrier, as
against their deal with the Company. OW replied that he did not think RMG could achieve a
better deal. TC queried then what would happen if RMG wanted an improved deal because
we were opening up relationships with other carriers. The short to medium downside of
this could be significant and we would need to have a plan in place to deal with this
possibility. EJ shared his view that negotiating with Royal Mail would not be a quick process,
and that the Company would not wish to be tied up in negotiations with RMG which could
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hings. OW advised that any world where the ii
£ ~~} BG contributed that if the Company did nothing, then
we would be dead in the water. RMG were looking to take volume away from the business
and the Company had to act. The measures that were proposed were the right ones — the
issue was then around time and cost. The Chairman asked if the Board members were all
agreed that the Company needed to take action. All Board members replied in the
affirmative. BG advised that 18 months felt too long to implement. OW took the point
however advised that we needed to think about the financial circumstances that we were in.
This meant that for aggregation we would look to use others.
SI asked for further details on the nature of the potential deal with Evri, and whether this
would include ] NO replied that Evri were not offering or expecting an
exclusive relationship with the Compan A full product
set was being considered also. ! ~ IRRELEVANT ae
NO advised that the team were certainly looking to achieve a
possible in the negotiations and would start hard at the transactional level. I
[ IRRELEVANT
EJ noted that the Evri proposal included PV's selling products at the counter not simply just
accepting returns and queried the likely earnings for PMs from the potential relationship.
OW advised that this was a critical question and th
attempting to equalise remuneration for PMs.
to automate. f
EJ referenced the energy pay-outs and queried whether by embarking on a relationship with
Evri, would that lead PM’s to be turning away other customers, and were the Mails team
satisfied that the proposed introduction of Evri would bring the best margins for PMs. EJ
also queried how in real terms the proposal was going to work at the counter. OW replied
that ZM could advise on devices and fit. We could not keep building ever more propositions
on Horizon, that was why in our conversation we were asking about using Evri terminals. SI
queried whether there was an appetite for Evri to progress in this way. OW replied that
there was. EJ advised that if Evri was introduced that PM’s would be going from sales to
selling and providing comparisons for customers. LH reiterated her point about introducing
the Evri products online first, to get the product set functioning, then to roll out the
products physically in branches and determine PM remuneration from the products. OW
advised that the Mails team were working on online and in branch options with Evri in
parallel. Evri had been very clear that they wanted an in-branch proposition, however had
advised that they would engage with us in relation to an online proposition as well. OW
shared his view that he thought that we needed to do both things simultaneously. CS
queried whether the proposal was to roll out Evri in all branches. EJ asked how quickly the
Evri products could be added to Horizon. ZM replied that the track record of adding to
Horizon indicated that this may not be a quick exercise. We had multiple options however
as to how we operationalised this. As adding to Horizon was not ideal, other options
included looking at the strategy for NBIT, and the use of devices.
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TC reiterated his earlier request that the Board approach the discussion in a more structured
way. The Chair agreed with TC’s request and asked that the Board examine each of the 3
proposals to test what was involved, and what each of these proposals would mean for
technology. The Chair shared his view that the worst thing we could do is take the proposals
on, then deliver these badly, because we were unable to manage the change.
CP advised that the Mails team were still working through the best route for all the trade-
offs that had been discussed. CP reiterated the 3 proposals and addressed the first of the
proposals, being the opening up of branch channels to non RMG carriers. This would
include looking to accept other carrier’s parcels as returns. The IT to enable this was within
the PUDO software. The key tech requirement was the label and the printing. The Chair
asked for clarification that there was nothing preventing us have Amazon and DPD
customers return their parcels. OW replied that this was the case, and that we already
accepted the return of parcels by Amazon and DPD customers.
CP directed the Board to slide 9 of the presentation and advised that this slide contained the
full PUDO piece, noting that the Mails team had assumed there were certain volumes. The
Chair asked, when we say full PUDO, precisely what did that mean. CP replied that full
PUDO assumed commercial relationships were in play with Evri and Amazon. The Chair then
asked that when we say PUDO, what did that encompass. CP replied that this reflected the
current pick up drop off service that was currently provided in relation to RMG products.
The Chair distilled this down as essentially encompassing someone being able to leave a
parcel for collection at the Post Office. OW agreed with this, noting however that it included
the acceptance by the Post Office of a parcel that was the result of an online sale.
TC advised that he wished to test the volume assumption, and queried where the parcels
were coming from; were they coming from RMG as well? TC noted that there did not
appear to be many parcels in the micro carrier area. TC also queried how many branches we
were looking at implementing this in, and what the implications were in terms of space. CP
replied that we currently had approximately 24% of the micro shipper market. TC noted the
number of parcels attributed to Evri and advised that he was trying to understand how
realistic it was to get to the number of parcels in the assumptions. CP replied that Amazon
did not really operate in this space currently so there was opportunity there. In addition,
Evri and Amazon had the largest online sales so that is why the Mails team thought the
number of sales was realistic. The Chair noted that the discussion raised several issues
being how many carriers would the Company be working with, how would PM's physically
cope with the number of parcels, and there was the issue of printing labels, which made the
proposition more challenging. EJ noted that Evri terminals allowed the printing of labels and
cautioned against the Post Office being in a position where we would need to offer an
inferior service. CP noted that in practice two thirds of customers printed their labels at
home. EJ advised that PMs would charge for printing and tape which was not an issue,
however queried how the label issue would work in the Drop and Go format. ACTION TC
asked for more detail on the working up of the projected market share. TC advised that this
started at 23% then ramped up to 9%. CP advised that she did not currently have the
numbers with her, however, would supply this detail to TC along with additional detail on
the volume proposition.
ow/cp
The Chair noted that the proposal would not result in significant additional income for the
Company, although importantly the initiative would generate additional remuneration for
PMs, and that it would also drive footfall. The Chair queried what the effect of the
additional footfall might be. NR agreed that the proposal would drive additional footfall and
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shared his view that this would provide opportunities for PMs to upsell. The Chair re-
capped on the discussion noting the volume assumptions, the practicalities of the options, IT
issues, and the likely value that could be extracted from the proposal and emphasized the
need to focus on preserving value for the Company and the PM.
SI noted that PMs were doing really well on special delivery and queried how this product
would work in with the Evri offering? If the proposition was to sell in branch and the
journey was via Horizon — how would that work? SI noted the importance of preserving the
customer journey and cautioned against this being disturbed. The Chair took the point and
advised that in an ideal world a device could be provided that could handle all carriers. The
Chair queried whether there was a way we could short cut all of this and acquire a product
to get us from A to B quite fast, that is, was there something that already existed that we
could take advantage of. OW replied that we needed to be cautious about having multiple
devices in branch. The Chair noted the traditional approach of developing a strategy then
determining how to the operationalise the strategy. Sometimes it worked to turn these
components around. The Chair reiterated his question as to whether there was a device
that could be air lifted into the Post Office. BG shared his view that there were likely to be
solutions out there. BG advised that all the market growth was currently in relation to micro
shippers, and that we needed to be looking not just at market share, but which markets
were growing, and this part of the market was growing exponentially. What we needed to
determine is how much we wanted PM to be involved and how much would go online.
The Chair observed that the Company should rebrand as ‘The Post Office’, so customers
could purchase any product and we could become a great competitor to Parcels to Go. EJ
shared his view that the process needed to be simplified from the start, which would enable
PMs to work across the products of multiple carriers. EJ further contributed that it was hard
enough at present using multiple devices. MR advised that what every retailer was doing at
present was simplifying the customer journey and that we needed to be vigilant to ensure
we were not making things overly complex.
The Chair paused to summarise the discussion, noting that the Board members all accepted
that we needed to do something. There were further questions to be answered on
operationalising the proposals, and there was more work to come in terms of investigating
the business case. The key point was about not overly complicating matters and having
something that was not operationally risky to implement. In terms of ease of execution, the
first 2 options were easier to execute. OW agreed with this, looking at this from a PM
perspective. The Chair shared his view that the third item proposed, being commencing
building a retailer returns proposition, seemed to be the item that delivered the least. The
Chair shared his view that we needed to focus on things that we thought we could do well
and that would be attractive to customers; if there was an occasion for selling other brands
within the Post Office then we need to be able to be able to generate some serious returns
from this.
TC queried if we had a functioning aggregator online presence, would we then need to
necessarily replicate this in branch. OW replied that the numbers could be uncomfortable
from a PM perspective. The Chair queried whether by not putting competitors into branch if
we would be slightly defusing the relationship with RMG. The Chair also queried whether it
would work to have a standalone screen in place for customers in branch, with functionality
to allow us to integrate other carriers at some point in the future. EJ took up this point and
noted that this would allow us to offer in branch the same to customers who had been
through the online journey. In relation to the third proposal, EJ shared his view that if we
announced that we were starting acceptance that he did not think PMs would be that
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excited. LH noted that the proposals was that we would start on the acceptance path. LH
queried which of the proposals was the most straight forward for us to implement. The
Chair emphasized that operational capability and the level of change that could be handled
needed to be carefully considered.
OW advised that the Mails team wished to start execution of each of the proposals and
were attuned and understanding of the issue around the execution of Evri in branch and the
consequent challenges. OW asked that the Board turn their minds to considering routes to
the aggregator principle. BG shared his view that he thought it was unlikely that some
aggregators such as Parcels to Go would wish to partner with us. OW advised that there
was the possibility of forming a JV with an aggregator like Parcels to Go. The Chair agreed
that this could be a possibility and we could access the technology required this way. OW
advised that he was not hearing any objection to commencing execution of full PUDO.
There were no objections. CP noted that Amazon, DPD, and Evri had indicated that they
would not pick up for less than 30 parcels, so the roll out would not apply to all branches. EJ
noted that Doddle had been mentioned earlier and that they had changed their corporate
complexion: what did we need to know that they had learnt. NO advised that Doddle
demonstrated what could be achieved by bringing alive parcel networks and working with
retailers. CP noted that Doddle could provide the technology, and this would allow us to go
to retailers.
TC noted the significance of building relationships with carriers and that it would take time
to build something credible. ACTION TC requested that when the business case was ow/cp
returned to the Board that it contained this detail. The Chair advised that he had concerns
as to whether we needed to do something now and queried whether it would be better to
do one thing really well and set it up and operationalise it, rather than trying to do all three
things. In the aggregator market we had a brand that could compete and there was a real
market opportunity. CS agreed with this however advised that she did not think that we had
6 months to wait; indeed, we had a finite window. NR noted that the market was moving,
and that consolidation was going to occur. EJ queried whether the Mails team had
considered looking at a much smaller player in the market, like Inter Parcels. The
technology employed was the same and it would not cost as much to buy a smaller business
that had the technology already, rather than forming a JV. CP advised that the option had
been considered however this had not been progressed due to the funding issue and that a
JV arrangement would be preferable. EJ contributed that the JV partner would need to pay
for the privilege of partnering with us. The Chair agreed that a JV relationship could be the
way forward and that aiming to arrive at a credible aggregator site could be a good thing.
The Chair advised that he did hear all the points on timing. BG noted the increasing
complexity of acceptance in terms of bagging. EJ agreed that there could be issues with this
and advised that the segregation would need to be made very simple. EJ referenced the
loyalty bonus for Drop and Go for last peak period and queried whether this was going to be
offered again. NR advised that the management team were acutely aware of this.
The Chair called for further questions. There were no further questions.
TABLED and NOTED was a paper, ‘Strategic Commercial Considerations’.
OW proceeded to provide an overview of the paper, advising that the 3YP would be
returned to the Board for consideration after the summer, and that whilst if implemented
the mails strategy would mitigate some of the challenges, that there would be critical
decisions to be made around key items of our product set over the next short while. For
now, the purpose of the paper was to raise these issues and to provide Board members with
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an opportunity to discuss. As we approached key contract moments we would need to
prioritise and determine whether we would seek cash today or value tomorrow. After
remuneration the key issue Postmasters asked about was when we were going to bring new
products into the network. The Company would need to decide whether there were any
products we should deprioritise, and whether the approach should be considering new
products and propositions or focusing on taking costs out.
The Chair invited questions and comments from the BoaI IRRELEVANT
i IRRELEVANT I
‘paper from thé previous session which had made that exact point, however the reality was
that only a handful of Banking Hubs existed however banks were still proceeding to close
ow
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The Chair noted that as further time elapsed the Company would be likely able to further
[oro IRRELEVAt jw noted this and
OW requested that the Board move on to considering the Company's lottery product. OW
reminded the Board that the Company sat in between the Postmaster and the lottery
provider. In terms of the lottery provider to succeed Camelot, this looked likely to be
Allwyn. OW advised that a decision would come to the Board as to whether we continued
to sit in the middle of that relationship. OW noted that there was a percentage of
Postmaster remuneration earned through lottery, and that withdrawing this product could
potentially have knock on effect in the network. CS queried how many branches relied on
lottery. CP replied. OW posed the question that if the Company did not sit in the
relationship, then would Postmaster’s devalue their views on the Post Office franchise.
Taking the temperature of the room the Chair observed that the takeaway was that the
Company would likely need to step away from this product. SI queried whether there was
any possibility of speaking to the new provider to increase the value to the Company so as
to retain the product. OW advised that this was a possibility and that the team had just
commenced speaking to the potential new provider. AC contributed that the mood seemed
to be that people would not be inclined to pay the costs associated with moving to a new
provider or moving the product to NBIT.
The discussion moved to considering the JV with ae: ne char queried whether —
was anyone we
TAC rep
would be unlikely to receive funding for this.
OW requested that the Board turn to consider the Company’s travel insurance business.
The commercial team had started some exploratory work around whether there was an
ability to It was challenging in the general insurance market h
there was new regulation, so it was not clear how things would behave.
and reminded the Board that the Company had committed to _
ig as part of the last funding settlement. TC noted that this item had
been discussed at Board before and the view seemed to be that insurance was {Rt
NR challenged this and advised that this had not been the case since NR joined 4 years ago.
TC reflected on this, however queried wheth
i IRRELEVANT jcs
‘shared her view that perhaps we had not given the insurance business the fuel in order to
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fully flourish
cing at the JV relationship I with BOI, noting that the current
IRRELEVANT
OW touched on Payzone and advised that he was not proposing to speak about this
business in this forum. NR contributed that Payzone had been discussed at ARC earlier in
the week and Board yesterday.
OW noted the possibility of Post Offices SI shared his view
that he thought this represented a huge opportunity for the majority of Post Offices,
although queried the insurance aspects of providing such a service. SI
saw this working, with the customer and the Postmaster accessing a
4 OW referenced a previous discussion with SI on this issue, where OW had
understood that SI agreed that we had ‘bigger fish to fry’ and we that didn’t have funding.
Sl advised that this market had one general player in it only. EJ contributed that
Postmasters needed to be able to keep the lights on and derive subscription-I
lue could Provide this, and eos Office could Build the first network off!
ay he
‘Such a proposal to work we would need scale and investment; was looking at this proposal
simply fiddling whilst Rome burns? ZP shared her view that she did not think that this was
the right thing to distract the management team on. OW replied that he shared ZP’s
instinct. The Chair reiterated his request that this proposal be explored.
Session II: Long-Term Drivers of Future Network Shape
Materials for Session III were produced in conjunction with the materials for Session IV, so
Session Ill proceeded on a joint basis with Session IV.
Session IV: Building a Resilient Network Equipped for the Decade Ahead
TABLED and NOTED was a paper, ‘Building a resilient network equipped for the decade
ahead’.
MR introduced the paper, advising that retailers were looking for new ways to attract
customers into their businesses. MR advised that he wished to speak about macro trends
and had selected 5 drivers that we should be having some conversations around. External
views had been sought as well to try to understand what factors would make a difference.
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MR noted that automation was on everyone’s minds, and that a lot had been learnt during
the pandemic on automation. Supermarkets were now operating on the basis of 80% of
customers self-scanning. We knew that we needed to push on with automation, however
that equally the self-service demographic was difficult. We also knew that our strategic
partners were investing in this. As we approached the 3-year plan, MR shared his concern
that if we did not look to invest in automation now, that we may miss the boat.
The second macro trend MR wished to raise was the continued shift to omnichannel digital
purchasing from sales in bricks and mortar. The third macro trend was people shopping
nearer to where they lived — this provided opportunities for the Post Office and played to
our strengths and our sense of community spirit. Village sizes had swelled as a result of the
pandemic, and we needed to take stock of where we needed to be and where we locate
new branches and in what format going forward.
Another macro trend was the shift to experimental shopping. This increased dwell time and
we needed to understand what the social connections were. We thought that these
experiences needed to be simplistic, clean and in the moment. The fifth macro trend was
the emphasis on sustainability. We needed to think about physical places where we might
want to be, for example in garage forecourts that were just EV, which is where customers
were going to be.
The Retail team were working with the Company's strategic partners to get support and
looking at how we could work in partnership to achieve what we needed to. For example, K
Secretan had a wonderful conversation with Compass last week on Hospitals and exploring
partnering options.
MR asked whether the Board agreed that these are the right 5 trends to be considering. The
Chair advised that he was in agreement with this list. TC advised that the thing that was
missing for TC was logistics. ME advised that the team hadn’t looked at items adjacent. AC
queried how permanent localism was. For example, if we go forward 5 years is it going to be
going back to City centres? MR replied that there were no signs of localism receding for the
moment. EJ shared his view that the focus needed to be on consumers desired immediacy —
that is, how do we deliver what customers required immediately and it was about being at
the point of need. This was why Drop and Go was important. EJ queried how Post Office
connected with the younger generation now. There was a huge opportunity with a market
that did not connect with us at the moment. LH agreed that the Company had an existential
question — how did we connect with the younger generation. EJ suggested that the Post
Office could start the journey with the younger generation via ID verification, and PUDO.
ME turned to presenting advising that the Retail team were looking at a number of items to
stress test in order to forecast over the next 10 years. In terms of cash and PUDO the Retail
team had looked at both upside and downside. The Retail team had not assumed any new
big product lines were introduced.
In terms of the shape of the network, the absolute numbers were less important than the
corrections they were telling us. In terms of the optimum number of branches, this was
around 8,000 — 9,000 with a shift in format. This reflected a point TC had made yesterday —
the issue was not so much about the shape of the network as the format. EJ queried
whether we were saying that there was no outreach, no legacy and all of that was replaced
by Drop and Go. ME advised that outreach would be maintained. Beyond this we would
need to bridge the gap between the commercial view and what BEIS might require. LH
queried the ways in which the future network would be different to what we have today.
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ME replied that the difference was essentially in the format mix. AC queried how people in
communities felt about Drop and Collects. ME replied that responses varied; it could for
instance prompt a different response if we are replacing an existing branch with a Drop and
Go, as opposed to installing a Drop and Go where there was previously no service provided.
LH advised that we would need to re-condition customer's expectations over time and
ensure that services were targeted to the people who needed then
‘The Chair asked whether there was a data base that existed holding information on each _
Post office as to how much we were making, staff and costs. If no data base existed could
the area managers find this out and this seemed to be very basic question. ME replied that
the information would be the Postmaster’s personal data and we would need to persuade
them to give this to us this; we had asked this question of Postmasters previously and they
had not been forthcoming. The Chair advised that this information would be useful in order
to assess different parts of the estate; we had asked this question 5 or 6 times and have not
had this information. ACTION MR advised that the team would take this away and have a MR
fresh look at it, CS touched on the reaction of the Minister earlier today, and what our
TC thought that we were very schizophrenic on this; if there was one thing
‘that We need to do it was to land this point and deliver on it. EJ noted that there had been a
lot of historical debate on Mains and Locals — the customer did not know what they are
walking into, however. We needed to make it easier for the customer to know our
capabilities before the customer walked in. MR agreed with this. CP queried how proposing
‘tc replied that BEISiiR
IRRELEVANT
true commercial scale heb and get this understood. It was time to get to the end
position. TM noted that it would still take time to migrate to a revised model. BT asked
whether the approach to BEIS could be that this is what we would we need to do to run this
as a commercial business, and this is what we need to do, and to give them the number. TC
advised that he would add something additional to this, which branches should do cash and
banking; this should give some insight into the true cost that the banks should be paying for
cash and banking.
The Chair referenced the case studies that were discussed earlier and queried what role the
access criteria played, as there must be some scope for making coverage inside cities better.
ME advised that the case studies showed that the access criteria was less of an issue. For
example, in one particular location we had 4 Post Office branches — however we and
customers would be better served by one mains, 3 locals and 2 Drop and Collects in this
space. TC noted that this was the conclusion of KPMG work a few years back: we needed to
reduce the number of mains and put in locals and Drop and Collects, so why had we not
been able to deliver on this. ME advised that Drop and Collects were only implemented if
they were within half a mile of a Post Office, given the strong emotions of Postmasters
around Drop and Collects. AC queried whether we could implement 1000 Drop and Collects
by 2025. ME advised that in theory we could deliver this although it might be tight. NR
commented that this issue raised the core problem of modern franchise businesses -
cannibalisation. The Chair agreed that he could see that issue here, so the best thing to do
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was to open more Drop and Collects and to re-distribute Post Offices to the areas where
people lived. This could involve for example closing a Mains but say opening 2 smaller
format branches. The question remained as to how to make the formats better for
Postmasters. EJ advised that he was concerned that Postmasters would receive work of a
lesser calibre and the better work would go to other carriers. NR agreed that the issue was
competition. ME noted that the Mains were some of the best performing branches for the
Post Office. The Chair noted this, however commented that there was something
inconsistent in how the Company was making money and how the Postmaster was. TC
advised that the Company could present to BEIS detailing that we would like 9,000 branches
however we could not execute on it. AC contributed that alternatively we could say we can
execute it on, and that BEIS needed to waive the 11,500 requirement, however BEIS would
need to recognise that it was going to be a brutal process to get there. BEIS would need to
lead on this policy. TC queried whether there were problems with changing between branch
formats. AC advised that the Company had the option of providing notice. TC took the
point noting that if the Company relied on churn the wrong branches would go. AC noted
the difficultly in that we could not execute under current government policy. EJ queried
how the reconfiguration mentioned in the paper fitted with hub and spoke. ME spoke
through this and the use of the retailer to host the Postmaster — this was a model we would
like to put into more locations. EJ shared his view that this would play to a lot of things
Postmasters would like. The Chair noted that one of the issues we had with Postmasters
was that they were trying to operate their business generally in a high premium site,
meaning the only way they could do this was if they received more and more remuneration.
There was something our remuneration structure that could need revising — paying the
same amount for every transaction was perhaps not right and there were some Postmasters
that were suffering because of this. ME advised that exceptional payments were provided
to some branches, similar to what we did with the rural support payments. The Chair
observed that there could be other ways to distribute remuneration.
The Chair sought to summarise the key points covered, being that the optimum commercial
network size was around 7,000 — 8,000. It would take funding to deliver this number. The
question was how we delivered this number of branches and what the trade-offs would be.
The themes of community benefit needed to kept high on the agenda.
The Chair advised that we could assume people would need to transact less in retail
generally. However, if you were in a remote village and previously there was a Post Office
which subsequently closed, was there a way in which to satisfy that person. AC replied that
this person could be serviced by way of outreach. The Chair asked whether there was any
way of dealing with this. It was going to be difficult however was there a point at which we
could say things were going to be online and certain customers needed to go online. EJ
noted that there were many companies investing in this the younger consumer market and
queried what 15-year-olds would want to do with us in 10 years. Carla agreed with this and
queried why this cohort would go to bricks and mortar. LH shared her view that businesses
would be operating by way of drones. CS agreed with this, noting that drones or robotics
would be used however people would go into Post Offices for social contact. The Chair
agreed with this, however noted that if we were going to provide a social space then we
needed to get value for money from the government for this. AC shared his view that the
best thing for Postmasters to rely on going forward was several companies picking up
parcels every day — this was the only example AC could think of where we might become
more active in a physical sense. EJ noted that Post Office was very good at owning last in
the market things — for example cash — and that we were very competent at being where
no-one else was. MR advised that most retailers were designing stores of the future; we
were not doing this. LH noted this, however observed that this sort of activity may not be
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affordable for us now. Co-op had undertaken this with Microsoft though, so perhaps
choosing partner to do this could be an option for us at this point.
with this, noting that we didn’t have the funding so were we constrained in our journey. ME
advised that there were things we could do, however without capital it was a slow process.
‘ ~ -
VANT.
The Chair called for any further contributions. There were no further contributions.
Any Other Business
There being no further business the Chairman declared the meeting closed at 15:19.
Chairman Date
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MINUTES OF AN ADDITIONAL MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON
THURSDAY 18 AUGUST 2022 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 18:00 PM*
Present: Tim Parker Chairman (TP)
Tom Cooper Non-Executive Director (TC)
Carla Stent Non-Executive Director (CS)
Zarin Patel Senior Independent Director (ZP)
Lisa Harrington Non-Executive Director (LH)
Saf Ismail Non-Executive Director (SI)
Elliot Jacobs Non-Executive Director (EJ)
Ben Tidswell Non-Executive Director (BT)
Nick Read Group Chief Executive Officer (NR)
Alisdair Cameron Group Chief Finance Officer (AC)
In attendance: Dean Brindley Senior Assistant Company Secretary (DB)
Martin Edwards Network Strategy & Delivery Director (ME)
Brian Gaunt Non-Executive Director (BG)
Tracy Marshall Retail Engagement Director - Postmaster Effectiveness
(TMa)
Paul Liddiard Head of Postmaster Remuneration Development (PL)
Action
1. Welcome and Conflicts of Interest”
A quorum being present, the Chairman opened the meeting. The Directors declared that
they had no conflicts of interest in the matters to be considered at the meeting in
accordance with the requirements of section 177 of the Companies Act 2006 and the
Company’s Articles of Association.
2. Postmaster Remuneration
1. The Chair took the paper as read and invited NR to give an overview and the outcomes
to be considered. NR explained that initial discussions had taken to place to brief the
Board ahead of the call but advised that it would be worth reprising some of the areas of
the paper. NR stated the current position on remuneration was understood by the Board
highlighting the significant changes over the last four years, noting improvements in
financial years 18/19 ,19/20 and 20/21 with setbacks encountered in 21/22. NR further
highlighted the paper has been influenced by the feedback received from the work
carried out by TMa in liaising with the NFSP, Voice of the Postmaster Group (“VPG”) and
600 other Postmasters. NR invited TMa and ME to provide additional comments for the
Board.
2. TMa made reference to the VPG and the recent activity arising from the associated
Facebook page, confirming the current number of members to be 611. TMa noted that
the page consisted of 6 administrators and identified the lead to be B. Johnson, who has
a branch in Shrewsbury. TMa highlighted that the group had called for an urgent response
to increase remuneration to support Postmasters and their businesses with the current
surge in energy prices and difficult trading conditions. TMa further highlighted that the
} Participation in the meeting was entirely via Microsoft Teams from participants’ personal addresses. In such
circumstances the Company's Articles of Association (Article 64) require that the location of the meeting be
deemed as the chairman's location. However, it was not deemed appropriate to record personal addresses on
the Company record. As such, the Registered Office is recorded as the meeting location.
2 This meeting is an addition to the scheduled meetings so standard items such as minutes and matters arising
have been carried over to the meeting on 27" September 2022.
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expectations of the increase from the VPG were unrealistic considering the same trading
conditions would apply to POL stating that the group have also expressed views on the
NFSP, citing a lack of independent representation and have requested more transparency
around POL’s 3-Year Plan (“3YP”). TMa informed the Board that members of the VPG had
sent a total of 101 emails directly to NR raising around 300 issues, noting that the vast
majority were related to remuneration including, increase of remuneration, information
on increased to cost of living experienced, concerns over the impact of MDA2 and non-
delivery of objectives on network transformation, particularly the removal of the fixed
element of remuneration for the main and local branches. TMa confirmed that a response
was sent to all emails and as well further engagement from POL with B. Johnson and
members of the VPG, reiterating their view for an increased remuneration. TMa further
confirmed that VPG had created a public petition, and to date had collected 1,230
signatures, to call on support for Postmasters requesting an increase in remuneration
from POL., where VPG have justified the request owing to the increased cost of living and
a lack of support regarding holiday/sick pay.
TMa made reference to the NFSP and informed the Board that meetings had taken place
with Calum Greenhow in respect of a status update on remuneration proposals,
confirming that Calum’s view was that the proposed amounts failed to meet expectations
and particularly mentioned focusing on banking transactions. TMa added that NFSP were
not comfortable with the actions of VPG and did not support their approach to raising
concerns and advised POL to deal with matters in a sensible way. EJ made reference to B.
Johnson and queried whether he was a current Postmaster. TMa confirmed B. Johnson
was the Postmaster of the branch in Kerry. EJ informed the Board that he had attempted
to join the social media page of the VPG, which had been rejected but instead received
an offer to have a discussion. EJ confirmed that he had not yet replied, wanting to update
the Board first.
NR stated that all thought had been given to the concerns received from Postmasters,
acknowledging the importance of swift action, highlighting, the difficulties in satisfying
concerns to full expectations. NR explained that the proposal will demonstrate POL’s
response, not as to remedy expectations of Postmasters in full but to offer a scheme of
activity that will allow for progress to made. NR advised that it was important to recognise
that the key element to consider was prevention, explaining that of 89% of branches that
had churned this year, 47% had done so owing to financial reasons and that the proposal
should be viewed with this in mind. NR assured the Board that the proposal had been
produced with the input of existing Postmasters and Postmaster groups sourced from
TMa’s engagements and various forums including identifying the underlying issues with
Banking/Banking framework on withdrawals and deposits, work completed but not
remunerated and areas that will offer satisfaction in part of expectations.
ME advised that a detailed description was contained within the paper and summarised
that the proposal was made up of three main components consisting of: an increase in
banking deposit remuneration, correcting unremunerated transactions and measures to
cause immediate benefit for Branches this year, which would be addressed later in the
discussion. ME explained that Banking was considered the cornerstone of the proposal
package, over the alternative areas of Mails and Fixed Remuneration, as it offered the
broadest scope of impact and this was supported by a member survey conducted by the
NFSP, highlighting Banking was considered in need of much focus. ME further explained
the reasons for not using Mails included fallout from the recent MDA2 process and that
top-up payments were still being made, this year, to Branches who are less or under the
MDA2. ME advised that Mails should be reviewed for the next financial year. ME
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would be coming in force as of January
Jand that POL had been signalling to Postmasters that BF3 would be used as an
“IME further confirmed that with the new
agenda had been addressed. Referring back to his earlier point on immediate benefits to
Branches, ME informed the Board that a was proposed that one-off payments be made
IRRELEVANT _
6. NR expressed that the objectives and reasonings behind the proposal should be clear and
indicated from previous correspondence that it was expected that the topic for discussion
would be whether the amount being offered was acceptable and would it be accepted by
Postmasters, highlighting: incentives leading up to the Christmas period and what that
would look like post-Christmas and to consider if there is an opportunity, to award a
dividend or an incentive share if year end targets are met.
7. NR invited AC to address affordability of the proposal before taking comments from the
Board. AC informed the members that it had been forecasted that POL would end the
financial year ¢ trading profit acknowledging that the forecasted figure does
not reflect the current to-date profit amount stating this was due to the drag effect of
Mails and cost pressures. AC explained tha had been calculated for the current
9. NR summarised that alll points had been presented to the Board and that a decision would
be required on agreeing the proposal subject to a revision of figures to be presented in
the November conference with incentive information in Mails and Travel. NR
acknowledged that the main area of concern for EJ and SI was around the one-off non-
consolidated payments and understood the current amounts suggested would not solve
issues currently faced by Postmasters but would demonstrate that POL is listening to
Postmaster concerns.
10. SF confirmed to the Board that his view on the proposal as it stood way under
expectations, declaring the amounts should be at least doubled to cover the increase of
costs outlined by Postmasters. SI informed the Board that, in respect of the one-off
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payments, the amounts proposed did not even compare to that which is awarded as a
staff bonus and would not cover the increased expensive caused by the cost of living
questioning the fairness of the decisio IRRELEVANT i
IRRELEVANT
. SI addressed the funding issues raised by AC and stated that efforts should be increased
to find additional funds, reiterating the importance that the proposed figures should be
increased. With reference to Banking being the cornerstone for the proposal offer, SI
agreed it was a good starting point at doubling rates but would still not satisfy on this
basis alone, adding that it was underappreciated how much effort Banking requires and
that the risk to reward ratio is still unbalanced. SI stated that from feedback received and
from his own experiences, high street and town centre branches differ significantly in
Banking transactions and the current proposed figures would not provide as an effective
reward as initially perceived. ME confirmed that Town and City branches were more
indexed towards Mails as they have not yet experienced the same number of Bank
closures, justifying how the -off pavment_was being based. on Mails sermuneration,
confirming that POL received: IRRELEVANT
which allows for a case-by-case assessment to be carried out for exceptional
remuneration much of which will be allocated to the struggling Town and City centre
branches. SI explained that prior to the meeting an alternative to the proposal had been
suggested to ME in giving Postmasters a short-term fixed income to the end of the
financial year, enabling POL as a business time to focus on revising remuneration for the
next financial year. SI advised that all suggestions should be considered and reiterated his
view that the amounts in the current proposal are not enough to offer Postmasters.
EJ offered his comments on the proposal agreeing with SI, that amounts offered were
underestimated and would not meet Postmaster satisfaction, totalling on average, !
{which does not accurately reflect the overall increases incurred. EJ also
supported the view that the proposal was a critical move for POL to demonstrate a clear
understanding of Postmaster support and this should be reflective in the budget,
highlighting that in other industries, strike action was being taken in order to achieve
double of what is being offered here and expressed that Postmasters would prefer not to
be left in a position where such measures need to be taken. EJ accepted the suggestion
of further revision on renumeration to be presented in November and then again in
March in preparation for the minimum wage increase but still advised the initial amounts
should be increased ahead of Tuesday's conference. EJ reminded the Board that the
energy cap does not to apply to businesses so figures would be severely unbalanced when
compared to the increased costs experienced by individuals with no limit to that what a
branch can incur. EJ expressed concern that if the proposal was submitted unrevised it
would indicate that the input of the Postmaster has been disregarded. EJ Informed the
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Board that while he understood AC’s point on affordability, it was respectfully suggested
that POL seem to be able to consistently find additional funds, of which, the Board signs
off on huge over-run costs on various projects and the same should be applied to the
proposal without debate, especially when some of the over run costs far surpass that
what would have been required for a fairer offer. EJ expressed to the Board that POL
IRRELEVANT
‘products and attributed a large portion of the current success with the products was a
result of Postmasters and Post Offices delivering a trusted brand on the high street but
stated that there is no incentive or reward in place for doing so, welcoming the
suggestions of profit share but advising there still a lot to be considered in devising a more
appropriate offer. EJ acknowledged that challenges were unlikely to be met by Tuesday's
deadline but accepted an offer is expected to be made. EJ agreed with the proposal of
doubling Banking deposits and the importance of raising remuneration but highlighted
that a one-off/lump sum payment would be the correct response to short term challenges
urging POL again to revise figures.
ZP addressed EJ and acknowledged the financial burden experienced by all individuals
and in particular Postmasters, due to very little leeway. ZP queried that if the proposed
amounts were to be doubled what short term compromises could be made, exampling in
another organisation, staff were being asked to take a pay-cut to support those most in
need. ZP suggested that a temporary hold be placed on Belfast Exit or SPN advising that
it’s owed to Postmasters that POL have gone through the process of exploring areas of
compromise or take higher risk elsewhere for a short-term hit. ZP agreed overall the
amounts were not appropriate but understood that challenges faced with affordability.
The Chair expressed the key point was to understand the implications of increasing the
offer. AC informed the Board that conversations on how figures could be revised had
taken place outside of the meeting which could be shared with the Board, explaining that
AC was sceptical about cutting operational costs, citing recruitment costs are accepted to
be 20% more expensive than in-house staff and was not confident that lower operating
costs could be achieved over time. AC confirmed that consideration could be given in
reducing central costs, but that would in itself have cost implications to which there is no
funding available adding that it unclear how, when and with what chance of success, POL
can ask for additional funding from Government. indicated that on the basis that POL
ELEV ~ _ it was unlikely
IRRELEVANT 3
additional requests would be considered and offered an altemate suggestion of
borrowing money from Government in order to cut POL’s costs but highlighted the same
uncertainty of success. AC addressed the final option would be to automate Head Office
processes but pointed out the obvious cost implications of redundancy resulting in the
same funding issue. AC confirmed that the suggestion of stopping Belfast Exit is being
actively explored. AC advised that when the Board reconvenes for 3 year planning in
September all of the information on the suggestions explored and the outcomes will be
shared.
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"IRRELEVANT
16. BG asked whether there was any guidance from Postmasters indicating what would be
deemed an acceptable offer as this would provide a total of funding required and
subsequently highlight POL’s ability to meet expectations or at least be able to close the
gap. EJ explained that in other businesses, between 5.5% — 6% was being offered against
what will be at 14% inflationary market reminding the Board that Postmasters are not
just individuals in every case and that their overheads are reflective of areas that of far
greater consequence when taking into consideration issues such as an increases to the
National Minimum wage and uncapped energy costs. EJ advised that the proposal
amount should be at least doubled in order to be considered a serious offer.
17. The Chair expressed that the Board was agreed on the sentiment of being able to offer
more to Postmasters, noting EJ and SI’s suggestion of doubling the initial amount and the
fact that an offer is expected to be made on Tuesday. The Chair also stated that while
supported, any attempt to increase offers would require the proper time to explore
options and the implications of where the additional fund is pulled from. The Chair
suggested that if a more suitable one-off payment could be agreed then this could be
announced on Tuesday together with assurance that POL will continue to review
remuneration with the intent to provide further payments in the future.
18. Si advise that any requirements for time would need to be supported with a strict
deadline to give Postmaster’s assurance of an outcome is provided in a timely manner.
19. The Chair questioned whether the conference on Tuesday could be delayed allowing for
exploring points raised and revise the proposal. NR advised against rescheduling the
conference stating it was vital to proceed as planned to meet the calls to action from
Postmasters. NR agreed with the views on a short-term fix with intent of providing future
payments in November and stated that the proposal as it stood had been created with
this in mind and within the affordability of POL, advising against the suggestion of
doubling initial offers without proper investigation.
20. TC asked NR whether he believed the proposal, as presented, would be accepted by
Postmasters at the upcoming conference. NR confirmed that while it was accepted that
not all expectations in terms of reward would be met, NR confirmed the proposal did
demonstrate a credible plan reinforced with signalling additional payments in response
to calls for action. TC raised concerns around signalling too much ahead of time and that
consideration would need to be given BEIS if a funding request is likely to made within
the next twelve months highlighting that while he agreed with the suggestion of a profit
share, it was viewed that the language around it can be contentious. NR agreed with TC
responding that additionally to the option of profit share, options around a dividend or
incentive scheme were also being explored to provide a more attractive long-term
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solution, TC reiterated ZP’s earlier comment regarding the pressure for POL to identify
cost savings from the 3YP and what can be done to compensate the business.
The Chair informed the Board that it is recognised that NR and his team are confident to
deliver the proposal in its presented form and that strong opposition had been received
from EJ and SI in respect of the amounts that had been suggested. The Chair explained
that despite strong arguments put forward for an increase, the Board could not ignore
the fact that without proper investigation into funding any increase would fall under what
POL can realistically afford at present. The Chair asked EJ and SI to clarify their position
on the basis that at the conference the proposal is made with strict deadlines in and place
with signalling of future payments. The Chair explained that progression is key and
wanted to avoid a deadlock situation between Board members. EJ agreed that the
announcement should not been delayed and POL would need to present something
adding that even with the assurance of continued remuneration review and strict
timelines the amounts suggested for the one-off payment are still not enough to be
considered a credible offer. EJ advised that an approach similar to how POL responded
to Covid should be applied here in that support was reviewed on a month-by-month basis.
EJ added that it was viewed that the numbers calculated had been flattered by the
22.
23,
24.
2
a
. SI reaffirmed hi
26.
2
N
28.
ie
EJ stated that he could not support the proposal in its current form.
The Chair expressed the importance of finding compromise to move forward and come
to a decision that would satisfy the views of EJ and SI, noting their support would be key
in the outward perception of POL to Postmasters. The Chair stated that it would not be
possible to make a decision during the meeting to increase amounts without the proper
investigation and suggested whether support could be gained from focusing on how and
when amounts could be revised and increased to meet expectations.
With regards to revising the figure of the proposal, SI suggested he would accept the
Board taking the decision to a vote by a show of hands. SI acknowledged the implications
of cancelling/rescheduling the conference but felt it was necessary in order that the
proper revisions could be applied and suggested that he would be comfortable with
publicly identifying his opposition as the reason to postpone the announcement with the
intent that POL would reconvene in a structed manner with assurance of increased
amounts. SI supported earlier comments from CS and LH in that the proposal is deemed
rushed due to a kneejerk reaction towards activity of various Postmaster groups.
insisted theI ~ IRRELEVANT.
Iready discussed.
The Chair asked the Board to confirm its position given the opinions expressed
throughout the call.
. AC supported the proposal.
BT agreed that Postmasters should receive more and would like to have time to explore
other options and would prefer the proposal to be used as short-term fix but supported
the proposal on the basis that the remuneration would be investigated heavily with intent
on delivering an acceptable revised offer at the next conference.
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29. BG agreed with the suggestion of BT and confirmed support of the proposal on the basis
30.
31,
a2.
33.
o
34,
35.
36.
3
N
that the remuneration would be investigated heavily with intent on delivering an
acceptable revised offer at the next conference.
CS confirmed support of the proposal under the provisions as suggested by BT and
supported by BG.
NR reminded the Board that the proposal was the result of a Postmaster call to action
and it demonstrates POL has listened and responded accordingly, highlighting it was
critical that this is communicated to Postmasters on Tuesday. NR highlighted that the
fundamental issue surrounds the one-off payment and acknowledged that more could be
done to increase the amount and suggested that an offline discussion would need to be
had on the approach, and this would be delivered together with a set of clear stages on
the payment plan process, with accountable assurances from POL.
The Chair stated that despite views on the one-off payment, it was supported and agreed
that NR had provided strong argument and analysis that the proposal demonstrates a full
assessment of issues raised and the appropriate outcomes, advising the Board to support
the proposal and make a decision on that basis. The Chair advised that the opposition of
EJ and SI would need to be formally noted with the intent that figures would be revised
substantially and presented in November.
EJ stated that he did agree that the proposal had dealt with a number of issued raised
from the Postmasters and an update on those issues was vital but explained that the main
reason for his opposition was the bottom-line figure not meeting expectations.
The Chair noted the comments from members and ask the Board to now consider the
position under NR’s most recent suggestion that the one-off payment would be
addressed urgently for a proposed increase.
ZP confirmed support of NR’s final analysis on the provision that the revised amount could
be agreed ahead of Tuesday.
BT confirmed support of the proposal under the suggested one-of payment revision.
. BG confirmed support of the proposal under the suggested one-of payment revision.
38.
ss.
40.
41.
CS confirmed support of the proposal under the suggested one-of payment revision.
LH confirmed support of the proposal under the suggested one-of payment revision
advising that focus would need to be applied to urgency and pace reflective of approach
to Covid.
TC confirmed support of the proposal under the suggested one-of payment revision.
The Chair noted the support from the majority of the Board and acknowledged strong
arguments form EJ and SI in favour of a figure that was significantly more that than what
was proposed today and noted that support would not be given until EJ and SI could be
satisfied that real progress has been made for numbers to be presented in November.
The Chair asked EJ and SI to provide wording in forming their opposing statements and
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suggested whether the statement could agree to endorse the direction of the proposal
while maintaining the argument that amounts are not enough and should be revised.
42. EJ confirmed that he would be willing to agree to a statement on those points and
welcomed NR’s suggestion of revisiting the one-off payment amount. EJ agreed with the
direction of the proposal but advised clarity would be needed around future steps and
advised that measures taken with Covid support could assisted with how the
communication is shaped.
43. SI asked NR when the revised figure for the one-off payment could be expected. NR
advised that GE would discuss after the meeting with the intent to have a response on
Monday ahead of the conference.
Resolved: The Board APPROVED the recommendations of the proposal on a majority vote
with oppositions received from EJ and SI. The Board’s approval was agreed on the provision
of urgently revised figures for the one-off payment and a clear plan for the payment
process.
3. Any Other Business
There being no other business the Chairman declared the meeting closed at 19:27.
4. Date of next scheduled meeting:
Ordinary Board Meeting — 27" September 2022.
Chairman Date
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5
Action I MINUTE REFERENCE ACTION ACTION OWNER DUE DATE STATUS OPEN/CLOSED iad
No.
1. I 2. Draft Budget 2022/23 I Si concurred with AC’s analysis around the value I Cathy Mayor Although a discussion did not take place I To Close
4) of lottery for Postmasters, which supported cash I Max Jacobi with Cathy Mayor, there is a wider
flow in branch. Responding, CM offered to meet discussion being had on lottery and this
with SI outside of the meeting, to go through the will cover the issue Saf has raised.
Mails Distribution Agreement 2.
The team have done the initial analysis
and the commercial and network teams
will come back to GE once they have
agreed a position.
a 2. Draft Budget 2022/23 I Responding to a request from TG, it was agreed I Al Cameron/ Max Uploaded to the Board Reading Room for I To Close
b) that AC would assist to circulate the Interpath Jacobi the meeting on 27" September 2022.
reports to Board members.
3. Annual Board and EJ noted that there were some interesting Rachel Scarrabelotti Update on 16/09/2022: Deferred to Ongoing
Committee Evaluation divergencies between the executive and non- November Board Meeting.
executive director scores. The Chair agreed with
this and noted that scoring divergences were Update on 22/07/2022: The Board agenda
then different across different areas. The Chair in July was full. An Action Plan is being
requested that the Board discuss the Report at a prepared for discussion at the September
future Board dinner. Board Meeting.
The Board APPROVED the recommended actions Update on 30/05/2022: An Action Plan is
to address points raised and areas which may Update on 30/05/2022:
iectire developnant being prepared based on the
recommendations and will be tabled for
discussion at the July Board Meeting.
4 ‘CEO Report SI advised that the question in his mind was how I Nick Read/ Tim July Board Update on 22/07/2022: This was covered I To Close
4 ‘SPM was balanced against Postmaster McInnes in the Away Day as a part of the Network
profitability. SI thought that we could find Strategy session.
ourselves in a situation where we wouldn’t have Update on 06/05/2022: Tim McInnes has
enough people to operate SPM. Sl also queried already kicked this piece of work off with
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the timing for the network review. ACTION NR
advised that we needed to get this piece of work
kicked off, ideally so we could have this work in
time for the strategy away day.
BEIS. Colleagues will recall this was part of
our conditions within the Contract.
However, it is unlikely that we will have
made substantive progress with BEIS by
the July Strategy day. We will however be
advancing our own work ahead of the July
awayday where we will share our
progress.
CEO Report
¢)
SI touched on software and shared the example
of a Postmaster investing time in undertaking a
customer transaction only to be told at the end
of the transaction that the transaction was
unsuccessful, SI advised that he had raised this
with JS about 6 weeks ago. ACTION NR
undertook to speak with JS on this.
Nick Read/ Jeff Smyth
lUpdate on 16/09/2022: JS discussed
requirements with SI and follow up actions
ere undertaken with product teams to
Ireview requests for change in Banking
ransaction journey, enhancements to MailsI
[Drop & Go and Government DVLA look-up
junctionality. JS to follow-up with product
teams to determine if they agree with
lpriorities in overall backlog (and change
junding is available).
lUpdate on 08/07/2022: JS met with SI to
\discuss a range of Horizon improvements
{that SI would like to see implemented.
These include transaction changes to
IBanking Deposit journey, Mails Drop & Go -I
IAuto-Top-up & SMS, MoneyGram
lexploitation of EasyID, DVLA Rates Look-up,
Stamp Bar-Coding. JS to follow up to ensure
hese requests are included in demand
backlog and to revert to SI with next steps
lby end July 2022.
Ongoing
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d)
2. FY 2022 - 2023 Budget
a)
The Chair queried what work had been
completed on setting an ideal operating model
for the Company, for example, on the basis that
HMU had been completed and the network
corrected. ACTION AC advised that work had
been undertaken in this space previously and
that this work could be refreshed. ZP requested
that we factor into the analysis that we are ina
declining market.
ZP suggested that once a quarter the Board
engage in a deep dive on the 2022/23 Budget, so
that if things weren’t progressing as against the
Budget the Board would have an opportunity to
get ahead of this. ZP queried whether the focus
of the Board would need to shift more to
delivery. NR agreed with ZP’s proposal in respect
of initiating a quarterly review process.
Al Cameron/ Nick
Read/ Tim McInnes
Al Cameron/ Max
Jacobi/ Rachel
Scarrabelotti to add to
Forward Plan
[Update on 22/07/2022: This was covered
in the Away Day as a part of the BEIS
Policy Review session.
[Update on 23/05/2022: The topic will be
included as a potential deliverable in the
\strategy and Policy work on the ‘Future of
Ithe Post Office’ being led by BEIS with
Isupport from Tim McInnes and the
{strategy team.
08/09/2022: Due to the packed agendas,
this has been included in the Forward Plan
for the Board meetings on 01** November
2022 and 28" March 2023.
12/07/2022: 4ncluded-in Forward Plan for
September 2022, 06" December 2022,
28" March 2023,
2. FY 2022 - 2023 Budget
b)
NR contributed that on CU it was clear where we
had made progress, however on HJ this was
much more of a judgement call, and that this was
why J Smyth was being deployed to work on HU.
TC responded that even if there was uncertainty
this matter needed to come back to the Board.
ACTION NR committed to bring this matter back
to the Board.
Nick Read/ Rachel
Scarrabelotti to add to
Forward Plan/ Jeff
‘Smyth
Sept Board
November
Board
Update on 16/09/2022: Propose that we
provide a noting paper to November
Board that covers Phase 3 HU deliverables
(which will be work in progress) and our
overall status position versus HUJ findings,
including planned NBIT carry-forward
actions.
Update from JS on 08/07/2022: I would
propose that we update Board on overall
HU progress in September (subject to
other priorities and slot availability). We
will be able to comment on areas where
we have closure of an HIJ finding and the
areas which are work-in-progress or
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scope.
9. 2. Minutes and Matters ACTION ZM committed to updating the Board on I Zdravko Mladenov Sept Board Update on 16/09/2022: We will update in I Open
Arising the time and cost implications of the decision November November due to congestion in the
and to return with an update to the July Board Board agenda in September. Verbal update to be
Meeting. provided in the regular SPMP item.
Update on 08/07/2022: The update will be
provided through the CEO Report, with a
formal agenda item deep dive in Sept or
November as part of the regular SPMP
update and slot.
10. 4. CEO Report ACTION NR detailed one measure that was being I Nick Read/ Zdravko Sept Board Update on 16/09/2022: We will update in I Open
FT taken was separating out the IT helpdesk and I Mladenov Novemb November due to congestion in the
bringing this back to ZM’s team. A further Board agenda in September. Verbal update to be
update to the Board would be provided on this. provided in the regular SPMP item.
NR queried how much self-help it was reasonable Update on 08/07/2022: The Board will be
to expect from Postmasters and referenced updated on the transfer of the IT Helpdesk
printers — if Postmasters for example were to to Technology via the CEO report in
clean their printers regularly this could contributeI September.
significantly to reducing printer issues.
Prior to that, GE will review investment
options for the Helpdesk, so a decision on
any additional funding can be made prior
to updating the Board.
11. 4. CEO Report Sl advised that he had had Postmaster’s offering IMartin Roberts/ October Board I Update on 26/08/2022: No change to the I Ongoing
to buy their own tablets to assist them tomeet I Martin Edwards/ status at present. Passport volumes have
8) customer demand, with some Postmaster’s Barbara Brannon not recovered, and early indications are
indicating that they would be willing to buy 2 or 3 that HMPO plan to expand their face to
tablets. SI queried whether this would be face fast track services further for next
possible. ACTION NR undertook to investigate summer. There have been no recent
whether this was possible. LH observed that this requests for a second tablet, but we will
could provide a useful Segway for other need to review as part of overall device
conversations with Postmasters. strategy for NBIT depending on the
number of products which are core to that
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platform, and those which could be
transacted on mobile devices including
other mails carriers. Wider usage than just
government services would change the
business case and also the number of
devices needed across the network. I don’t
expect any sort of a decision on this within
the next quarter.
Update on 04/07/2022: Initial assessment
completed by Commercial & Retail. In
principle we would be supportive of
introducing a postmaster self-funded
option, and indeed this is an approach
we're looking at more generally for
hardware like SSKs which go beyond the
‘core’ offer to PMs.
However, for tablets specifically would not}
recommend pursuing in short-term given
the recent sharp drop in passports
volumes, as spreading declining volumes
across more branches could undermine
the proposition for existing tablet
branches. Will review position in the
autumn in light of latest trading and
broader approach to tech co-funding.
12. I 5.1 Financial Performance I [Individual product profitability report] AC Al Cameron 30/06/2022: Product profitability Open
Report advised that last time this report was run it had outcomes are being reviewed by the CEO
b) shown that every product was profitable and GE and will be circulated to the Board.
however margins varied considerably. ACTION Al will provide a brief, verbal summary on
AC advised that management had been 12" July.
refreshing this report and would bring this report
back to the Board in July.
13. I S.d Financial Performance I Si queried what the average pay-out per branch IMax Jacobi/ Martin We have addressed the immediate need I To Close
Report was. ACTION MJ advised that he could work out I Edwards with higher remuneration as part of the
August package, The underlying question
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c) what this out and advise SI. will feed into Martin Edward’s ongoing
work on remuneration principles.
This has been addressed as part of the
wider conversations on Remuneration that,
Martin E is having with the Postmaster
NEDs.
14. 5.1 Financial Performance In terms of the Local Authority pay-outs, AC Al Cameron/ Max
Report noted that whilst we could determine what the I Jacobi
4 Postmaster remuneration was, the problem was
that we didn’t have sight of what Postmaster
costs are. ACTION AC committed to reviewing
this, with the local authority pay-outs.
15. 6. Joint presentation from I ACTION ZM advised that he would return to the IZdravko Mladenov Sept or Nov Update on 16/09/2022: Delayed. Open
the Network and SPM Board with details on what the upcoming Board Discussion ongoing with Chief Retail
Teams: Deep dive into Drop] significant decisions for the Board on NBIT would Officer.
& Collect and wider Horizon} be. Update on 08/07/2022: The regular SPMP
replacement update will include a deep dive on
Q outstanding decisions.
16. 3.1 Remuneration ACTION Assistance was required from R Taylor _ I Richard Taylor to liaise Update 26/07/2022: DRR has now been. To Close
Committee and his team to finalise the Director's with Angela Williams. updated and will be finalized post
Remuneration Report. The Committee had and Paul Wood Remuneration Committee meeting 26 July
considered the draft however this required 2022.
further editing. NR advised that R Taylor had
been on leave however was due to return shortly
and could assist.
17. 3.3 Nominations Committee) The Committee had reviewed the results of the I Angela Williams Update 26/07/2022: Succession Planning I Open
Annual Committee Evaluation process and the (including succession below the Board and
Committee had considered the extent to which GE level) has been added to the Board
the Committee should consider succession below Forward Plan for 01* November 2022.
the Board and GE level. ACTION The Committee
had determined that given the significance of the
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issue a general discussion on succession should
be had at the Board every 6 months.
18. 3.4 Audit, Risk and ACTION CS undertook to send a full report to the I Carla Stent Completed. To Close
Compliance Committee Board on the central items the Committee had
5 considered, especially in relation to the
Committee’s approach to provisions [CS emailed
the Board this report 12 July 2022 at 23:22].
19. I 3.4 Audit, Risk and The second phase of the Inquiry was due to Richard Taylor 15/09/2022: ARA 2021/22 planned tobe I To Close
Compliance Committee _I commence in September; it could be good to published in December 2022. Media can
b) publish the ARA ahead of this. ACTION LH shared report verbatim comments; Press Office
her view that there was likely to be no good time equipped with lines to take e.g. explaining
for the accounts to be laid, and requested that remuneration / bonuses for colleagues as
management be ready and front footed to well as Executive Board Directors,
respond to reactions on the ARA, especially in
relation to comments on remuneration.
20. 3.4 Audit, Risk and Payzone represented a significant debtor for the IOwen Woodley 08/09/2022: A decision was made at the Ongoing
Compliance Committee
)
Company, and it had been queried whether more
of a provision was required for this. ACTION EJ
questioned whether it was intended to move Pay
Zone to NBIT. AC advised that management
were working towards a conclusion on this and
the general viability of the entity, and O Woodley
was leading on this.
August SPM Steerco to use Payzone as the
mechanism to deliver NBIT for Legacy Pre-
pay/Bill Payments. Using a Payzone device
for Bill Payment in-branch rather than
building a solution into NBIT will help to
de-risk the delivery of the overall NBIT
programme whilst adding further retailer
benefits (such as service provision out of
core hours). In order to progress with this
option, we are exploring the potential for
integration of Payzone into POL - for which]
there may be compelling non-NBIT
reasons too. This exploration will take 6 to
8 weeks and if it does not look feasible or
sensible, we will support this NBIT solutionI
via a contractual JV between the two
entities instead. A separate noting paper
on this will be going to the November
board meeting. PZBP has created a 3-year
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plan that shows the business becoming
cash generative by 24/25 and would
enable PZBP to start repaying
intercompany monies from that year.
Clearly, this issue would be addressed
much more quickly if integration proves
feasible.
21. 4. CEO Report BT queried the status of the NFSP Grant Fund Nick Read/ Martin 29/08/2022: The NFSP are now querying
Agreement. NR advised that the NFSP had not I Roberts/ Shaun ‘one last clause that relates to the VAT
brought the agreement back as yet. ACTION NR _IKerrison treatment of the grant payment.
agreed to update the Board and provide a note We are arranging a 4-way meeting with
once the NFSP Grant Fund Agreement had been our respective tax and legal teams to get
settled. this resolved.
22. I 5. Improvement TC queried the items that were outstanding from IDan Zinner Included in Board pack for the meeting on I To Close
Development Group Update] an Oxblood red perspective. ACTION DZ directed 27" September 2022.
TC to the section of the paper detailing the
relevant Cll items and noted that the outstandingI
HI items were not in paper and were still being
progressed, however DZ could provide a list.
23. 6. Financial Performance The Chair queried whether the need to disburse I Andrew Goddard Andrew has spoken to both Saf and Elliot, I To Close
Report cash might come up again. NR advised that it specifically in relation to the Postmaster
would. ACTION SI requested a session be Remuneration for the payout transactions
arranged between SI and EJ with A Goddard to for government benefits. Andrew has an
review what was in the pipeline. outstanding action to meet up with Saf in
Preston/ to the Payzone offices.
A broader discussion took place on
Postmaster Remuneration on 18" August
2022.
24. I 7. Draft Strategic Planand I ACTION AC advised that the paper represented I Al Cameron/ Max On the Board agenda for 27 September I To Close
Options Review the initial work that had been undertaken by the I Jacobi 2022.
finance team and that the paper would be
returned to the Board in September with a
recommended way forward.
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25. I 9. Appointment of External I It was RESOLVED that PwC be appointed as Tom Lee 23/08/2022: A paper is due to be Ongoing
Auditors external auditors for the Company for the submitted to Board in September, to
2022/23 financial year, subject to the Board outline the procurement route for
receiving a further recommendation from the retaining PwC for a further 2 years. Subject!
Audit, Risk and Compliance Committee on PwC’s to Board agreement we'll then seek formal
fees, scope, and terms of engagement. ARC approval for the FY22/23
reappointment of PwC.
26. 11.2 HMU ~ Funding ACTION The Chair requested that the HMU team I Simon Recaldin A POL Board written resolution and cover I Ongoing
Requests prepare a recommendation in relation to the paper was circulated on 26" July 2022. An
second phase of the proposed NBW engagement updated written resolution was circulated
and that this be circulated by way of written on 03"? August.
resolution for consideration.
27. 11.3 Public Inquiry Update I ACTION BF advised that a note would be Ben Foat Completed. To Close
and Funding Request prepared and sent to the Board summarising the
key happenings at the day 2 hearing. [M
Underwood emailed the Board this report 18 July
2022 at 23:08).
28. 12.1 Belfast Exit Funding JS advised that he was concerned about Fujitsu; IJeff Smyth Update on 16/09/2022: The Belfast Exit To Close
y whilst their behaviour was not malevolent, they Board paper deals with the issues raised.
simply did not have the resource required to In summary, AWS delivery scope has been
conclude the Project. ACTION CS queried increased to transfer all feasible software
whether we could arrange for AWS to take deliverables (PODG, APOP, Data Lake)
Fujitsu’s elements of the Project. JS advised that from Fujitsu, but AWS are unwilling to
this had been tried previously however JS would adopt an overall systems integrator
pursue this, JS advised that the team was position (as AWS don’t offer production
physically with AWS 2 - 3 days a week. support services). Additionally, role of
AWS for Belfast Exit will change
significantly if “Stay in existing Data-
centers” option is selected.
29. I 12.1 Belfast Exit Funding ACTION The Chair requested that JS return to the I Jeff Smyth Update on 16/09/2022: Belfast Exitison I To Close
») September Board to report on the technical the September Board agenda; paper will
solution and on overall Project costs. provide updates on technical solution and
programme costs.
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30. 13. Procurement/ Approval I ACTION AC noted that BG was very experienced I Brian Gaunt, Russell The team have supplied Brian with a 2- To Close
Requests in third party logistics so suggested that RH and_I Hancock, William page briefing pack with the caveat that
WP meet with BG. BG advised that he was Porter, Stephen they can walk him through the pack via a
familiar with all the main players in the market, I Faulkner-Atkinson Teams meeting, if required.
however thought that perhaps the golden
triangle location was not the best given the
competition for labour.
31. 13.2 Payment Card IndustryI ACTION TC advised that he may have misread theI Al Cameron/ Jeff Update on 16/09/2022: Approved costs. To Close
‘Compliance Funding appendix to the paper, however queried whetherI Smyth for the PCI-DSS programme total cost
the request was outside the original estimated envelope is £24.90m. This includes the
programme total cost envelope. CS advised that funding request of £2.57M relating to the
she thought the initial approval was under the transfer of Audit SAN activities from the
amount quoted in the paper. AC advised that he BEX Programme.
would arrange for this to be checked,
32. I 15.1 ATM Banking Strategy I ACTION EJ shared his view that he did not think I Nick Read/ Tim ATM Banking Strategy Programme: To Close
Programme: Lessons Learnt I that the paper captured how badly the Mclnnes Lessons Learnt and AEI Assurance Review
and AEI Assurance Review I programme went and did not present a fair is on the Board agenda for 27°" September
appraisal of the situation. NR advised that 2022.
management could take the paper away and
bring the item back for discussion to the
September Board Meeting. The Chair requested
that this item be included as an early item for
discussion on the Agenda for September.
33. I 16.1 Health & Safety Report) ACTION EJ advised that the branch robbery Martin Roberts/ We are planning to include in future To Close
stories should be shared and suggested that MR I Alexandra Burrell communications, however recently with
do this in his weekly update to Postmasters. conferences and Post Office remuneration
we have had to prioritise the weekly
newsletter. We did however communicate
across the network via the Field Teams.
Alex (Head of Postmaster
Communications) will plan to include
hopefully during September with latest
data.
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34,
Session II: Deciding the Way
Forward on Mails and
Strategic Commercial
Considerations
Post Office Lit
ACTION The Minister had advised that she
wished to spend some time in branches and
further afield. MR and his team would facilitate
these visits. MR further advised that the Minister
was interested to understand the retail blend in
Post Offices, and that the Minister thought there
could be opportunities for the Company to
develop the retail aspect of the business.
ited Board Actions as at 16.09.2022
Martin Roberts
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35.
Session II: Deciding the Way
Forward on Mails and
Strategic Commercial
Considerations
b)
ACTION TC asked for more detail on the working
up of the projected market share. TC advised
that this started at 2 - 3% then ramped up to 9%.
CP advised that she did not currently have the
numbers with her, however, would supply this
detail to TC along with additional detail on the
volume proposition.
Chrysanthy Pispinis/
Owen Woodley
36.
Session II: Deciding the Way
Forward on Mails and
Strategic Commercial
Considerations
¢)
TC noted the significance of building relationships
with carriers and that it would take time to build
something credible. ACTION TC requested that
when the business case was returned to the
Board that it contained this detail.
Chrysanthy Pispinis/
Owen Woodley
37.
Session II: Deciding the Way
Forward on Mails and
Strategic Commercial
Considerations
d)
Sl also raised the issue of bagging, and that the
Company had never invested in paper bags.
ACTION OW advised that the team would take
this issue away and agreed that TCR was not the
answer.
Owen Woodley
38.
Session II: Deciding the Way
Forward on Mails and
Strategic Commercial
Considerations
The Chair asked SI, if you had a choice between
safety deposit boxes and stationery and you
could only choose one, which one would it be? SI
replied that it would be safety deposit boxes.
ACTION The Chair asked that this possibility be
explored.
Owen Woodley
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39. Session IV: Building a The Chair asked whether there was a database I Martin Roberts
Resilient Network Equipped] that existed holding information on each Post
for the Decade Ahead office as to how much we were making, staff and
costs. If no data base existed could the area
managers find this out and this seemed to be
very basic question. ME replied that the
information would be the Postmaster’s personal
data and we would need to persuade them to
give this to us this; we had asked this question of
Postmasters previously and they had not been
forthcoming. The Chair advised that this
information would be useful in order to assess
different parts of the estate; we had asked this
question 5 or 6 times and have not had this
information. ACTION MR advised that the team
would take this away and have a fresh look at it.
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HI] Remediation Phase 3
OFFICE
August 2022
3
2
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Limited - Docum
on; INTERNAL
Deliverables & Workstreams for Rem-Co Tracking
Deliverable/Workstream Delivery Completion Milestone Outcome
Branch Reporting Suite 31% March 2023 This meets HlJ remediation objectives to provide Post Masters with
data directly that will enable them to ‘self-investigate’ discrepancies
in branch, Post Masters will access this data using the Branch Hub
tal directly at th it ia thei devi
Least Privilege Access Implementation 31% March 2023 Reduces Fujitsu access to the least possible level required for service
operations. Addresses HI findings around privileged & remote
access management
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Tab 2.5 ATM Banking Strategy Programme: Lessons Learnt and AE Assurance Review
POST OFFICE LIMITED
BOARD REPORT
ATM Banking Strategy
Title: I Programme: Lessons Learnt and _I Meeting Date: I 27 September 2022
AEI Assurance Review
Joanne Welch, Head of Quality
Assurance
Tim McInnes, Strategy &
Transformation Director
Author: Sponsor:
Input Sought: Discussion
Board are requested to discuss and confirm the recommendations from the recent PIRs
concluded on AEI Exit & ATM Strategy Programmes.
Previous Governance Oversight
Approved by GE on 14th September 2022.
Executive Summary
Post implementation reviews have been recently performed on the AEI Exit Programme and
ATM Strategy Programme. These were commissioned due to issues occurring as new technology
or software was deployed/migrated and legacy practices and equipment were changed or
decommissioned. This went to Board in July and it was requested the paper was revisited and
to return in September ensuring the programmes performance indicated how poorly they had
been managed and the subsequent impact to Postmasters. Both programmes impacted a
similar demographic of Post-offices in short succession, causing significant disruption and in
some cases, services were interrupted for a period of time. Both PIRs concluded these
programmes were not structured or resourced to support the volume of change being
undertaken, and contractual deadlines put additional pressure on delivery timelines. Below is a
summary of the overall assessment and recommendations made. Throughout both reviews a
number of common themes were identified. Both reports have been shared with accountable
GE members and all fully support the PIR findings and the recommendations made, and action
plans have been agreed.
AEI Exit Programme
RED-Successful delivery of the project to time, cost and Priority Level 1
Priority Level 2
Priority Level 3
ATM Strategy Programme
Amber- Successful delivery of the project to time, cost and
quality was broadly achieved: however issues existed post-
delivery, requiring management attention.
Questions addressed
To confirm board are happy with the conclusions & recommendations held within this paper?
Background
1
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1. Concerns were raised at an ARC session regarding two inflight change programmes based
on negative feedback from Postmasters. These were: (i) AEI Exit, where issues had been
identified during deployment with defects interrupting both DVLA and SIA services plus
significant physical branch disruption as legacy AEI booths were decommissioned; and (ii)
ATMs, which impacted a similar cohort of Postmasters, this programme was enabling POL
to take on the management of this service from Bank of Ireland but software issues had
led to an increase in purged notes, leading to multiple engineer visits and a lack of spares
to help repair the aging estate led to extended downtime. A failed disaster recovery
exercise by Vocalink also led to the incorrect data for 205 branches being process, and for
these branches further disrupted activities, a POL task force worked to rectify, issuing
transaction corrections. PIRS were undertaken on both to identify lessons and
recommendations that can help improve future change delivery. Common themes were
identified across the two programmes.
2. For both programmes a project performance survey was issued to 10-15 respondents to
identify areas of focus and where further investigation was required. In each case 3
workshops were held, and these were well attended with a total of 23 individuals over the
3 sessions for AEI Exit and 31 individuals for ATMs. These explored in detail areas of best
practices, areas of dissatisfaction and lessons learned. The outputs of these workshops
were reviewed, systematic issues identified, findings and recommendations were defined
to remediate and prevent re-occurrence. The PIRs have been reviewed and agreed by
relevant Group Executives, sponsors, and the Strategy & Transformation Director. A
management response has been obtained where recommendations apply.
3. The PIRs identified 16 recommendations for the AEI Exit programme (8 Priority Level 1;
6 Priority Level 2; 2 Priority Level 3) and 15 for the ATMs (7 Priority Level 1; 5 Priority
Level 5). Full reports are available in the reading room. These are summarised below.
AEI PIR Conclusion
4. This PIR concluded that although this project was expected to deliver its benefits, the
decision not to extend legacy services when delivery timelines slipped resulted in services
being deployed when they were not fit for purpose. Device ownership, IT testing (including
user acceptance testing) and final release practices were unclear which led to additional
confusion. It has since been agreed that this will sit within Technology under the CDIO.
Clearly defined practices are also being developed to complement the existing business
readiness process to ensure the correct stakeholders approve final deployment.
5. Ways to ensure the voice of the Postmaster and supporting teams are engaged to ensure
solutions meet their needs must be reviewed and activities to ensure this cultural shift
must be embedded further. Business readiness practices are being improved in
conjunction with the network gateway team to ensure the network has capacity to accept
the change and that the correct teams and Postmasters are engaged.
6. When the projects were merged in March 2021, it was not resourced appropriately to
support the programme of activities being undertaken and the associated business
change. Heads of Transformation Portfolios and Business Sponsors have been reminded
of the importance of correctly structuring and resourcing a project, in particular when the
project structure changes when in-flight, but this risk remains high due to the current
constrained investment budget and the current change portfolio, which could lead to
similar choices being made.
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Tab 2.5 ATM Banking Strategy Programme: Lessons Learnt and AEI Assurance Review
ATM PIR Conclusion
7. This PIR concluded that the ATM programme was highly complex, introducing changes in
practice for Postmasters as well as multiple internal teams and although it had met
delivery milestones, the project team was too lean with insufficient resource to ensure a
smooth transition leading to Postmaster disruption and unplanned capacity issues for
internal teams.
8. Internal business teams who ringfenced staff to help translate new ways of working were
more successful in embedding changes. Projects need to engage and agree this support
more formally and must where necessary cost into the business case the temporary
additional capacity support teams may require.
9. Contracts with external suppliers and partners must ensure they contain the correct levers
throughout their lifecycle up to termination to aid exit activities, and appropriate
governance and oversite must be applied during the contract lifecycle.
Common Findings across the 2 Programmes
10. There were common findings identified across the 2 programmes. These were:
i. Both programmes were constrained by a delivery schedule linked to a contract end
date. Better forward planning by management is required as historically POLs ability
to deliver quality outcomes when constrained is poor. This led to Postmasters bearing
the brunt of issues caused as a result. This included:
e Services being unavailable for an extended period (AEI)
« Disruption to physical location (AEI/ATM)
e Multiple visits by third parties to remediate issues (AEI/ATM)
e Photo quality issues requiring additional peripherals to be provided (AEI).
ii. Forward planning must also consider the Retail teams and Postmasters capacity to
accept changes. Introducing 2 significant changes which impacted a similar
demographic exacerbated the situation. The retail team are introducing a Central
Operations Director to help plan network change more effectively. The strategic
portfolio office will work collaboratively to ensure all capital projects feed into new
processes developed.
iii. Business support to help translate new practices was not formally assigned and
sustained throughout each programme, business readiness has been strengthened
to ensure named individuals are listed and the expectations are clear and where not
met this will be escalated.
iv. Integrated end to end testing including user acceptance testing for all impacted areas
need system environments to support and to be robustly enforced. Technology has
agreed integrated testing is their end goal, but may not be fully in place until NBIT
is operating at scale.
v. Contact details for Postmasters are inaccurate and do not facilitate robust
communications when undertaking significant programmes of change, a working
group is currently looking at how this can be improved for use by future programmes.
vi. The revised POL culture of putting the Postmaster first was not seen in all interactions
with our suppliers and unplanned disruptions were seen which impacted trading. All
suppliers should be made aware of our culture and values and this should be
monitored appropriately through contract management, and obligations tracking.
Other AEI P1 Findings
11. Additional priority one findings include:
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i. Challenge by Governance forums needs to ensure Business cases are robust and
include all elements to aid successful delivery, this has been re-iterated. Lessons and
recommendations from both PIRs have been shared with the IADG.
ii. Project governance and steerco attendance needs to be enforced and roles and
responsibilities clearly defined, and nonattendance escalated to ensure the correct
representation is in place.
iii. Service termination notices should be revisited and extended if development of new
solutions is delayed and it is possible it will compromise quality of end product
deployment.
iv. AEI had a number of live operational fixes which needed to be fixed, which are being
tracked to completion
Other ATM Strategy Programme. P1 Findings.
i. Contractual levers were not present in the BOI contract to ensure legacy vendors
acted appropriately, this meant out of date software not including recent patches
for polymer notes was provided, causing an increased volume of notes purging. In
additional governance and oversight was lacking as the contract was old and there
were several unidentified compliance issues across the legacy estate. New
contractual obligation and practices are now in place with all new suppliers, in
addition, compliance levels show improvements.
ii. Postmaster training, engagement & communication is fundamental when
implementing change and ensuring the correct mix and approach is taken.
Guidance and standards should be in place for projects to utilise, but this needs to
be marshalled appropriately to ensure the network are not overwhelmed, a new
central ops director is being recruited to help develop a pipeline of all changes,
while the Postmaster engagement director will look to maintain the standards
required.
iii. This project initially kicked off in 2017 but the full business case was not approved
until 2020 there are many theories as to why but personnel changes have been
made within this period, the delay in starting did put increased pressure on the
successful delivery which was constrained by a contract termination date.
Common Best Practices
12. In both cases once issues arose and taskforces were invoked to rapidly respond to issues
POL teams came together and collaborated well to resolve as quickly as possible.
13. Business sponsorship of both programmes was called out, with AEI sponsorship changed
multiple times throughout the programmes but once Barbara Brannon (Product Portfolio
Director - Lottery, Retail and Government Services) took ownership and accountability a
noticeable change was seen within AEI Exit programme with clear direction and decision
making. In ATM this remain static with Wendy Luczywo (Head of Automated Products),
but this was also commended by many with ownership and clear leadership called out
throughout its lifecycle helping to steer the programme.
Next Steps
14. All Recommendations have been agreed with accountable business areas and timelines
agreed these will be tracked to their conclusion.
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POST OFFICE LIMITED
BOARD REPORT
72 of 342
Title: Chief Executive’s Report Meeting Date: I 27 September 2022
Author: Nick Read, Group CEO Sponsor: N/A
CEO Narrative
Despite the summer months typically delivering some respite before Peak, the
period since the last Board meeting in July has brought with it a good deal of
change. First, the deepening cost of living crisis has damaged consumer
confidence significantly. The impending recession has had a marked impact on
trading in P5 - our first period trading loss of 2022/3 - and footfall continues to
slow. Postmasters too have reacted, unsurprisingly, to the leap in inflation, the
energy crisis and the threat of interest rate hikes. The Voice of the Postmaster
group mobilised effectively to challenge our PM Rem strategy and question our
responsiveness as a business. Clearly we are unable to resolve macro economic
issues, but we reacted quickly to the disquiet and implemented an immediate
response, albeit not a remedy.
Alongside the mounting concerns of Postmasters we have experienced a number
of days of industrial action across the DMB estate, supply chain and support and
admin centres. This has been compounded by RMG strike action which has
further complicated operational delivery. The dispute with the CWU and Unite is
far from resolved and we can expect industrial action into the autumn. This will
be mirrored at RMG. Our Printer issue has also absorbed management time and
although we are now over the worst, the lead time for new printers is
frustratingly long.
The implications of this situation is a likely increase to the cost base at a time
when we need to respond to a halving in our trading profit. The demands from a
highly unionised workforce will be difficult to ignore as will the challenges from a
Postmaster network which has experienced years of under investment in pay.
Add to this the ongoing decline of 10% in letters volume and the 8% YOY decline
in parcels and it is clear that a reset in expectations is required. The one metric
that has yet to go adverse is churn. At the end of P5 we continue to record the
best churn numbers in a decade and the working churn figure is now less than
300 for the financial year.
Uncertainty and change is also evident within BEIS following the Conservative
leadership contest. We have a new Secretary of State, in Jacob Rees-Mogg and,
the promise of a new Postal Affairs Minister, although no announcement on this
appointment has been forthcoming. We also have a change in leadership within
the Board, not just Tim Parker but three other NED’s have resigned which will of
course result in significant dislocation. Finally the passing of HM Queen
Elizabeth, in the very same week that brought us a new Head of Government
saw the end of the long reign of our Head of State.
I have written to Buckingham Palace to ask that our deepest condolences be
passed to His Majesty The King and to other members of the Royal Family on
behalf of Post Office, Postmasters and colleagues. A long-standing of symbol of
constancy in UK life over seven decades, her death marks a truly sombre
moment for the country and I know many of us are both deeply saddened by it
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and grateful for her years of public service. Given our historic relationship with
the monarchy via Royal Mail, I am clear that the Post Office and its network
should mark the State Funeral and allow colleagues and Postmasters to express
their condolences. Combined, then, these three elements mark a moment of
great turbulence for the UK.
It is in this context that I am focused on delivering as much certainty as we can
to Post Office, our Postmasters and the UK more widely. For Post Office, the crux
of our discussions at Board will revolve around for which
The effects of the cost of living crisis are emaiienieay acute for our Postmasters,
given they must not only weather rising costs, but also dampened consumer
confidence. As the Board will be aware, we launched a package of measures to
support Postmasters, averaging a 5% increase in remuneration, which has been
welcomed by parts of the network — though other parts feel it does not go far
enough. The new Government's announcement of energy support for businesses
for six months will be further welcome news - and we are pushing for
‘vulnerable business’ status with BEIS. At the same time, we are in the midst of
planning another Postmaster conference in November, where we will follow up
on our announcements around remuneration, but also signal our intent for the
future more widely. Assuming the BEIS policy review has been publicly
announced at this stage, we should be able to set out our vision for the business
with greater clarity for Postmasters.
Lastly, with a package of measures due to be announced by the Government to
support communities through the autumn and winter, I am clear that Post Office
has an important social role to play in the coming months. Despite typically
being one of quietest months for cash, we saw another record month in August
in volumes over our counters, with +£3.45bn moved through our branches - in
part on account of consumers resorting to cash to budget their finances. Looking
ahead, we also expect to issue as many as 7.6m vouchers to distribute the £400
Energy Bill Support Scheme (EBSS) payments to 1.3m pre-pay energy
customers from October to March. There is, no doubt, more we can do to - and
we will work with Government officials to see how else we might support
communities, much as we did through Covid.
There are no easy options and I look forward to using the discussion at Board to
weigh the options before us and, in doing so, align on how best to navigate the
challenges ahead.
REPORT
[ Finance ]
rhea we SOA
I ‘August trading, i “ireflected the costs of the
‘one-off and backdated elements of the Postmaster remuneration package
2
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4. Finally, the Annual Reports and Accounts for FY2021-22 has ‘been signed
and is due to be published in December.
Commercial
Mails, Parcels & Retail
5.
10.
YTD (to week 23) trading revenue is -4.1% vs budget, while total volume
excluding stamps is -2.6%. Label sales, which represent 39% of income,
have seen a 17% decline in volumes year on year, driven by small parcels
(-20%). This is in part driven by wider UK online sales falling 6.2% in
August.
5,157 branches now offer one or more ‘Click & Collect’ clients, and we
remain on track to reach 8,000 by Christmas. Our PUDO capabilities
expanded with DHL Express signing a contract for ‘Click & Collect’ on 1st
September, with an initial soft launch in Northern Ireland before further
expansion next year. We also commenced our new Returns service trial
with Amazon in 200 branches. If successful, we expect to expand Amazon
Returns to ~2k branches for Christmas and more next year.
Royal Mail’s (RMG) widened online price differential for small and medium
sized parcels means the acceptance ratio increased to 24.7% in August (vs.
24.1% in July). RMG is now offering free doorstep collection through its
Parcel Collect service, bypassing Post Office.
Strike action by CWU has resulted in the suspension of service guarantees,
cancelled or delayed collections and some branches reaching their physical
capacity to accept mail. Further strike dates have been announced in
September and October and will disrupt volumes over peak if continued.
RMG's largest shareholder, Vesa, has advised BEIS of its intention to raise
its stake in RMG from 22% to more than 25%, thereby triggering a
National Security and Investment probe. Vesa holds stakes in Dutch postal
operator PostNL (20%) and Sainsbury‘s (10%).
Looking ahead, we are developing the business cases for Mails Strategy
work following July Board and separate prove cases are in development for
Drop & Go enhancements and a new solution to ensure International Data
Capture.
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Banking, Payments and Transactional Products
pb
12.
13
14.
15.
Banking continues its strong performance, with +£3.45bn moved through
our branches in August following significant increases in the volume and
value of cash and bank closures driving up footfall. Actions are in hand to
avoid the risk of cash shortages in branch as customers revert to budgeting
in cash with the cost of living crisis.
Banking Hubs - now with a signed contract - will see three further go-live
(total five) in 2022, with the remainder (and further commissions) planned
for Q1 23/24. We are targeting ‘in excess of 90’ through 23/24. Enhanced
POs with cash-handling automation will also start to be deployed by end of
FY22/23. Meanwhile, LINK has announced 13 more Banking Hubs, with Post
Office now contracted exclusively for delivery. This brings the announced
total to 25. The commercial model for Postmasters has been developed with
Postmaster and NFSP input.
Payments revenue continues to exceed budget, benefiting from exclusive
utility deals and incremental volumes from Energy Bill Support Scheme
letters.
Travel continued its strong recovery, with every product line performing
well ahead of budget. We have also been working through some technical
issues with Western Union. Our go-live for international money transfer is
planned for January 2023.
More widely, due to concerns over money laundering, the FCA has written
to all banks to impose various deposit limits (each bank imposing its own).
This is leading to some diversion away from Post Office in favour of bank
branches. We are in discussion with the FCA and UK Finance on the
unintended consequences to Access to Cash.
Platform Products
16.
17;
18.
19.
Whilst we continue to outperform against budget, online demand for Travel
Insurance has inevitably started to slow after the summer peak. We remain
on track to meet or exceed latest forecast. Incentive commissions from the
Bank of Ireland relationship are likely to remain enhanced with increasing
interest rates. This will more than offset slowing Travel Insurance and
uncertainty over Credit Card sales performance.
Positive momentum continues in the Digital Identity partnership with Yoti,
with most major employment checking agencies signed up to enable digital
‘Right to Work’ checks.
Our Q3 Protection (Life Insurance) campaign has been paused following the
death of HM Queen Elizabeth II, and we will be re-planning and rephasing
marketing activity throughout the remainder of the year.
We have made good progress with the Post Office Insurance Board in
planning our response to the new FCA consumer duty regulations which
require all firms to ‘deliver good outcomes for retail clients’.
Lottery, Retail and Government Services
20.
Lottery is performing in line with budget and slightly above forecast with a
small boost seen from Euro-Millions. Retail is up 2% on budget YTD, but
Gift Cards are down 19% YoY due to the end of One4All exclusivity.
Government Services is +£0.2m on budget as a result of product mix
changes. DVLA performance has been consistently strong across its three
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main products. While passports are down 15% YTD, this has been offset by
a strong performance in UK Visa & Immigration Secure Card Collect.
21. Camelot has announced the withdrawal of its challenge to the outcome of
the L4 Lottery Licence. We will now be allowed to engage with Allwyn to
understand and review its proposed solutions in the context of the NBIT
programme and develop the commercial business case/product profitability.
We will revert to the Board with our strategy late in Q3.
22. Tablet performance has stabilised with some minor application
improvement work underway in advance of project hand-over to IT BAU
support. Branch remediation work from AEI removal has been completed
on schedule. Finally, discussions continue with Crown Commercial Services
around the new Government Services framework as it seeks to scope out
the services which could be included.
Customer Experience
23. Our Customer Strategy programme is underway, focusing on customer
data, segmentation and a number of customer culture initiatives.
24. The Summer Travel campaign has concluded, with 40% of branches
exceeding their Travel Money sales target, driving £500k of net income and
£600k remuneration. Following its success, we are working with FRES on a
sales incentive, offering a short-term increase in remuneration on Travel
Money Card (Sept - Dec), fully funded by FRES. Looking ahead, we are
developing the Travel app migration business case, building more
functionality to help us maintain our competitive position in the market.
25. The Contact Centre has a backlog of 1,100 customer enquiries (down from
>3,000), with ongoing work on an automated tactical solution to direct
~25% messages to the correct point of contact (e.g. RM). Service
performance remains strong, with significant improvements made in our
travel insurance contact centre and customer support team.
26. New brand positioning ‘We Can Help With That’ has been developed. This
will launch externally as part of Christmas Peak on 7 November. We also
continue to support the ‘Let’s Talk Mails’ campaign, tracking the positive
outcomes (e.g. Special Delivery and Drop and Go penetration rates) of over
4k Area Manager visits to branches.
Postmaster & Network
Network coverage
27. Network numbers have remained stable over the month, with 11,600
branches trading during August. The numbers should be boosted over
coming months with the accelerated roll-out of Drop & Collect, enabling us
to reach over 100 sites by October and 250 by March 2023. This is subject
to Royal Mail (RMG) approval for us to proceed beyond the initial trial
branches, with positive signals to date that they will be supportive.
Back Office Postmaster Service & Support
28. Branch Support Centre service levels reduced in P5, with 57% of calls
answered in 60 seconds (vs. 70% target), due to resourcing issues that are
being addressed with ten new starters due to join in September and
October.
29. However, Postmaster satisfaction has remained consistent over recent
periods, standing at 81.3% in P5 (vs. 85% target). The number of
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complaints resolved within the 10-day SLA stands at 78.9%, short of the
80% target. Meanwhile, good performance on discrepancy investigations in
P5 with 74% of cases resolved within SLA, +10% on the previous month.
Postmaster Engagement - Remuneration Package
30.
31.
32.
33.
34.
We identified a Facebook group called ‘The Voice of the Postmaster’ in early
August, led by 6 disenfranchised Postmasters. The group’s concerns are
remuneration not keeping pace with inflation and the costs of living; the
need for ‘true independent representation’, believing the NFSP to be failing
in that regard; and greater transparency about Post Office’s strategy. The
group now has 660 members and has called for Postmasters to email me
asking for urgent action in the current climate. 120 emails were received.
A package of remuneration improvements, 4 was
announced on 23rd August, including increased remuneration for banking,
label and pay-out transactions, plus a lump sum payment based on
individual mails and travel sales for the year to date. The overall package,
discussed with the NFSP and approved by GE and Board, was positioned as
the first step on a wider journey to support Postmasters. We stated a
further update would be provided at a Postmaster Conference in November.
There have been mixed reactions to the package. Some of our Regional
Forum members, along with Strategic Partners, have expressed gratitude,
whilst others perceive the package as insufficient but a step in the right
direction. Others believe that the package is an insult, not addressing the
concerns raised. Both the NFSP and Facebook group are campaigning for
more improvements to be made. Since the update, 38 NFSP-templated
letters have been received from Postmasters with a further 31 emails to me
demanding further increases. At present the noise on the Voice of
Postmaster site appears to have waned.
Branch remuneration statements showing the value of the announced
package have been made available for Postmasters from 14th September
via Branch Hub, while Area Managers will engage with Postmasters on the
detail both verbally and face-to-face as required. Feedback will be collated
from these engagements to gain a sense of how the numbers are landing.
We have identified 40 ‘influential’ Postmasters that we will engage through
SLG members to talk through the package and gain feedback in a
controlled way.
Preparation for the November conference in Glasgow is underway. The
agenda will cover a CEO introduction on our business priorities, an update
on Mails activity (including expanding our PUDO network), and further
support for Postmasters. We will also recognise Postmasters for key
achievements and long service. Options regarding further remuneration
improvements are now being explored in the context of the 3 Year Plan.
Wider Postmaster Engagement
35.
36.
New Postmaster satisfaction with the onboarding journey has improved
significantly, now standing at 80%, primarily due to team changes and
more streamlined ways of working. Time to onboard a Postmaster has also
reduced to 150 days (a 14-day reduction on previous period). A new target
is in place to complete the onboarding journey in 12 weeks.
Overall satisfaction with training support is high with 94% of Postmasters
feeling confident after their e-learning, and 96% confident after classroom
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37.
training. An extra day of classroom training has been introduced for all,
allowing more time for complex areas.
Discussions are ongoing with the NFSP regarding the signing of the Grant
Fund Agreement. One outstanding issue remains around the treatment of
VAT with both parties seeking advice on how to proceed.
Retail Field Teams
38.
39%
The first phase of network reorganisation has been implemented. It
provides additional leadership support to the network and full line
accountability to the Audit and Training teams, under single ownership.
Peter Marsh joins the business in late September to lead the network
teams, supported by North and South Retail Directors who are now in
place. A new Central Ops Director will also join in October.
Area Manager activity is focused on ensuring every branch visited by end of
November to support the ‘Let’s Talk about Mails’ campaign; on preparing
the network for industrial action should branches bulk out, encounter issues
or require support (which has proved effective as the strike days to date
have been managed well); and on PUDO activation to close out a backlog of
non-active Amazon devices prior to any rollout of Returns.
Strategic Partnerships
40.
41.
42.
SupI
43.
44.
A challenging trading period for Strategic Partners throughout P5, beating
target by +2.3% (vs +6.1% in P4). YTD Strategic Partners are £58m
(+4.7% to target), still positive but a step back from +5.3% YTD in P4. The
targets and trajectory coming out of summer are more challenging to
achieve. Most partners traded up on target for P5 and YTD.
McColls and OneStop both had negative performances for the period, with
both now just on target YTD. The trading issues in OneStop are
predominantly driven by reduced hours and closures as a result of staff
losses and recruitment issues, which is being addressed in a joint retail
action plan but is taking time to have a positive impact. Meanwhile, McColls
are slow across the board with footfall decline still being seen since
administration - we are working with Morrisons on interventions.
Morrisons’ purchase of McColls has received a first view from the
Competition and Markets Authority (CMA), which sets out 35 areas in which
there are competition concerns. The Morrisons team will negotiate through
this with a target of mid-Oct for settlement of the estate. A small POL
team are working under strict confidentiality to understand the scale of the
closure of unprofitable McColls stores which will be confirmed in an
announcement relating to the purchase. Approximately 60 stores with post
offices will close and guidance is being provided to Morrisons on the PR
implications and the level of mitigation required.
ply Chain
P5 saw an average weekly inflow of £438m a week (down from £452m in
P4, +16% on same period last year). 100% of available deposits were
processed on Day A in cash centres and productivity was slightly up on P4
and remains ahead of target YTD.
Stock availability was at 98% (vs 96% target) and value pouch accuracy at
99.46% (vs 99% target). Productivity was 49.6 lines per hour against a
target of 42. Christmas planning is coming to an end, with the distribution
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45.
46.
47.
starting on 19th September. Capricorn exit project is progressing with
planned go-live in the new area in November.
Despite the extreme weather and Industrial Action challenges, CIT achieved
Quality of Service of 95.3% (+3% on last period). Cash Management call
centre measure of customer satisfaction was in line with last period at 91%
- ahead of target.
Counterfeit notes coming into cash centres remain high at £51k in P5 (vs
£60.8k in P4), vs £27k for the same period last year.
G4S are currently providing support for Belfast CIT depot that continue to
struggle with acute staffing shortages due to long term absence.
Meanwhile, in advance of nights drawing in and the increased risk of CViT
robbery, enhanced (Cennox) cash carry boxes are being introduced into the
operation on all routes at the six highest risk depots.
Strategy & Transformation
BEIS Policy Review
48.
49.
50.
Work on the BEIS policy review continues, and we have now held briefings
on our financials, network, commercial business, Postmasters and funding —
as well as a series of branch and site visits for the BEIS and UKGI teams.
Data has also been shared in response to questions raised. The aim of this
process is to better familiarise BEIS and UKGI with our business and the
challenges we face. Through this we are seeing a better level of
understanding develop.
The policy review was mentioned in BEIS’s briefing to the new Secretary of
State so he is aware. We also referred to it in our letter congratulating him
on his appointment, so we are hopeful of continued support for this work
and the announcement of a Chair of the review over the coming weeks.
BEIS have been having discussions with potential Chairs since the start of
September and that they are hopeful of bringing these discussions to a
close soon.
While BEIS remain committed to their timeline - concluding a first phase in
Spring 2023 and a consultation by Spring 2024 - we will engage with the
Secretary of State on certain topics covered by the review prior to this end-
date. We will likely need to face into certain challenges in the network over
this time where we will want a steer or support from BEIS. We will likely
want to explore ways in which we can finance investment to protect income
or cut costs. This will be covered in more detail in the Board discussion on
the 3YP.
settlement), £26m below our budget, due to various movements across the
portfolios - nearly all of which were delays rather than savings. The largest
variances were in NBIT, Belfast Exit and HSS Post Offer. YTD incremental
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budgeted incremental benefits come from the ATM Strategy.
Historical Matters & Inquiry
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Criminal Appeal Cases
53:
Following our work with CCRC, disclosure is now being prepared on a
further 15 cases, with 30 more requests expected. Good progress is being
made with the non-Post Office prosecutors in both Scotland and Northern
Ireland. The Scottish CCRC are considering 10 cases with a decision
expected in September, while NI are considering two. We continue to make
disclosure to assist their consideration of potential cases.
Historical Shortfall Scheme (HSS)
54.
59:
Best endeavours are being enacted to deliver a stretch target of 95% of
offers issued by the end of October. The achievement of our target of 80%
of outcome letters issued by the end of August was an excellent result.
Work continues apace to ensure we keep on this trajectory, but our aim is
to ensure that all claimants have a clear route to outcome resolution,
anticipating that the remaining cases will feature a higher degree of
complexity as we move towards the tail.
Alongside HSF we have commenced a review to forecast and consider what
the 5% of cases are anticipated to be post-October 2022 to ensure we
appreciate and are well prepared to complete these cases as quickly as
possible.
Late Applications
56.
Good progress is being made with BEIS on the subject of funding for Late
Applications. We are currently reviewing their funding offer letter to
understand the timelines and implications. Late Applications were raised at
the recent Inquiry hearings, where Sir Wyn Williams noted that the failure
to progress these applications was ‘wholly unacceptable’.
Overturned Historical Convictions (OHC)
57.
58.
We are making good use of the positive outcome from the Early Neutral
Evaluation (ENE) process to progress the settlement of non-pecuniary
damages for the 10 Postmasters whose cases were considered by Lord
Dyson, but also across the broader cohort. All 10 involved in ENE have
accepted the offers made on their non-pecuniary damages and settlement
agreements are close to being finalised. Dr Hudgell indicated that he would
send through five new non-pecuniary claims each week - this has been
slow to start but the cases are now starting to come through.
In terms of mediation, on Friday 9th September, a successful mediation
process was concluded on the first two OHC claims to be considered. This
is a substantial milestone and paves the way for other claimants to be
progressed at speed. This remains a highly confidential decision at this
stage but is the culmination of many months of work by our colleagues at
HSF in partnership with the POL HMU team.
Postmaster Detriment
59.
On suspension payments, our priority is to complete the delivery of the
Operating Model to deal with this population, followed by final external
project assurances (by Deloitte), and ensuring we obtain the relevant legal
assurances of the Consequential Loss Principles.
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Sir Wyn’s Inquiry
61. Following the hearings on 6 and 13 July 2022 and Sir Wyn’s Progress
Update issued on 15 August, we are working at pace to address his
observations. HRC were presented with a number of papers on our
recommendations on 8 September, some of which are still being reviewed.
We met with our King’s Counsel on 14 September to consider our next
steps for updating the Inquiry, looking at a date in mid-October for our
follow up submission.
Cost Challenge
62. Finance is supporting the work to reduce third party and internal costs in
order to return Historical Matters to the original challenged budget. Options
being considered are:
i. HSF contract renegotiation and efficiency savings.
ii. Moving to a ‘POL Remediation Model’ across OHC, and the benefits
that would bring (i.e. the model suggested by KPMG).
iii. Reduced assumption for the number of appellants - 150 (down
from 293).
iv. Revised, lower profile of Historical Shortfall Scheme disputes.
v. Internal resource challenges.
vi. I How to deal with the HSS late applications costs to POL (noting
these costs were not in the original HMU budgets).
[ Technology Operations ]
Service Performance
63. There were 2 major incidents in August, which is the lowest for a number of
years and against an average of c.8 per month. One incident impacted 216
branches performing Travel Money transactions. We are investigating
lessons to be learned for our pre-release testing process, which should
have caught this issue. The second incident impacted our Cash Centres,
where the main application was unable to process cash for deliveries for 24
hours due issues outside Post Office.
64. Given ongoing printer issues, our operational focus has been on reducing
the volume of branches that are unable to trade for technical reasons. In
August, we peaked at 185 “branch downs”, with 95% of those due to our
lack of printer stock. We deployed a new, multi-pronged approach,
including twice daily meetings with our suppliers and the insertion of our
small “Branch Availability” unit to guide or support suppliers. The results
are that, as of 15 September, there were 55 branches down and unable to
trade, with 70% of those having developed in the last 48 hours.
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65. An array of measures has been put in place to address the branch impact of
a lack of functional printers to replace damaged ones, as well as prevent
further damage:
i.
Initially, an aggressive printer swaps strategy (i.e. minimal to no
field engineer requirement) was used to reduce any printer-related
down time.
Our field support supplier, DXC, aggressively recruited and upskilled
field engineers. DXC also brought in at their expense extra field
engineering capacity from third parties. We now have c.40
engineers in the network (vs. 10-20 previously) — a sufficient
number.
In parallel, we launched a large-scale campaign to eliminate use of
non-OEM ink, from calling branches and partnering with Area
Managers to deploying stickers advising of correct cleaning. Despite
this, we still observe episodic usage of non-OEM ink, but not near
the original scale. Anecdotally, Postmaster maintenance of printers
remains low, contributing to breakdown rates.
We have begun a targeted campaign visiting the top 50 branches
who frequently log printer issues to ensure they are fully trained on
printer maintenance.
66. Today, the major outstanding gap is with the supply of new or repaired
printers to replace damaged ones. We have an outstanding need of 1500
units, which is climbing. Between two measure, we should be on track to
clea the backlog by the end of November:
Improving our printer repair success rates. Due to the
magnitude of the ink damage, initially we had less than 25%
success rate with the repair process, which meant that 3 in 4
damaged printers remained non-functional. With practice and
investment in specialist third-party knowledge, we are now slightly
above 50% ‘clean and repair’ success rate.
Purchasing new printers: In July, we made an emergency
investment in 1000 new printers. Subsequently, this investment
was doubled to 2000. In the latest 3YP, a further 2000 printers will
likely be provisioned. After some early production and customs
delays, the first batch of 150 units will land the week of 26
September. A steady flow of 100-150 new printers is expected
every week.
IT Service Desk (ITSD) Performance
67. The performance of ITSD continues to be a concern, affecting Postmasters
and colleagues with long wait times. However, with the transfer of ITSD to
Zdravko Mladenov earlier this year, the trajectory and KPIs have improved,
alongside modest improvements in morale:
Confidential
Call volume: Volumes per month continue to fluctuate (August,
9409; July, 12,383; May, 10474). Notably, 77% of the calls in
August were to log a new incident (vs. repeat callers) compared to
only 56% in July. Alongside the decline in calls, this suggests
incidents are being resolved more to the satisfaction of Postmasters
in terms of quality and pace.
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ii. Channel: 77% of incidents were raised via phone (down from 79%
in July). We noted a positive trend with 18% of incidents reported
via Branch Hub (vs 15% previously). However, the overall channel
distribution remains lopsided towards costly phones. Funding
dependent, our intention remains to shift to online and self-help
channels.
iii. Response rate: 77% of calls were answered, meaning the other
23% hung up due to not wanting to wait. This is broadly on par
with historic ITSD performance. However, the average wait time
was 7 mins 53 seconds (vs. 9 mins 28 seconds in July) and the
longest wait time was 40 minutes (on par with previous months).
iv. Root causes: The main drivers for the levels of demand into ITSD
continue to be printer issues, and particularly the now suspended
use of non-OEM ink. As of 15 Sept, there are 1292 outstanding
incidents - mostly printer-related.
v. Resourcing: ITSD remains materially down on headcount, but on a
positive trajectory. c.20 agents work each day (target = 24), which
is an improvement of 3 agents in the last report. Attrition remains
high, so recruitment remains critical.
Cyber Security
68. Cyber-attacks remain on the rise in the UK, with many organisations being
hit this year, including SPAR, Yodel, the NHS and the Ministry of Justice.
Our response include:
A
A
Mm
rr
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=
—_
Fujitsu’s privileges to the Horizon Counter for the purposes of support.
Horizon and In-Branch Live Service
70. The next Horizon application release (72.10) was successfully deployed with
no issues raised and documentation added to central SharePoint library.
The scope of Release 72.30 has been agreed internally, but 3 items were
removed due to outstanding requirements.
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72. We are now beginning to collaborate with the business as we prepare for
Peak Period. From a Horizon operations perspective, this means more
regular sessions with suppliers and internal teams to monitor overall
preparedness (e.g. assurance non-printer stock will be available more
urgently than in non-Peak times)
73. From a Horizon architecture perspective, minor improvements continue to
be developed to meet business needs (e.g. a Direct Settlement mechanism
for Lottery is in proof-of-concept phase, while a QR code is being developed
to improve mid tier payments).
74. From a Commercial perspective, the Horizon Support Approval Process
document has now been updated to reflect the latest agreements with
Fujitsu. The next step will be to extend the coverage to include changes
Fujitsu may need to make to cloud infrastructure.
Technology Programmes [SPMP and Belfast Exit covered in separate
Papers]
Horizons Issue Judgment (HIJ) Remediation
75. The scope for Phase 3 is now agreed and will complete formal governance
in September. Work continues on providing web-browser capability on
Horizon. Some of the technical challenges that caused the current delays in
rollout have been addressed. The new timetable provisions for testing and
launch of the pilot ahead of peak trading.
76. Meanwhile, the programme has launched an effort to improve the
Reference Data and APADC scripts change control. This joint activity with
the Post Office Data Services team will produce a more robust change
process, adding in control, governance, standardisation and clarity of
accountabilities. The programme is also now working on the scope of the
Deloitte audit of transactional integrity and privileged and remote access.
77. More widely, implementation of restrictions to Fujitsu’s access to the
counter are being tested with a view to fully implementing these in
September. Formal agreement and implementation of full disclosure from
Fujitsu of all PEAKS live regardless of impact to give a holistic view of
issues in the service. Lastly, 10 defects are now in the defects closure
process for agreement to close post-delivery and release of 72.10.
People
Organisational Design
78. Work continues to ensure the implementation of the end-to-end Technology
Target Operating Model. We are executing hiring plans and strategies for
retaining key talent.
79. Our new Retail Operations Director joins on 26 September and the Central
Operations Director joins on the 17 October, completing the Retail
Leadership Team. Recruitment of the new Regional Managers, as we move
from 9 to 12 regions, is ongoing and being managed by interim
appointments to ensure consistency and support to the network.
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80. In People, the new ServiceNow case management system, “PeopleHub
2.0”, will go live on 20 September, allowing employees to self-serve, with
in-built case management capability. This follows successful pilots with the
People and Supply Chain teams.
81. Achange in approach to IR35 determination has led to a review of our
existing contractors. We are defining our approach to transition contractors
to an “Inside IR35” contract where required, while new contractors are
engaged on the new policy. This follows the transition of our contractor
provider from Intelligent Resource to Morson International.
Culture & Wellbeing
82. Acolleague engagement survey will launch on 22 September to set a
baseline for the coming years, to identify the progress that has been made
and locate where we need to take action. Results will be available in
November, forming the basis of action planning.
83. From October, we will roll out a programme to bring hybrid working to life
through people managers as well as engaging the Workplace Champions to
support the planning and move from FD. Separately, the Post Office Culture
Club launches in October with c.20 representatives from across our
colleague base acting as ambassadors.
84. The programme to support witnesses and their families in responding to the
Post Office Inquiry continues with the support of Optima Health. This
includes a dedicated helpline for potential witnesses and families and
further workshops for witnesses and line managers.
85. We plan to re-establish the Health and Wellbeing Board to review our
wellbeing strategy and priorities over the coming months and will be
relaunching the Wellbeing portal with an Autumn campaign, including the
offer of health checks. We have launched the flu voucher scheme to
colleagues and have organised on site vaccinations by nurse in larger
populated centres across Supply Chain and Future Walk.
Talent, Diversity & Inclusion
86. Talent reviews have been taking place with individual GE members to
establish development interventions for the GE and GE-1 population. This
has resulted in a number of executive coach assignments being established.
87. Following the success of Leading to Serve Module 1 with Senior Leaders,
this programme is now being rolled out to the GE-2 population starting 22
September. There are 24 courses scheduled over the next 6 months with
over 300 participants invited.
88. Following the launch of Everybody's Conversations in June, a number of
drop-in sessions and workshops have been held, with 300+ people
participating. Mid-Year Reviews start in October and workshops are being
held with 130 employees signed up so far.
89. 929 colleagues took part in the annual D&I survey compared (vs 801 in
2021). Overall, the results this year are relatively stable compared to last
year. High level results have been communicated; a detailed review is
taking place to allow for a full analysis to be shared.
90. The revised diversity dashboard has been released and is sent to all senior
managers monthly, along with a summary page posted to the EDI intranet
site on the Hub. We are also working through the feedback from our
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Disability Confident analysis and prioritising improvements in partnership
with the Disability Network Group, Be You. Meanwhile, The EDI team have
been shortlisted for ‘Team of the Year’ at the European Diversity Awards.
Wider Updates
91. Reward: Bonuses were paid in August to 1,350 current colleagues (40% of
the workforce).
92. CWU Dispute: Talks with the CWU at ACAS broke down following the
rejection of a 5% pay increase, plus £500 lump sum offer. We have
stipulated that this is our best and final offer. There will likely be a further
ballot for more industrial action when the legal mandate expires on 27
September. Our strategy is now premised on considering the imposition of
the pay award. Communication directly with CWU and through ACAS
remain open.
93. POL NED/Chair Search: Henry Staunton, new Chair, commences 1
December. Ben Tidswell will act as interim Chair. We have approval from
UKGI to start the search for three Non-Executive Director positions, and
Green Park have been appointed to assist with this.
1s
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Tab 5.1 Financial Performance Report
POST OFFICE LIMITED
BOARD REPORT
Title: August 2022 (P5) - Meeting Date: I 27" September 2022
Performance Overview
Navin Batra - Strategic i
. ; : . i e Al Cameron - Group Chief
Author: pence) Planning & Analysis Sponsor: Finance Officer
Input Sought
The Board is asked to discuss & note P5 performance.
Previous Governance Oversight
Approved/ Noted by GE on 14th September 2022.
Executive Summary
The purpose of this paper is to summarise our Period 5 financial performance, with further
details and analysis provided in the accompanying reading room slide-deck.
budget on {
IRRELEVANT
fT IRRELEVANT riven by continued underperformance
‘on Labels (cost of living crisis) and International (customs changes), offset in part by strong
performance on Special Delivery. The gap to budget is widening, with YTD trading revenue
jas come in the last two periods.
# : : v) “driven by higher volumes
* - EVAN’ ~ “driving an {IRRELE
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Tab 5.1 Financial Performance Report
agreed top ups and Travel recovery. I
is potential for some further upside
‘with discussions ongoing, we
continue to work on managing our year to go costs, asking business areas not to reverse
YTD favourable spend outcomes, and assessing emerging risks in the light of the broader
economic environment in the UK.
* The open network fell to 11,600 branches in August as we continue to progress to plan,
continuing the stability we have seen over recent months. The drop in the total open branch
network across branch categories is normal over the Summer. We are forecasting a rise in
September driven in particular by growth in the Drop & Collect format.
. ‘x ‘draft POL scorecard is attached to the appendix, highlighting key metrics across BOL,
Commercial and Retail. We are working on incorporating further IT and HMU metrics into
this scorecard.
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Report
Overview
pen branch network declined slightly to 11,600 in August in line with
forecast.
‘* Security Headroom and Facility Headroom remain temporally boosted by
Council Tax rebate prepayments.
*c £2.0m less spend (excluding HM) to latest forecast in P5.
1. POL Trading loss of
underlying basis} IRRELEVANT
>M Rem one-offs and top ups. On an
profit share continued to exceed expectations. However, this is the end of the Travel peak
with the scale of revenue expected to decrease. Travel Insurance ended in line with budget
in I period. Mails trading I IRRELEVANT
__IRRELEVANT
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Highlights
2. Overall M
seeing continued shift from 1st to 2nd Class due
in the 0-1kg weight band. Volumes versus 21/22
3s
IRRELEVANT
4.
“transacti
patterns. I
4
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Tab 5.1 Financial Performance Report
—_ now in P5 is the
re-pandemic levels. Payment Services revenue was
relating to an increase in Payout revenue, driven by the
Council Tax Rebate scheme. Further upside is expected later in the year when the £400
Energy Rebate scheme commences.
5. Staff costs were £0.3m favourable to budget as vacancies unfilled have more than offset
budget challenge. Non staff costs were (£0.5m) adverse to budget predominantly from
an increase in current Postmaster debt provision.
7. Investment expenditure (excluding Historical Matters) of £7.7m was (£1.6m) under
latest forecast due to CIO programmes, notably Belfast Exit, PCI and Connectively, as well
as placeholder projects for People and Organisation Effectiveness that have been rephased
to H2 this year.
8. The open branch network fell to 11,600 branches in August, which is normal over the
Summer and in line with forecast. We have 28 Drop & Collect branches at the end of
August and will roll out this programme significantly across September. Based on the
forward planned activity the network will grow rapidly from the August 22 base. Growth
from September onwards is driven by the opening of over 200 Drop & Collect branches by
the end of the financial year. We are currently on target to deliver these working in close
partnership with RMG and Payzone. Based on last year’s churn rate of 321 we forecast
closures as set out below and churn is currently trending slightly behind last year.
However, we have also considered the more prudent assumption of 500 exits (equivalent
to 151 additional closures by end March), reflecting the macro-economic challenges facing
the UK and specific risks with certain Strategic Partners. With this additional risk provision,
we forecast an open network of 11,590 by end March.
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Sapital Facility Increase
@
POST OFFICE LIMITED
BOARD REPORT
defen Working Capital Facility Increase Meeting
Title: for peak trading period FY22/23 Date: 27 September 2022
Author: Peter Mitchell, Group Treasurer Sponsor: Alisdair Cameron, Group Chief
Financial Officer
Input Sought: Approval
AJ
AJ
mi
i
<
>
Zz
a I
Previous Governance Oversight
None
Executive Summary
POL has access to a £950m Working Capital Facility (“Facility”) provided by BEIS, used mainly
to fund cash inventory in the network. As per Treasury policy and at the Boards request, we
have a pre agreed maximum Facility usage of £750m, leaving a £200m buffer for exceptional
circumstances.
Strictly Confidential
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‘ab 5.2 Working Capital Facility Increase
Appendix 1
Strictly Confidential
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Tab 6.1 Three Yeai
Plan Overview
STRICTLY CONFIDENTIAL NOT FOR SHARING &
POST OFFICE LIMITED
BOARD PAPER
POL00448625
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Title:
Three Year Plan
27 September 2022
Author:
Navin Batra — Director of FP&A Sponsor:
Al Cameron - CFO
Executive Summary
Context
The Board must recommend a 3YP to our shareholder for approval, covering the funded years
2022-23, 2023-24 and 2024-25.
The initial submissions were short by
inflation and the rising costs of technolo
This reflected a further decline in Labels,
Board’s discussion was postponed from June
to assess the situation. The latest submission increased the gap, in spite of an improved
Commercial forecast.
The purpose of this paper is to set down how we will close the gap, allowing us to discuss a
realistic way forward.
Questions
The questions covered in this and subsequent papers are:
Bl a la
How has the gap arisen?
Are the forecasts realistic?
How will be close the gap?
What are the next steps?
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We are in an intense period of decision-making and choices. These include:
e Ade-risked plan for NBIT including the physical roll-out
Products to be delivered through a second device
A much smaller change plan, leading to reduced activity now
New cost and headcount plans in each area
A fortnightly group to monitor delivery, chaired by the CEO
We have included supporting papers:
e A first discussion of options to reduce losses in the network, extending our D&C
ambitions and looking at focusing on potentially viable Postmasters
e Explaining the trajectory on Mails trading
« Highlighting choices in the approach to HMU as we seek to join up affordability, delivery
and risk management
e® Obtaining directional alignment on risk tolerance.
There is a separate paper recommending that we stop the current Belfast exit programme.
In addition, we will be seeking Board support to work on two or three submissions to the
shareholder, all of which will be predicated upon the fact that we are already taking the
necessary steps to close the gap. They will be:
e Seek borrowing to reduce our costs by £50m in the plan period and £50-70m per annum
thereafter
e Seek support for the trade-off between Postmaster viability and the new network
strategy, recognising the linkage with the policy review.
e Potentially seek a package of support for Postmasters that might be triggered if inflation
rises further, depending on the detail behind the energy plans
We will build a business narrative setting out why we will be a better business, more focused
on Postmasters at the end.
Next Steps
We provided a high-level briefing on the challenge to BEIS and UKGI on 15 September. We
will continue to validate our options, seeking to present a 3YP for recommendation to BEIS to
the Board on 1 November.
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Three Year $ itegic Plan Overview
The Report
Background
ay
5. The funding discussions were based on an Aug 2021 submission. Many things have
changed.
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Tab 6.1 Three Year Strategic Plan Overview
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. IRRELEVANT
Are the forecasts realistic?
11. Forecasts have multiple moving parts and the volatility is material. We have therefore
made some overlays. The key elements of judgement are:
Postmaster remuneration
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Tab 6.1 Three Year Strategic Plan Overview
@
17. Competition, Brexit impacts on international parcels and difficulties at Royal Mail have
been taken into account, with the trend lines on the core product sets as set out in the
table below.
Mails
18. We need to be clear that this is the right balance of expectations, considering:
e Higher CPI increase than forecast applied to PM Rem on PUDO & Mails
« Customer Incentives for Drop & Go
e Improvement of Mails Segregation compliance
e Macro-economic impact of cost of living/economic slow down
¢ — Evri PUDO income
¢ Retailer Returns acceleration
e Tracked 24/48 - modelling of options to take place
¢ Labels 2 Go
e RM Disintermediation/RM Retaliation
e Impact of NBIT de-risking
e International Data Capture impact on international parcels.
Other key assumptions
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Tab 6.1 Three Year Stra
@
20. Gap closure plans are developing along the following, proposed structure. These all
needs validating and testing and the numbers will evolve:
How will we close the gap?
BEX and NBIT
21. There is a separate paper on the BEX recommendation and Zdravko will provide a verbal
update on NBIT.
22. Continuing with BEX would further increase the financial gap by c. £20-30m and we
have no confidence that the delivery timetable or even that elevated budget can be
delivered. As BEX is taking longer to deliver, the additional risk of maintaining the old
data centres until March 2025 reduces. We are therefore recommending that the current
programme is halted.
23. This does not mean that we cease spending on Belfast: there will be some money
required to maintain the service and purchase spare equipment. In addition, specific
activities will still have to be migrated.
24. We must be off Horizon by March 2025 and therefore NBIT must be fully rolled out. The
team is de-risking the programme to give 6 months’ contingency for things to go wrong
or be delayed. A number of decisions flow from that.
25. Bill payment and Lottery will be built outside NBIT, at least for now. We will use the
current Paypoint device, or some evolution, suitably supported, to deliver bill pay in all
locations. This is sub-optimal both financially and for customers but is simpler and more
realistic.
26. The early indications are that our financial assumptions are optimistic. In particular, we
have to work through the physical roll-out plan, what else we have to stop and how we
fund device 2 development and roll-out.
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Tab 6.1 Three Year Stra
@
27. We are working through reducing other change spend. The change plan excluding NBIT,
BEX and HMU was £162m, which we looking to reduce by £75m. This is a challenging
number, especially given the projects reduced and cut back previously.
Other change spend
Historical Matters
29. There is also a separate paper on future approaches to HMU.
30. In essence we require the HMU and Inquiry teams to revert to their previous forecasts,
reversing most of a forecast increase in costs of some £47m, even though the Inquiry
will take longer and we have late applicants to deal with.
31. The clearest impact is that we must reduce the role of HSF as much as possible. Their
quote for late applicants was double the cost of HSS cases. We must proceed with the
rapid recruitment and appointment of other resource. We have had a helpful meeting
with HRC where there was in principle alignment around savings of some £17m, around
half the HMU gap, recognising that we will need to demonstrate that we can deliver
safely.
32. The support for Inquiry participants and the level of attendance and sessions must fit
our available funding and recognise the different levels of risk for different witnesses.
Commercial
33.
34.
35. We need to agree the approach to Lottery. The Commercial team is recommending it is
not built on NBIT. We therefore have three choices: build it on a different device; seek a
deal for Postmasters under our brand but without our equipment; or withdraw entirely.
While there are many things we cannot know yet, the NBIT decision is urgent.
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Operating costs
36.
ate
38.
39;
40.
41.
42.
We need to save £55m from operating costs, accepting that we are keeping the lights on
as we support Postmasters through the cost of living crisis. This means that we must be
ruthless in the work we do not do and the improvements we do not make because we
have limited resources. We have suggested £20m of redundancy payments to enable the
changes to happen.
We are calling out one specific area, the scale of our support for Postmasters. This has
been built piecemeal in response to the historical issues and there is an opportunity to
focus it.
It requires a change in our culture, where we are much clearer with Postmasters what
they must do and when. So for example, are we prepared to say that they must
complete declarations and monthly balancing on time or they will not be able to trade -
as we do for fit and proper.
In addition, we must have discipline over the channels. It must be clear what has to be
done on branch hub, what the phone lines are for and what the role of the area
managers is and we will have to be relentless in not just endlessly “helping out”. This
can be explicit with Postmasters: it is the price of increasing their share of turnover.
This will be important as we define the role of Area Managers, shifting from helping and
building relationships with the positive Postmasters to delivering value, including the
safe and accurate roll-out of NBIT.
In addition, we simply cannot afford to increase costs across the functions and we have
to see FTE numbers declining. This does not mean we should stop recruiting in key areas
or take a one-size-fits-all approach. We are asking the functions to work out how to hold
their costs. We will reduce the proposed spend on technology but we will not be able to
hold those costs: we have to dual run NBIT and Horizon for longer, increasing pay to
Fujitsu.
Following this debate, we will revert with proposed targets by area.
Borrowing for cost reductions
43.
44.
We have to reduce our own costs but have limited money to do so, despite explaining
the opportunity in the funding conversations. We have been exploring the opportunity to
have partners fund the costs of change in DMBs and in wholesale cash. These are worth
doing but will be small and delay the benefits.
As set out below, we will be looking to borrow the funding for specific benefit cases and
repay it over a 10-15 year period. A borrowing period that extends beyond this funding
round adds complexity. The opportunities we know exist are: complete the franchising of
all DMBs; outsource Supply Chain; reduce loss-making branches further; and reduce our
functional headcount by process engineering, automation and lean working practices.
This last point tends to have the weakest business case but in a world where we do not
have DMBs and SC, we also can’t have a complex, insourced approach to payroll, for
example.
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Tab 6.1 Three Yeai Plan Overview
@
Headroo!
46.
Overview
47. These decisions are individually and collectively problematic and difficult. They are also
necessary and allow us to right-size the business, putting Postmasters at its commercial
heart.
48. We are considering whether we have the capacity and capability to deliver, even with a
smaller change plan and less functional activity. Our preference is to own the activity:
past experience suggests that outsourcing it to a third-party delays action and
undermines delivery. That said, we will need some help to turn this into a deliverable
programme and build the complex cases, such as for network change.
49. We have diarised a fortnightly Steering Group to govern the development and delivery
of targets, chaired by the CEO, with secretariat provided by Finance.
What are the next steps?
50. Our role over the next few weeks is to narrow down these numbers and challenges as
much as possible, setting up the workstreams that can take decisions into rapid
execution.
51. The most important decision we can make is a clear recognition that this is necessary
and we will approach it consistently and proactively with our teams and across the
business.
10
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Accelerating the Network
Strategy: overview of options
For discussion at Board meeting on 27 September 2022
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Executive Summary (1)
Context:
= At the July Board awayday we discussed our longer-term vision of!
IRRELEVANT
IRRELEVANT
perative to accelerate the transition to a more commercial network:
Overview of the options:
* Across the franchised network therearess—s—~S~—CidC IRRELEVANT ——s™
= The existing target for, IRRELEVANT)
more flexible locations policy (including going closer to exiting branches) we could potentially target
excluding central costs).
and faster than any previous POL roll-out programme - but with a
This
* Within this constraint, slides 5 & 6 set out the options for saving IRRELEVANT I lepending on our risk appetite to manage the
customer, stakeholder and postmaster noise. NB.A separate legal risk assessment is being prepared and this can be discussed at the Board.
* We also recommend pursuing funding to resume DMB franchising, given the compelling financial case a
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co
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Executive Summary (2)
Decisions & questions for discussion at the 27/09 Board:
IRRELEVANT __what is the Board's risk appetite to pursue the
I. In the context of the other measures being considered to;
options outlined on slides 5 & 6 to tackle loss-making branches?
LL.Sk bi
2. To offset these closures and maintaii hes, do we agree in principle with the steps necessary to support the more aggressive
roll-out of D&C to up to! ..4 potentially including the relaxation of exclusion zones around existing branches
(reducing from 0.5 to 0.25 miles) and/or allowing new host retailers to continue offering pre-existing parcels services from other
providers?
3. Do we agree we should pursue additional funding from BEIS (potentially via external borrowing) to resume the DMB programme?
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Recap of the Post Office network that we’re working towards :
Our current 3YP will see us moving towards our ideal network by reducing Outreach and Legacy
branches and increasing D&Cs — but we now need to accelerate this change
The current Network Plan takes incremental steps
to move us towards the optimum network and
reduce costs over the 3YP period:
Evolution of the Post Office network over the next 3 years
=DMBs_ Mains Locals mLegacy Outreach m Drop & Collect
12000
10000
“= IRRELEVANT 2
Bunsen
Zi
4000
2000
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Which branches are loss-making for Post Office?
!branches are loss-making after remuneration and variable costs are allocated
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What is the (unconstrained) long list of levers to address all loss-making branches? ©
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Summary and next steps
I. The measures outlined in the previous slides will be extremely noisy with the impacted postmasters and communities, but given the
context of the wider 3YP our recommendation is that we pursue at least some of them, starting with the relatively easier levers
(removing exceptional rem, closing temp branches and realigning hours & rem).
up cash flow and providing clarity for NBITI
jin April 2023 would mean most branches drop out in April 2024
___ IRRELEVANT iwith D&C (given the I 1.5k is now formally measured each March).
2. The earlier we can implement these measures the better, freeing-
and we effectively have a full 2 years to I
a 3. This gives us just 6 months to complete the detailed branch-by-branch planning, engage BEIS and prepare the stakeholder management
Fy plans ready for execution. Some options (particular levers 2-4) can commence within this period, for example we are already starting the
process of managing out high cost / low value exceptional rem branches.
4. In parallel, we will bring forward plans for enabling an accelerated roll-out of D&C to up to 2k locations by March 2025 — including
proposals for creating a larger pool of candidate host retailers by relaxing exclusion zones & potentially product restrictions, the
necessary enhancements to the proposition to increase take-up and the procurement requirements beyond the end of the current
Service Concession Agreement with Payzone (which links to the work for enabling the use of their technology in PO branches).
5. If we can secure access to additional funding {IRRELEVANT ~—~“‘~‘~™~S~SCSCSCSTV validate our thinking,
a small number of ‘pluralist’
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Board Update
Mails 3YP
27% September 2022
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Contents overview
I. Executive summary & background
A reminder of the Strategic initiatives
3YP for Mails: what has changed since the 2021 submission?
How are these changes impacting the Network?
What is the latest on Royal Mail?
Key risks to delivering the 3YP
aS Se ee eS
Incremental opportunities to the 3YP
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Slide 3
Slide 4
Slides 5-8
Slides 9 -10
Slides 11-12
Slide 13
Slide 14
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I. Executive summary & background
At the July Board Strategy Away day, we discussed four fundamental challenges to our Mails business including:
* Migration of sales online for marketplace sellers
slump in parcels volumes in the market following the pandemi:
IRRELEVANT ind
In the intervening period, there is no sign of these challenges dissipating. The recent industrial action at RM is symptomatic of the wider cost and trading
challenges our biggest commercial partner. These challenges are long term, and we are cognisant that as RM faces into these challenges, there may be
[ _ IRRELEVANT ~ “Hor Post Office. This reinforces yet again the: _IRRELEVANT and execute our Mails strategy.
We are not presenting the Mails strategy again here following the Board's agreement to it. We have an implementation programme mobilising and will keep the
Board updated on progress as we get towards execution.This paper, however, focuses on the 3YP.
The recently submitted 3YP differs materially from the version reported in 2021. The previous assumptions around volumes gained in Covid staying for the long
term are no longer valid. Furthermore, changes in the market, including the significant tariff changes within the RM portfolio earlier this year, have altered our
product mix. The heavy discounting on certain services flows directly through our P&L. This is all a reminder of the critical need to broaden our market reach
which the Mails strategy is intended to do.
IRRELEVANT
IRRELEVANT I
What are we asking?
* The Board is asked to note the fundamentals around changes to the 3YP, risks and opportunities.
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2. While not the scope of this paper, here is a brief reminder of the Mails strategy initiatives, which
we are executing as a priority...
We are working at pace on the implementation of these initiatives. The market is moving fast, and the evolution of the Mails 3YP over the last year, which is
the focus of this paper, is yet another reminder of how critical it is that we execute at pace.
Remuneration is assumed to be like-for-like with our current product set until an alternative remuneration strategy is determined. The full business cases for
these initiatives will also contain an updated and more detailed view of benefits.
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now included in BAU in
hich is likely to be ongoing.
Costs have increased by
forecasting of Mails Segregation service
The cost of living crisis, and subsequent changes in consumer spending habits are two of the many variables that are challenging to forecast how the recent
government intervention on energy bills mitigates this picture remains to be seen.
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3.A significantI_ I in RM’s business ia
i i; for illustrative purposes, we have modelled volumes falling by
IRRELEVANT
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3. Loss of Covid volumes and market shifts decrease income in the: IRRELEVANT
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3.The market is changing fast as e-commerce slows and competitors invest in capacity/automation
350.0
300.0
250.0
200.0
Volume m
150.0
100.0
50.0
00
Key Product Volumes 18/19 to 24/25
Stamps
Home Shopping Returns
Special Delivery
Labels
18/19
19/20
20/21
2/22
23/23
International
2/24 pas
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Market Overview
+ E-commerce growth slowing as cost of living crisis intensifies: online
sales -4.1% YoY in Aug 22
* Customers continue to migrate to cheaper online channels for the
purchase of post: online acceptance ratio has increased to 25%
* Competitors continue to invest to boost network capacity and
automated OOH solutions: InPost locker estate up 25% in the past 6
months to c.4k sites; DPD partnering with Quadient to launch 500
smart lockers
* Industry players remain cautious on outlook due to low consumer
confidence, with some predictions of inflation reaching 20%
Key Product Volume Assumptions
* Stamps - historic volume reduction continues with ongoing decline in
letters and social senders
* Labels & International - excluding additional volumes gained during
Covid restrictions, current trend is broadly in line with pre Covid
direction - with a levelling out of volumes in outer years
+ Acceptance/Home Shopping Returns - we expect these to
continue to grow at similar rates
* Special Delivery - continues to grow slowly to saturation at March
2025
4
Py
c
o
dA sit
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4. Face to face ‘sales’ continue to decline in our branches in line with the changing market as i
correspondingly
% of mails that is
If current trends continue, then by 202:
The shift to online sales will have a huge impact on
Postmasters over the next 10 years
Ld Research by Quadrangle shows that I in 5 Projection
Marketplace sellers normally or always a
purchase their postage online H
50
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= I
> ot
5 I
8 40
a
3
z
eo High Covid-related growth, :
Gis expected to reset at pre-
. pandemic growth rate
—
‘Oo
ae 20
ie Oe Actual
Cm Accelerated migration .
= current Run Rate
O=No change
°
2019- 2019- 2020- 2020- 2021- 2021- 2022- 2022- 2023- 2023- 2024- 2024- 2025- 2025- 2026- 2026-
Period I Period 6 Period I Period 6 Period I Period 6 Period I Period 6 Period I Period 6 Period I Period 6 Period I Period 6 Period I Period 6
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4.This clearly impacts Postmaster remuneration, affecting a broad range of density segments
and geographies
The most recent trends we are
seeing versus last year show that
all areas except Rural are
impacted by the Mails downturn,
with the higher density areas
being affected most heavily.
This trend continues at a regional
level, with all geographies (with
the exception of Scotland, which
is majority rural) —_ seeing
remuneration declines in Mails.
We would expect any further
declines in Mails to follow a
similar pattern i.e. impacting a
wide population of the branch
network.
This would also suggest that the
focus of strategic _ initiatives
should be on the very high
density areas in the first instance.
5, 3
© SSS SSS
Yorkshire and the Hnber, 4%
I
South West, 2;
i; §};
eee el
oth (2s,
MEE Scotland, 1%
Northen, 7;
orth es, ,
I
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5. RM’s planned transformation is under significant pressure due to industrial action and a
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slowdown in parcels market growth but see the battel with the unions as one that they simply have
to win
RM is aiming to transform into a more customer-focused, parcels-led business
* Losing £1m a day as benefits from the pandemic period unwind.
* Accelerating requirement for operational change and cost reduction programme due to revenue and cost headwinds.
* Focusing on new market segments such as healthcare, larger parcels and Sunday deliveries.
+ Despite heavy investment in parcels automation, efficiency improvements needed for long-term growth have stalled.
The industrial relations environment is existential for RM
* CWU Industrial Action against “pay-for-change” deal is creating major operational disruption; negotiating sides remain far apart. Strike action is
weakening RM’s financial position, putting the position of the company and jobs at risk.
* Creation of new holdings company indicates the Group is preparing for break-up in the event that significant change within RM is not achieved.
+ At the same time, RM’s largest shareholder, Vesa has advised BEIS of its intention to raise its stake in RM to more than 25%, increasing the risk of a
split, with Vesa’s interest lying in RM’s successful GLS business.
_.JRRELEVA
RM has stepped up I I
+ Widening the gap between online and in-branch pricing - increasing online discounting whilst also increasing in-branch pricing on the majority of
parcels services.
“ily promoting onl
nnel. temp< ying the cost ‘step collection service.
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5.Whilst we execute our new strategy, we will increase engagement with RM to try and reduce
jand protect and develop revenue and joint service initiatives
Key areas Indicative actions
Sales initiatives G
Operational and cost efficiencies 0
Customer C
Service improvement o
Minimise disintermediation &
Joint commercial strategy .
Recovery plan for International products
Product enhancements for marketplace users (e.g. bolt-on EasylD features, POint-to-POint service)
Joint sales approaches to selected retailers and business users
Simplification of in-branch sortation
Tech
Share customer data to drive product and service improvement
Simplify products
Joint marketing initiatives
Focus on product service performance through clear KPls and reporting
Look for ways to improve product access and customer experience through collaboration
Develop a joint Commercial Board to meet quarterly to review Trading Performance, pricing and
marketing decisions
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6. Key risks to delivering our 3YP in Mails
Market risk - cost of living
crisis
RM Industrial Action could
lead GLS or PFWW being
split off from RM
Resource - Change and
Mails
Timelines
Lack of disposable income and lower
consumer confidence may reduce volumes
achievable
IA could lead to break-up of RM (sale of GLS
and/or Parcelforce). Dilution of POL product
offering, customer confusion, very different
partnership required between POL and RM
ismxeven delivery may reduce business
capacity to support! initiatives rollout
To meet the critical path schedule of design
kick off, the required resources must be
recruited into an empowering structure now
and during the next six weeks.
Current initiative timelines are ambitious and
leave little room for delays.
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Mails team to monitor risk/opps on monthly basis
through forecast cycle and use external market
research to confirm trends
IRRELEVANT
Engagement plan with RM, branch engagement Unknown
plan and remuneration strategy. Work to assess
contractual and other implications
Sponsor to engage with wectand IT leadership to
ensure delivery imited by.
delivery as key priority after
Delayed programme and
benefit delivery
Support from SPO and wider teams to confirm
availability of required resources including
potential re-prioritisation. On-boarding of
resource before business case approval will be
required.
Late delivery of benefits
Prioritisation of key activities and workstreams to
ensure critical path maintained. Clear governance
roadmap required to ensure approval obtained
from all required forums before spend
commences
Delayed programme and
benefit delivery
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7. Potential incremental opportunities to the 3YP in Mails
In-branch sales with another carrier Sei be introduced to
Non-RM In Branch Sales
CPI impact higher than planned
Mails Segregation Service Credits
Any Government intervention in RMG
as USO provider yet to be determined
{also a risk)
International
Increased sales organisation
Higher CPI increase than forecast (plan for 4.0% 23/24, 1.5%
24/25) (CPI Increase — increase to 13% in 23/24 and 5.5% in
25/25 per BoE assumptions
Improve compliance on L/LL bag will increase remuneration
and reduce service credits to RM
Government's intervention
Volumes in strategic initiatives are domestic only;
international volumes for PUDO and International inbound
(as part of returns) could create further volume opportunity
Adding sales resource and capabilities to focus on support
of product and segment sales initiatives
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Royal Mail - Board Reading
POST Document
OFFICE
: 27% September 2022
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Impact of latest RM developments on PO
The purpose of this paper is to provide the Board with an overview of recent fast-moving developments at Royal Mail (‘RM’), including its share
price collapse, the industrial relations situation and the potential impacts on PO.
The key take-outs are as follows:
* We can expect prolonged industrial action (‘IA’) at RM; the CWU and RM management are miles apart ideologically
* RMis losing £Im per day; its intent is to urgently deliver operational change and it is raising the stakes with CWU to achieve this
* However, RM’s current share price is not just company-specific - it is also reflective of wider macro- and industry-specific headwinds
* Prolonged IA would have a material impact on Post Office income an tmaster remuneration
* RMwill likely accelerate it: jand furthermore, some customers are likely to move
away permanently to other carriers
IRRELEVANT ]
+ Weare progressing our Mails Strategy initiatives at pace, as endorsed by the Board in the July Strategy Away Day
* So the need for
This paper will be walked into the Board meeting and will be handed out to Board members to review subsequently - the team is ready to
answer any follow up questions that might arise.
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RM’s strategic intent is to deliver urgent operational change to drive long-
term sustainability - it is raising the stakes with CWU to achieve this
Everything we have read and heard to date leads us to believe that RM intends to stick to
a ‘pay for change’ offer with CVU. RM has already paid a 2% salary increase to
demonstrate its intent. It is very unlikely to cede to the union’s demands for a no-strings
inflation-related pay rise which is anyway unaffordable.
With RM losing £1m a day, it must urgently implement its operational transformation
plans, including plans for a separate premium parcels delivery network, if it is to succeed in
an increasingly competitive market.
The company is pulling every lever it can to prioritise critical mails during strike days,
including rewarding managers for working on a Saturday. RM knows these actions are
inflammatory to the CWU, but their challenge is now an existential one...
“tf we don’t deliver change, we face extinction.”'
To break the deadlock after five months of negotiations, three dispute resolution
procedures and three days of CWU national strikes, RM is proposing to take its talks
with the union to arbitration. It is also exercising its right to serve notice on its ‘unique,
complex, costly and highly restrictive’ agreements with CWU. The union views these
actions as a major escalation of their disputes aimed at breaking the company up,
introducing a gig-style parcels network, and making the USO unsustainable.
Friday's ‘mini-budget’ forthcoming legislation on strikes (requiring unions to put pay deals
to their members) may be helpful to RM in the event of a long running dispute. But it is
not yet clear if the legislation will be fast-tracked through parliament and therefore the
timescales are unknown at this point.
' RM Chairman, Keith Williams, The Times, 9 July 2022 Strictly Confidential
Source: RM Manager briefing
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RM’s current weak share price reflects wider macro-economic, industry-
specific issues as well as company-related headwinds
Macro: cost of living crunch and an impending recession is impacting global
stocks, but especially the UK where the economy is being hit hard.
+ Weaker than expected growth figures from the ONS suggest that the
economy has little momentum and already in recession.
* Concerns about personal finances curbing consumers’ discretionary
spend.
Industry specific: e-commerce market has gone from returning to
‘normality’ to worsening as consumer confidence withers.
* FedEx, considered a transportation industry bellwether, unexpectedly
released figures on I5 September showing a dramatic quarterly
downturn and warning about a ‘global recession’. The weak outlook has
had a negative read-across for all industry stocks, not just RM.
+ RM’s European postal peers have also seen large declines in their share
prices over the past year and similar trends to RM. All peers have seen
high single-digit declines in their share prices during the past week.
Company-related: weak financial performance reported at QI, with the
UK company expected to break even if transformation achieved. Ongoing
strike action reflects the structural challenges facing the business.
* Stock downgrade to ‘neutral’ by JP Morgan also caused shares to decline
further last week. The broker simultaneously downgraded DP DHL.
* Credit ratings agency Standard & Poor's also downgraded RM outlook to
‘negative’ watch with the possibility of a further debt downgrade. Poorer
ratings mean it will be harder to borrow / investment will cost more.
Strictly Confidential
European postal peers have seen similar share price
trends to Royal Mail over the past year!
Post NL (Netherlands) ——
Key: Royal Mail Deutsche Post DHL
Potential impact of further RM share price decline:
+ Further RM selective price increases.
+ Lowering or cancellation of dividend, making shares less attractive.
+ Further cost cutting measures / deferral or cancellation of investment.
+ RM asset sell-off, including its ‘jewel in the crown’ property portfolio.
* Both RM (incl. PFW) and GLS are vulnerable to takeover bids or tender
offers.
* Possibility of a GLS management buy-out.
I MSN Money share price comparison, 26/09/2022
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Potential impact of prolonged IA on external stakeholders
Royal Mail Deepening losses, currently running at £1m / day; investor targets become unachievable.
* — Efficiency and productivity gains not achieved, resulting in customers of all sizes switching and further regulatory fines.
* — If ‘significant operational change’ cannot be achieved, possible separation of RM and GLS.
+ RM'’s ability to continue to offer everyone a job will be diminished — compulsory redundancies could be necessary, despite a
commitment to avoid these as set out in the joint 2020 Pathway to Change agreement.
+ RMis reviewing with a view to modernising all historical agreements with CWU as progress on pay talks has been frustrated.
* RM as a standalone business is unlikely to be an attractive investor proposition with its declining core, inability to make
productivity and efficiency gains, unionised workforce and USO. If not bought or re-privatised, the company could collapse.
* Government and regulatory intervention would be required to protect the USO.
Competitors * Having expanded capacity during the pandemic, more agile competitors will be able to cherry-pick more lucrative areas, leaving
RM with a network that is hard to reach and costly to serve.
+ Evri could accelerate its strategy to recruit small businesses and expand to retailers outside of the RM network, reducing prices
to gain volume share.
+ Retailers could turn to more automated delivery options, e.g. Parcel Lockers which are benefitting from greater investment,
availability and take-up by carriers. Increased parcel volumes could bypass both Post Office and Royal Mail.
* Digital parcel send solution development accelerated, including by Amazon, e.g. automated drop boxes for consumers and small
businesses.
* Hostile takeover bid for of RM by competitor; DPD, DHL, FedEx, UPS and Yodel unlikely to be interested in the RM UK business,
while Amazon and Evri may be interested in certain non-regulated UK assets only. Both FedEx and UPS could be interested in
the GLS business at the right price.
cwu * CW is ideologically opposed to RM's proposed pay and terms and is fighting to remain relevant.
members + More official strikes means less pay for members taking action. At a time of rising inflation and in the run-up to Christmas,
prolonged strike action will become unsustainable for many members. CWU hardship fund will not sufficiently compensate all
members (especially as CWU is simultaneously escalating its dispute with BT).
+ Return to work possible, but under work-to-rule conditions and relationship with management will be severely fractured.
Strictly Confidential
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RM challenges and possible responses & short/medium-term impacts on PO
Rate/Scale of
RM challenges
Unable to realise benefits of investment in technology.
* Requirement to change ways of working to enable service
enhancements in line with competitors’ offerings e.g. automation,
24hr working, Sunday deliveries etc.
Competitors better placed to challenge and adapt.
Market reducing in specific areas, particularly international.
Need to respond to the cost of living crisis against the
backdrop of an already expensive and _ increasing high cost
model.
BEIS enquiry into Vesa Equity’s interest in increasing its
shareholding in Royal Mail to >25%. Potential for USO to
be under international ownership.
Potential organisational split following a restructure with
new holding company, therefore potential for a sell off or
the need for Government intervention in future.
RM’s creation of a new holding company, International
Distributions Solutions, has been presented as a buffer to
sell-off GLS in the event that progress on modernisation
cannot be achieved. But a GLS demerger would bring many
complexities of its own.
online, alternative acceptance channels etc)
Potential behavioural impact on PO
ize)
RM will likely continue t
+ More aggressive pricing via RM’s online channels/app. Likely.
* Business Account sign-ups drive. Likely as increases ‘stickiness’ of customers to RM
+ Increased promotion of RM owned acceptance channels - doorstep and Customer
Service Points.
RM will work to
* Contracts with alternative retail acceptanci
increases. RMs..cast.hase.so.would need.
[ IRRELEVANT
IRRELEVANT
Been
* Charge costs for new collections (churn replacements and Drop & Collect).
mooted previously, so this is possible.
+ Reduce services available in Network - limit USO products to c5k branches to meet
USO obligation. - Unlikely until RM severely cost challenged.
Structure/product changes
+ Price review to grow revenue in areas with less competition e.g. Large Letters and I*t
class. Customer switching to 2" class resulting in less profit and revenue for PO and
Postmasters.
+ Expansion of print in branch (Labels to Go) accelerating channel shift.
+ Delay of tracked 24/48 being sold in PO and potential for pricing differential vs online
sales.
Strictly Confidential
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Quantifying the impacts of IA on Post Office in the immediate term
date, individual strike days have resulted in income losses of c£100k/day, and associated Postmaster remuneration of
weekly Mails income.
‘This represents 2-
* Our assumption is that income losses will be much greater on multiple strike days.
* For example, although the latest second strike day was cancelled by CWU due to the period of national mourning, we still saw a c£85K loss
of income on that day.
+ We expect the percentage of lost income to increase over time as customers shift to competitors, potentially on a permanent basis:
* Social customers - primarily impacting Special Delivery
* Marketplace sellers - primarily impacting Labels
* Businesses - switching from RM will primarily impact on Returns
+ The current CWU strike mandate is valid for the next four months (total six months). As Royal Mail and CWU are unlikely to reach an agreement
during this time (subject to arbitration), we expect industrial action of 2-3 days per month over the next four months. A re-ballot could potentially
take place in January.
* The daily loss of income is assumed to be much higher over peak period, increasing to I IRRELEVANT, income as Special Delivery in particular
will be impacte 7 onic ——!
* Extrapolating these assumptions, and assuming 3 days of strike action per month in October and November, and 3 further days in December, we
would be looking at a potential income! }
irelated to IA action alone.
+ An ongoing lack of collections in branches will lead to more Post Office branches reaching capacity, meaning Postmasters could have to find
additional capacity or turn customers away.
* This will put immense pressure on Postmasters and longer-term, the lack of income could put PO's ability to delivery our BEIS network
commitments at risk.
Strictly Confidential
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Potential longer term financial impact of prolonged IA...
What we have laid out below is not a revised 3YP, but setting out potential worse case trading scenarios should IA persist long-term
IRRELEVANT
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Indicative timeline for key Board updates
* The following timeline outlines key known events
The Board will only be asked to make decisions I
* We continue to monitor market dynamics, RM share price and investor announcements, with reporting to GE on significant exceptional events and
their actual and potential impact on PO. Weekly trading updates will continue as usual.
+ We continue to engage on a day-to-day basis with RM on joint initiatives, e.g. Tracked 24/48, whilst simultaneously executing our strategy.
Strictly Confidential
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HRC
HMBU Cost Challenge
OFFICE
September 2022
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1.0 HMBU Cost Challenge — Background
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By way of background, our original cost challenge was £15m. This rose to c£35m once extra costs were accounted for
across HMU.
This table details those extra costs, as well as recommended big-ticket savings that are detailed later in this pack.
£m Slide Ref HSS OHC PMD Other Total to Mar-25
FY21 11+1 Forecast spend to end March-2025 40.4 26.5 5.7 5.0 912
Cost Challenge (1141) (15.0) (15.0)
Spend to PS FY22 (11.3) (2.7) (3.2) (1.1) (0.8) (19.1)
Future Forecast 29.1 23.8 10.4 46 (10.8) 57.1
Cost Challenge (1141) 15.0 15.0
‘OHC forecast risk (Additional HSF cost if they ran OHC) 17.0 17.0
Late applications: Based on HSF assumptions 22 13.9 13.9
Additional resources within HMU 3.5 3.0 65
PM Det, PFA Triage and Independent Panel not in original forecast 11 0.9 24 44
HC Remediation model 20 (10.1) (10.1)
Embedded savings: -
Contract renegotiation with HSF (7.0) (7.0)
= Operational efficiencies within HMU (1.5) (0.8) (0.4) (2.7)
- Savings from Rod C exercise (2.3) (2.3)
Revised Cost Challenge [ ree 9.9 On i 24 14.6 34.6
Reverse embedded savings:
= Contract renegotiation with HSF (added back in due to uncertainty) 7.0 7.0
~ Savings from Rod C exercise (added back in due to uncertainty) 2.3 2.3
Revise OHC Claim Forecast (293 > 150) 23 (11.1) (11.1)
Late Applications: In-House 22 (8.9) (8.9)
Targeted Savings 24 (4.0) (4.0)
Revise HSS Post Offer forecast 23 I 2.6) a a ree am ne a A
Savings Gap sil 5.5 (1.2) O14 24 10.6 17.3
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1.1 HMBU Cost Challenge - Walkdown
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Further to the £34.6m cost challenge, a number of incremental costs and realistic savings options are presented, to leave a residual cost gap of
£17.3m. A number of these savings options will require HRC decisions to progress.
M increase Mi Decrease M® Total
2.3
70 aaa
386 ia
(11.4)
(8.9)
(4.0) Bea 173
(2.6)
HSF contract negotiation OHC claims: 293 > 150 Targeted Savings Savings gap
Cost Challenge HMBU Reduction in banked savings Late Applications: In-house HSS Post Offer Assumptions
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1.2 HMBU Cost Challenge — Summary
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This paper responds to the challenge to reduce Historical Matters costs by c£35m against forecast in the period to 31 March 2025. If we
continue at the current trajectory we will be over budget. This potential overspend needs to be addressed, and a number of HRC decisions are
required for HMBU to take interventive action. We have given thought to how these processes could operate in HMU POL, and we have made a
preliminary forecast against these proposed cost savings, however they would all be subject to further due diligence and a full business case.
To address this shortfall this paper seeks approval of the following:
OHC Cost Savings:
1) HRC and POL Board to approve the implementation of a remediation approach in OHC
2) HRC to approve revised forecasts at 150 cases (prev. assumption 293)
HSS Late Applications
1) HRC to approve the review of HSS cases by POL, as distinct to HSF, and to accept that this will be a change of approach to the main HSS
cohort.
2) HRC to agree how the decision making process will work, i.e. we could run a decision making panel in HMU, or pay for an external
independent panel per the existing model.
3) HRC to agree what is an acceptable timescale to resolve the current late applications
HSS Post Offer
1) HRC to approve revised forecasts based on lower dispute volumes and earlier resolution in DRP
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2.0 OHC —- Approve Remediation Approach
Savings of £10.1m from an ‘OHC Remediation Model’ approach have been assumed within the £35m challenge, in advance
of approval. For this to be realised HRC needs to approve implementation of a remediation approach in OHC
. Decision: Recommend approve moving to an OHC remediation model led by principles
The current approach is for HSF to deliver OHC using a negotiation legal process. We forecast this to cost £37m to Mar-25 (based on working
level assumptions from HSF, though we are yet to receive a full business case from HSF) of which only £20m is currently budgeted. This is not
affordable.
The recommended alternative approach is to deliver OHC via a principle led ‘Remediation model’. Under this model, recommended by KPMG and
designed by NBW, the project proactively works with postmasters and their advisers to provide swift and fair compensation to postmasters in a
non-adversarial manner. It will be run by a POL ‘OHC Compensation Unit’, using a mixture of POL, Consultant and Contractor resource. This is
forecast to cost £26.9m to Mar-25, representing a £10.1m saving against the current approach.
Note that this approach does not necessarily require engagement of NBW.
Note that on 8" Sept-22 a paper detailing the principles and processes to run this remediation model including full costings went to HRC asking
for approval. At the time of writing this decision was outstanding. HRC’s two areas of concern were i) Transition risk; and ii) Buy-in from third-
party advisors. Note that this approach is being discussed with Hudgells.
Note: Current costs are based on 293 current volume assumption, if we reforecast to 150 this brings in an addition £11.1m of savings, as
detailed on slide 1.0 and 2.3.
Risk: Real or perceived loss of independence of using the current HSF process. This may impact confidence and buy-in from claimants’ legal
advisors
Risk mitigation: Sample based Assessment assurance performed by HSF, and POL and BEIS oversight of outcome determination.
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2.1 HSS Late Applications — Approve POL approac
(1 of 2)
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will be a change of
ct to HSF, and to accept that t
HRC to approve the review of HSS cases by POL, as di
Ir h he main H hort.
Late Application costs of £13.9m have arisen because applicants will be remediated despite applying post the HSS
deadline. Amending the approach delivers a potential saving of £8.9m (Note: An estimated delivery cost of £5.0m has
been used, based on prior modelling by the Operational team. This will need further process and cost modelling work.)
. Decision: HRC to approve recommended alternative approach
+ An IAP should be used, as this continues to ensure a level of independence which, for all parties (PMs, POL, HMG), is an important part of the
Scheme’s credibility. Alternatives can be considered, as bringing this in house would drive further savings.
+ I The quicker we want to deal with Late Applications the more expensive it is. Therefore to run as cost efficiently as possible we would potentially
stretch the resolution over the full provision period. We are mindful that some of these customers will therefore have been waiting a long period
for an answer, which could potentially be mitigated by interim payments.
+ We need to debate what is an acceptable period to complete the late applications. We are mindful some of these have been waiting c2 years. It
is a balance of cost and SPM experience.
+ The proposed approach is to exclude the involvement of HSF Belfast, using alternate HMU resource. The further benefit of running both Late
Applications and OHC ourselves is the ability to leverage fungibility of the skilled resource to bring economies across the two schemes.
+ The proposed approach reduces HSF London support to a minimum - dealing with legal exceptions only
+ Because these applicants are late, they will go through a different process. The principles applied will be the same as HSS, so they should get
the same outcome.
+ Estimated cost of HSF approach is £27.5k per applicant; estimated cost of HMU approach is £10k per applicant.
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2.2 HSS Late Applications — Approve POL approac
(2 of 2) =
HRC to approve the review of HSS cases by POL, as distinct to HSF, and to accept that this will be a change of
Ir h he main H hort.
. Detail of resourcing proposal under alternative approach
+ We will use appropriately qualified internal resource to cover the HSF Belfast / London scope of work transitioned to POL - primarily
legal contract resource due to the fact that the case assessment involves the application of principles, many of which are legal
principles.
+ To cover the Late Application work performed by HSF Belfast, a team of c. 9 FTE is required.
+ The skillset required covers case assessment, eligibility assessment, RFI, creating panel packs and writing offer letters. We
would also need to replicate some of the seniority range present in HSF Belfast, which ranges from Partner to legal support
+ The source of this internal resource is proposed to be Jacki Adam’s Detriment Team. It currently contains 15 legal contractors,
and by cherry-picking 9 FTE against a skills matrix we believe that a capable team could be stood up.
+ Availability contingent of release from Detriment work. Impact to Detriment delivery needs to be accepted.
+ To cover the Late Application work performed by HSF London, a team of c. 2 FTE is required.
+ The skillset required is a more core Legal skillset
The source of this internal resource could be either Jacki Adam‘s Detriment Team, other legal resource within HMU, or new
external contractors.
+ The approach to writing of Outcome letters is still under consideration
+ Our assumption in pricing the new model is to not include the potential benefit of de minimis cases (c30%)
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2.3 OHC & HSS - Approval of Cases reduction
S}SOQ SION [EOUOISIH f'9 GEL
HRC to approve update to Volume Assumptions, as recommended below:
Saving: Potential savings totalling £11.1m have been identified as a result of lower volumes in OHC. Details as follows:-
. Potential Saving: £10.1m
+ Basis of Saving: the OHC Claimant population assumption of 293 now seems overstated, given current flow rates and learnings from a triage
exercise. We propose revising to 150. This will lower operational cost.
+ — Risk: Latest P&P forecast is a range of 162-210 claimants. Taking 200, at the upper end, reduces potential savings by £4m to £6.1m
+ Risk: The number of claimants is not within POL control
. Potential Saving: £1.0m
+ Basis of Saving: The original OHC Programme assumed 293 claimants. Updating this assumption to 150 OHC Claimants is expected to drive
£1.0m reduction in P&P costs
+ Risk: This is outside POL control, and the most likely final population is subject to uncertainty
Saving: Potential savings have been identified in as a result of lower volumes in HSS Post Offer. Details as follows:-
. Potential Saving: £2.6m
+ Basis of Saving: The original assumption that 40% of HSS cases would dispute their original offer appears overstated. Fewer than expected
cases have been entering the Dispute Resolution Process, and due to productive post-offer engagement with disputing applicants more cases
have accepted the offer earlier in the DRP, with much lower volumes in the expensive later stages of DRP. Recent numbers: i) GFM 40% > 35%;
and ii) Escalation Meetings 60% > 25%.
+ Note: This saving does not involve a change to the current process, but simply recognises the financial impact of lower dispute volumes.
+ Risk: The reduction in dispute number assumptions is untested, due to the mix of complexity (i.e. only now dealing with dissolved, termination
and PI cases).
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2.4 Targeted Savings
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We still have a savings gap of £17.3 after accounting for big-ticket cost savings. Therefore these are the further potential
savings we are pursuing:
These potential savings need more work to confirm feasibility and accurately quantify. Where these would necessitate a change of approach,
these will be brought back to HRC for approval.
Details as follows:-
HMU plan to impose a £4.0m Resource Cost Challenge across HMU teams to deliver targeted savings.
The Late Applicants internally resourced cost - further process and cost modelling work may yield addition efficiencies and savings.
Commercial Discount from HSF. A value of £7m has previously been discussed. A discount is not impossible, and still being pursued by Rod Campbell,
but the probability and quantum is impacted by other proposals that will reduce our spend with HSF.
PFA triage - as per HRC discussion on 8-Sept-2022. Current budget c. £0.9m, which has potential to be reduced.
Resource savings. Potential opportunities are believed to exist across operational teams, and are being explored with the Operational Managers.
Maximise leverage of internal Legal Team across all projects. Direct as much work internally as possible rather than to more expensive external Legal
resource.
Reduce HSF involvement in the remaining HSS work as we move through the last 20% of stock.
Reduce HSF involvement in the physical Settlements process.
Potential further savings in HSS / Late Applications in MI, Relativity vs. Dynamics, and Admin areas
Further savings identified under the Rod Campbell work that are currently being worked through.
Further volume savings are possible. For example, costings are based on 500 Late Applications as a forecast, however so far only 200 have been
received. The final number is expected to be 200 - 500. A final volume lower than 500 will drive potential cost savings. Further, our assumption in
pricing the new model is to not include the potential benefit of de minimis cases, which could be c30% of population.
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2.5 Rejected Options é
a
Some savings have been considered as potential responses to the cost challenge, but have been rejected on the grounds of
feasibility, risk, or other blockers. These have been excluded from our proposed response, but are noted here for reference.
Details as follows:-
. Transferring work currently handled by HMU programme resource (Governance, Finance, Legal and CoSec services) to functional BAU
4 teams. This has been rejected on grounds of feasibility given the lack of capacity within central BAU teams.
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3.0 HMBU Cost Challenge — Actions needed
This slide summarises approvals that are required from HRC.
Option Detail on Action to deliver: What further evidence or assurances are
Appendix needed for HRC get comfy to make a decision?
slide:
+ HRC to approve the implementation of a remediation
Perma 2.0 £10.1m approach in OHC
+ HRC / Board to sign-off NBW as a supplier
+ HRC to approve moving this activity in-house from HSF
es + HRC to approve decision making process will work
: pen £8.9m + HRC to agree what is an acceptable timescale to resolve
Applications ;
the current late applications
OHC Claimant * ener oes) revised forecasts at 150 cases
eoume: 2 £111m — HMBU to ensure internal and P&P cost reduction
Reduction
commensurate with activity
HSS Post Off
Sn + HRC to approve revised forecasts based on lower
Volume 23 ear dispute volumes
Reduction ares
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Tab 6.5 Risk Tolerance Considerations and Next Steps
STRICTLY CONFIDENTIAL NOT FOR SHARING &
POST OFFICE LIMITED
BOARD PAPER
pai pia Meeting
Title: Risk in the 3YP. Datae 27 September 2022
Author: Sponsor: I Al Cameron - CFO
Executive Summary
Context
The Board is discussing the 3YP to March 2025. As set out in the earlier paper, we are seeking
t IRRELEVANT
This will require us to shift our risk appetite. The purpose of this paper is to set down what we
think that might look like and the implications for the business.
Inputs and Decisions
We are seeking alignment from the Board in principle, enabling us to put forward a
recommended 3YP at the next meeting. Feedback on red lines will be appreciated. The Board
will need to recognise and support the change in approach if we are going to deliver the
outcomes.
The Report
How will our risk appetite change?
We need to make a number of difficult choices to save money and most of these steps will
either trigger specific risks or increase our overarching risk profile. These are principally caused
by a reduced levels of activity in operations and in change, or simplified and streamlined
processes where we will not have the capacity or resources to deliver at the levels we have
done in the past.
This list is intended to inform debate and to gauge the Board’s views on our likely direction of
travel. It is illustrative but it is not exhaustive.
Network
1. We will increase our appetite for taking difficult and potentially unpopular action within
the network, withdrawing discretionary fixed remuneration from branches and taking
steps to close loss-making Post Offices, potentially without compensation, for which there
is long-established precedent. This will be visible and unpopular in communities.
2. We expect to deploy a significant number of Drop & Collect branches in urban areas,
shifting the network away from rural areas and reducing the current “white space”
proximity rules. This may be seen as a loss or degradation of service by customers and
changes to proximity rules will land poorly with Postmasters.
3. We may close branches before we have replacements, though we will at all times make
sure that we have a plan to meet the 11,500 branch and access criteria requirements at
the measurement points agreed with BEIS.
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@
4. We will partially re-balance the relationship with Postmasters so there is more focus on
the reciprocal nature of the relationship; i.e. there will be clear consequences for breaching
protocol or guidance. We will also reduce contact channels so there is less choice and a
greater focus on self-support.
5. Weill have to legally recover some Postmaster debt and continue to share criminal cases
with the Police. We may have to reduce the amount of cash in the network again.
Technology
1. We will remain in the Belfast data centres until March 2025, minimising spend to secure
the service they provide. We will not complete full end-to-end disaster recovery testing.
This has potentially material business continuity risk.
2. We will need to roll-out NBIT during peak, and the roll-out will not be supported by
classroom training. Much of the roll-out is likely to be supported by area managers, who
will not be available for BAU support, limiting what we can deliver and manage in the
a IRRELEVANT
4. We will not invest materially in our data systems or governance, living with the limitations
of today’s infrastructure and the risk profile this presents. This may have operational
consequences, it will hold us back from progress we ultimately have to make and may
have consequences for our positioning around physical data.
5. We will minimise all other technology spend and apply a top-down challenge to risk and
resilience budgets as well as other key projects (e.g. Copper Stop Sell, PED replacements,
etc.)
Pay, Administration and Governance
6. We will not increase the pay of our people in line with high inflation rates, creating
retention and recruitment challenges. There are likely to be operational risks associated
with this.
7. The change plan will be much smaller, especially outside NBIT and Historical Matters, both
of which have their own governance. We will therefore streamline change governance and
the team that supports it.
8. We will simplify the way in which the business reports, internally and externally, with
reduced frequency of business-as-usual reporting, shorter papers and simplified
governance. We will need to engage with UKGI and BEIS on this.
9. In the same spirit, we believe less should come to the Board. The authority delegated to
the Executive was reduced a few years ago from £20m to £5m and, recognising the
reduced levels of activity and capacity, this should be reversed.
Legal, Risk and Procurement
10. We will increase the materiality thresholds applied by the Legal team in determining where
contract and other decisions require formal review and a legal risk note, enabling us to
focus resources on our key risks. Consequently, legal and regulatory risks may crystalise
more frequently and it may be harder to respond to unplanned requests.
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11. Weare planning to halve the size of the Risk team and reduce a number of internal audits
from full audit to health-check. We expect to materially reduce the size of the second-line
Compliance team.
12. We will not undertake a comprehensive programme of control frameworks but we will
maintain what we have.
13. We will take a less risk averse approach to procurement - particularly in technology - and
we will push as many contract renewals (e.g. Verizon, Accenture) post-NBIT because we
simply do not have the capacity to implement any change.
Historical Matters
14. In HMU we need to operate very differently. We will minimise the involvement of HSF and
insource more. We will maintain key principles, such as independent review but
recommended changes will increase operational and consistency risk and this risk will
have to be managed.
15. We will continue the existing controls work which is focused on CIJ/HIJ without which Post
Office cannot demonstrate ongoing conformance but there will be no further roll out to
other areas of the business.
16. Our approach to the Inquiry is being reviewed, recognising that we do not have the funds
to carry on as we are, given the extension to the timeline. Witness support may have to
be weighted towards the importance of the testimony. Again, we will have to rapidly
reduce the dependence on HSF and this will create risk in timely delivery.
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Tab 8 Belfast Exit
POST OFFICE LIMITED
BOARD REPORT
Title: Belfast Exit Programme Meeting Date: I 27 September 2022
Author: Zdravko Mladenov (Group Chief
Zdravko Mladenov (Group Chief
Digital Information Officer)
Sponsor: Digital Information Officer)
Input Sought: Decision
Board is requested to:
e Approve management's recommendation to stop the current delivery of the Belfast
Exit programme, moving away from a migration of the datacentres to AWS Cloud and
towards a reinforcement of the legacy data centres. At the same time POL will retain
the scope within Belfast Exit that is shared with, and is necessary for the successful
execution of, NBIT.
« Approve £5m programme funding for October within the current Belfast Exit wrapper
to ensure programme activity can start to be wound down and that new scope of
work — specifically Belfast fortification and components shared with NBIT - can be
stood up.
Previous Governance Oversight
« Board Belfast Exit Progress Update - July 2022
« GE Progress Update/Discussion of Delivery Challenges & Strategic Options - 17%
August 2022
Executive Summary
e In July the programme leadership agreed to return to Board with a clear
recommendation on whether POL should continue with the current strategy or to
change direction to stay in Belfast. The table below summarises two main options
and a high level view of the associated risks:
Migrate Horizon in Belfast Physical
to AWS Cloud Datacentres
Cease the branch / database
migration activities and tactically
invest in Belfast to mitigate the
risk of critical equipment failures.
Retain scope related to shared
components for NBIT
Continue with the current plan to
Summary migrate all of Horizon to the cloud
and exit the Belfast datacentres
c « Planned exit from Belfast in «Planned completion of
Completion March 2024 fortification in October 2023
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«Planned completion of shared
NBIT components March 2025
« Planned exit from Belfast in
March 2025
4 Upgrading production equipment
Technical AWS work is bespoke to the Post ‘live’ environments requires
Risk Office, resulting in multiple planning to mitigate risks of
emergent technical challenges unintended Horizon outages
I Large number of technical - I Similar datacentre upgrade work
Delivery unknowns may continue to cause has been completed before, and
Risk execution delays the challenges are understood
Large number of technical After the upgrade scope is agreed,
Cost unknowns may continue to cause costs can be reasonably accurately
Risk cost escalations estimated
Estimated Cost £56m-£78m _ _ £40m-£52m
to Complete Low level of certainty Medium level of certainty
Given the relative risk profiles of the two options, and the constrained funding
position POL is presently in, management’s recommendation is to cease current
migration activity to AWS Cloud and to remain in the Belfast datacentres.
In parallel with this management also recommends investing in the Belfast
datacentres to ensure the Belfast infrastructure is appropriately fortified to ensure
service continuity, and that parts of the scope of the Belfast Exit programme that are
shared with NBIT continue to be delivered. Stopping Belfast Exit does not therefore
mean spending will stop.
This recommendation is predicated on the following key assumptions:
- Upgrades to security, resilience, and operability will be rapidly completed.
Absent remediations, POL must accept critical hardware failure risks;
— NBIT will be fully delivered by March 2025. If this is not the case, then the cost
and risk profile of the ‘Stay in Belfast’ option would be adversely affected.
Subject to Board approval, the next steps would be:
- Immediately reduce spend on cloud migration and archive work completed to
date. This will involve standing down much of the POL team;
- Engaging with Fujitsu, Oracle and AWS as well as UKGI / BEIS on POL’s change
in approach. These conversations will need to be managed carefully; and
- Launch recommended Belfast fortification activity and transfer scope of shared
NBIT components to a new project, to ensure continuity of delivery.
Subject to the Board’s decision we will present an updated funding request in October
setting out more detail on the new and retained Belfast workstreams.
Note this recommendation has implications for POL’s RemCo as Belfast Exit outcomes
represent targets in certain remuneration incentive structures.
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Overview
1. What is the summary of Belfast datacentre exit progress since July?
e While remediation of existing critical issues (e.g. data migration and integrity issues
associated with the AWS-supplied Data Migration Services toolset), has progressed,
further issues have manifested, requiring further defect remediation by AWS and
pausing some previously ongoing activity. The short-term impact is a delay in key
delivery activities (e.g. client file comparison activity by Fujitsu to validate identical
output from the new AWS target cloud database). Thus, this phase of activity will
now not be completed until mid-October.
« The programme has asked AWS to contribute to the overall budget due to the on-
going issues relating to Data Replication. The package equates to about $12m / £10m
of value for POL, split between consultancy and deferred hosting fees. Specifically,
AWS are assisting with key deliverables that will also be used for NBIT (Post Office
Data Gateway - PODG, and our tool for Voucher and Postal Orders management).
2. What are the options and the recommendation?
e The following options exist:
- The current Plan A option is to continue migrating the physical data centre
infrastructure to AWS Cloud.
- The Plan B option is to stay in Belfast, while noting that the Fujitsu data centres
have had minimal technology investment over the last 5 years. Thus, this plan
has 4 sub-options (see Appendix 1 for details). Those options vary depending
on spend levels, which correlates with degrees of risk mitigation for key risks
(e.g. hardware or security failures in the data centres).
- Plan C would be to move to a hybrid cloud option utilising Oracle (for cloud
hosting) and AWS for compute services. While initially attractive, because our
existing legacy database is an Oracle one, upon further review this option has
now been discounted as too technically difficult, as well as requiring very
challenging co-delivery and extensive co-management of Oracle and AWS. Plan
C has not been considered any further as a feasible option.
« The programme recommends Plan B - Stay in Belfast, with the associated focused
hardware and software investment.
- From a risk of delivery perspective, Appendix 2 and Appendix 3 outline the
various risks and possible mitigations. Plan A now exhibits the greatest level of
intrinsic risk and uncertainty around timescales of deliverability.
- From a cost perspective, Plan A is considered unaffordable given the broader
macro financial position. The risk profile of Plan A costs is also difficult to
manage, compared to the greater level of confidence around Plan B costs.
- Thus, the recommendation is to proceed with Plan B. Within Plan B sub-options,
the recommended option is Scheme 3 - Replace Security and Cooling Devices,
whilst building an inventory of spares. This provides the optimum balance of risk
and costs whilst satisfying some minimum recommendations from Fujitsu.
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Tab 8 Belfast Exit
- Critically, it should be noted that without the required targeted upgrades to
improve the data centres’ security, resilience, and operability, POL would be
accepting critical failure risk.
« The costs associated with remaining in Belfast, including datacentre fortification
activities outlined in Scheme 3 are currently expected to have a funding profile of
£24m-£30m. Fortification costs are estimated to around for ca.£14m of this total.
3. What does the recommendation mean for NBIT?
e The Belfast Exit programme has been delivering strategic components, which NBIT
requires for migration off Horizon (e.g. Application Modernisation, APOP and PODG)
« NBIT will still need to deliver those remaining elements. Using the Belfast Migration
estimates, this will require between £16m and £22m to be established elsewhere to
fund the delivery of these parallel Horizon / NBIT dependencies.
* Coexistence dependencies with PODG and APOP will need to be addressed during the
branch and branch data migration of NBIT. These require a policy decision to be
agreed upon with Fujitsu, which is currently being negotiated and is expected to be
viable, provided we have a credible Fujitsu Exit plan.
e It is critical to note that, previously, the Belfast Exit programme was a reasonable
mitigation for any potential NBIT completion delay. Should NBIT be delayed, a longer
duration to remain in the Belfast Datacentres could be costly and risky as many
components (e.g. the SAN and Oracle Database) will be further out of support.
e Thus, the recommendation presumes that NBIT will be fully delivered by March 2025.
If this is not the case, then the cost and risk comparison between Plan A and Plan B
could be materially affected.
4. What are the recommended next steps?
e Subject to the Board’s approval of a change in approach to Plan B POL will halt work
on the cloud migration and we will archive database / branch migration work
completed to date. This will allow spending to be reduced at the earliest opportunity.
e POLwill also need to engage with Fujitsu, Oracle and AWS as well as UKGI / BEIS on
its change in approach. These conversations will need to be managed carefully,
particularly with AWS given POL’s wider strategic relationship and UKGI / BEIS given
spending approved and incurred to date. POL will also launch a Belfast fortification
programme of reinforcement activities, alongside the delivery of shared components
Belfast Exit is delivering for NBIT.
To support this recommendation the Board is requested to approve an initial
drawdown of £5m to ensure funding cover is available for October (Appendix 4
highlights activity being stopped, continued and started as a result of a positive
approval, relative to current Belfast Exit programme activity). A further request will
be presented to the Board in October setting out an update on progress made in
October subsequent to this meeting, as well as the new and retained Belfast
workstreams (incl. milestones and financial / cost models).
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Appendix 1: Summary of Upgrade Schemes considered
Upgrade Element Scheme 1 Scheme 2 ‘Scheme 3 Scheme 4
Security Upgrade the Continue as ~is £0m I Refresh security £6m I Refreshsecurity £6m I Refresh security £6m
Devices infrastructure, including I with minimal spares critical firewalls, critical firewalls, critical firewalls,
new firewalls, routers, and look for Risk routers, appliances, routers, appliances, routers, appliances,
and appliances that are Mitigation activities and switches and switches and switches
out of service life. Many
of these provide
perimeter security
defence.
Software Upgrade the software I Continue as -is £0m I Upgradesecurity- I £5m I Upgradesecurity- I £5m I Upgradesecurity: } £5m
Security beyond service life, with minimal spares critical software, critical software, critical software,
including Operating and look for Risk including OS, including OS, including OS,
Systems with broad Mitigation activities crypto libraries and crypto libraries and crypto libraries and
privileges across the move to SHA2 move to SHA2 move to SHA2
infrastructure. certificates certificates certificates
Plant Provide new Air Continue as -is £0m Partial refresh of £1m Partial refresh of £1m Partial refresh of £1m
Conditioning in the with existing cooling cooling cooling
IRE11. ‘equipment
Hardware While the infrastructure I Continue as -is £0m I Continueas-is £0m I Seek equivalent / £2m I Refreshcore £40m
is resilient, 75% of the with minimal spares with minimal spares recycled used ‘compute and
infrastructure is either and look for Risk and look for Risk hardware as failure storage technology
out of or within 6 Mitigation activities Mitigation activities insurance and upgrade Oracle
months of the end of
service life.
Upgrade our stock of
spare equipment to deal
with failures.
Software Provide additional Continue as -is £0m Continue as -is £0m Continue as -is £0m
support for Oracle from I with a 3° party is with a3" party is with a 3" partyis
a3" party in2023 and I Oracle stop support Oracle stop support Oracle stop support
2024. in 2024 in 2024 in 2024
‘Scheme 1 estimated £0m ‘Scheme 2 estimated £12m ‘Scheme 3 estimated £14m ‘Scheme 4 estimated £52m
cost cost cost cost
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Appendix 2: Summary of Datacentre Scheme risks
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The team, including Fujitsu, have analysed Belfast using a framework using the following dimensions: Service Life
Status and EOL support availability. A priority score has been calculated based on this framework.
isk
Security
Devices
Software
Security
IRRELEVANT
I Scheme 1- Mitigation
I ‘Scheme 2 - Mi
[ scheme3-
Scheme 4 - Mitigation
Plant
Cooling in IRE11 is old and at Risk of not being
maintainable. There isa risk that failing cooling
would compromise DC operation. In case of
failure, we have a high risk of Hardware issues
occurring due to the high heat or the
equipment automatically shutting down, which
will affect the service
Risk Acceptance
The Air Conditioningis
maintained, but it must run 24/7
due to the heat generated in the
data centre. No Guarantees can
be provided that it won't fail.
Upgrade of Cooling System
Upgrade of Cooling
System
Upgrade of Cooling System
Hardware
While the infrastructure is resilient, 75% of the
infrastructure is either out of or within 6
months of the end of service life. . There isa
risk that hardware failure will result in a single
point of failure for an extended period raising
the likelihood of an impacting service issue
Risk Acceptance
Procure from the market when
failures occur. Re-purpose
hardware from IRE19 where
possible - This will prevent
change and erode cross
datacenter resilience.
Risk Acceptance
Procure from the market
when failures occur.
Re-purpose hardware from
IRE19 where possible - This
will prevent change and erode
cross datacenter resilience.
Seek equivalent /
recycled used hardware
as failure insurance
Software
There is a risk that supports for Oracle is not
established beyond 2023 as Oracle has not
committed to providing support post:
December 2023
Budget to procure support from
Budget to procure support
froma 3” party in 2024
Budget to procure
support from a3 party
in 2024
Refresh core compute and
storage technology and
upgrade Oracle
Project
The Risk that the programme of work won't be
completed in time to ensure the continued
service of Belfast, these mitigation options
need to be completed as soon as possible
No effort required
Itwill take 12-48 Months to.
complete from the initial
engagement with Fujitsu,
assumed to be in October
2022.
Itwill take 12-18
Months to complete the
initial engagement with
Fujitsu, assumed to be
in October 2022
Itwill take 24-36 Months to
complete the initial
engagement with Fujitsu,
assumed to be in October
2022
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Appendix 3: Review of Risks and Mitigations
Plan A — Migrate to AWS Cloud
Plan B — Stay in Belfast
Risk Category
1- Minor Risk 2- Moderate Risk
The AWS Cloud will provide for any localised cloud The Data centre is well engineered and has multiple levels
Risk hardware failures once Migration is complete. The Risk __I of resilience. The Risk of hardware failure will increase as
Risk of Details exists during the period that Horizon runs in Belfast the hardware ages. The Post Office cannot economically
Eaaisiene without upgrades. replace all the ageing hardware. The Storage Array and
Fil Oracle database will remain risks
CUT 2- Unlikely 2 Unlikely
affecting = I The Risk is unlikely to occur as Belfast is well engineered _I There are no single points of failure where a single piece of
Horizon service I Likelihood I i+, 1.5 single point of failure. equipment would halt Horizon's operation, and multiple
failures would be required.
Mitigation I Complete the Migration to reduce the dependency on the I Targeted hardware replacements will reduce the likelihood
Belfast Data Centre of hardware failure of the components replaced.
1 - Minor Risk 2 Moderate Risk
Risk The AWS Cloud will provide for any localised cloud failures I Kit sourcing gets more difficult/uncertain over time, with
Details I once Migration is complete. The Risk exists during the reduced availability when required. This Risk will become a
period that Horizon runs in Belfast without upgrades. major concern in any post-March 2025 scenario
Risk of Spares 2=Unlikely 2= Unlikely
Bein Likelihood I The Risks unlikely to occur as the kits predicted tobe I The Riskis unlikely to occur as a backlog of spares will be
He ie available for the next 12 months. crested, and there is a good track record of repairing
ardware.
when they are ‘Complete the Migration to reduce the dependency on the _I Proactive spare holding and testing is the minimum
required Belfast Data Centre recommendation.
eae However, should it become necessary in an emergency,
Mitigation there is the option to take the kit out of one data centre to
keep the other moving. However, there are unknowns
with this approach as the kit may not turn back on.
Risk of Plant 1 - Minor Risk 2 - Moderate Risk
Failure ( HVAC, Risk The AWS Cloud will provide for any localised cloud failures I The plant is ageing but operational and serviced, and it is
eee a Details I once Migration is complete. The Risk exists during the at the end of its operational life.
di period that Horizon runs in Belfast without upgrades.
Suppression) 2- Unlikely 3— Possible
within the Likelihood I The Risk is unlikely to occur as the kit is predicted to be
Datacentre available for the next 12 months.
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‘The HVAC is at the end of its life and cannot be
guaranteed; spares are likely to be difficult to source,
scarcity of options, provenance unknown.
Complete the Migration to reduce the dependency on the
Replace the HVAC is recommended, and this will
Mitigation I 5 «fast Data Centre. completely resolve this Risk
1- Minor Risk 3- Significant
Risk Aurora Postgres support arrangements are known. Oracle will provide 11.2 market-driven support for 2023,
but the future position is not certain. After this time 3"
Detalles party support may be required if Oracle support is
Risk of the withdrawn.
Database 1-Rare 2- Unlikely
Support ending II iretihoog I Strategic Platform for AWS, support will be provided. 3rd Party Support in 2024 is available and will provide
before March support. The database isn't internet-facing, reducing the
2025 Risk as any security exposure is smaller.
No Mitigation required Upgrade the Network and security to protect the
Mitigation database. Any Upgrade of the Oracle Database will take
years, and although it will completely resolve this Risk isn't
recommended.
Risk of Post 1 - Minor Risk 1- Minor Risk
office not being I Risk Intrinsically more options as availability of parallel Performing live changes in a production data centre is risky
able to Details environments on demand to validate changes before {but possible) and will require resource-intensive planning
jeiblewaent promotion to Production with out-of-prime-hours change management
mone rae, 2 Unlikely 2 Unlikely
“hangs Likelihood I Even ina cloud environment, we will require simulators for I The technical changes are well understood and have been
3" parties as the 3 parties do not offer POL test facilities _I completed in other datacentres
Ensure the test environments are set up as part of the Bex I Ensure the Hardware replacement project is correctly
programme. resourced.
Mitigation
However, there will be an extended change freeze during I Although Horizon change should slow as 2025 and NBIT is
the Branch Migration deployed.
Risk of POL 1- Minor Risk 3 — Significant
being exposed I pick More recent software versions for AWS-hosted Much of the datacentre software is unsupported, and
to Security and I petails components make this an easier task and, in many cases, _I security patching/intrusion detection scanning is marginal.
Vulnerability an AWS responsibility. There may be some Cyber Insurance implications which
eee have yet to be assessed
Likelihooa I 2~ Rere 2- Unlikely
Strategic Platform for AWS, support will be provided.
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The unsupported kit can be replaced to reduce the
vulnerabilities
Periodic External review of security rules We need to make calculated replacement decisions with
Mitigation the Post Office Security team. The hardware replacement
will mitigate but not eliminate security risks
Risk of issues 4-Major 0-No Risk
found during Risk One of the major technical challenges for the AWS solution I No direct risk as the existing Horizon solution is extended
Branch Reh is the domain where we have had the most technical
Migration obstacles and uncertainty. The programme hasn't proven
that Branches can be moved without data loss.
4= Likely O-N/A
Likelihood I Until the solution has been rigorously tested, Branch
migration won't begin.
noe More testing of each solution as problems are found. N/A
Mitigation I sowever, this adds time and cost.
Risk of 3-Possible 1- Minor Risk
Technical Risk Initially higher than the status quo, but knowledge Worsening Risk of knowledge decline, but currently no
Operating & Details availability for cloud is good. service concerns. It will become a major issue if Belfast is
Support issues required post-2025.
being 3—Possible 2- Unlikely
Rts Greater POL responsibility in Service Management. Fujitsu are committed to the contract till March 2025
discovered Likelihood ‘
Whichever system is deployed first, Horizon or NBIT will
have initial issues.
Knowledge availability for the cloud is good, albeit Fujitsu staff retention strategies to retain knowledge until
expensive to acquire. We will have access to a the end of the Horizon contract in March 2025.
combination of our capability, outsourced out-of-hours
Mitigation I cover and AWS advisory services.
Risk of 4-Major 2- Moderate Risk
additional Time There are many delivery unknowns as the work completed I The Data Centre is a well-understood environment to work
being required I Risk by AWS has demonstrated that there isn't a playbook for _I within, and Fujitsu has a good track record of planning and
nee the Migration, and all the processes are being written for I executing change.
fi the Post Office. It is impossible to highlight where the next
technical issue will come from, but there will probably be
more delays.
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4- Likely 2- Unlikely
Peni Past performance indicates that further delays are likely. The environment and scope are understood as the start of
Likelihood
the programme.
“4:4. I AWS is deploying resources to resolve issues quickly and —_I The upgrade work will be in the primary control of Fujitsu
Mitigation
make product changes when required.
Risk of 4-Major 2- Moderate Risk
additional The probability of unknown technical delays makes it There remains the possibility that the SHA1 upgrade could
funding being I Risk difficult to predict cost with any certainty. The upper cost more than planned once a detailed analysis is
required Details bound has added ina risk profile that Branch migration is I completed, but the other elements are well understood.
delayed to late 2024, and the programme delivers no
benefits before NBIT deployment
4- Likely 2- Unlikely
The programme can run till June 2024 under the upper- Focus on software and SHA1 as a primary first step.
Likelihood I cost prediction. If this occurs, then given the current NBIT
plan, Horizon will only run in the cloud for 9 months
before it is decommissioned
Contingency is now predicted considering with past Fujitsu has been involved in assessing the Belfast Data
Mitigation I performance. Centre, but the Risk remains that the costs provided to
date are best estimates, not quotes.
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Tab 8 Belfast Exit
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Appendix 4: ‘Start - Stop - Continue’ plan for the Belfast Exit programme
Start
Stop
Continue
Strategic Design with NBIT
for the following
components to reduce any
possibility of Regret Spend
* PODG
* APOP
* Bank Account Checker
© Application
Modernisation
Launch Belfast fortification
activity, and complete
detailed resilience planning
activity
The Belfast Exit Teams
responsible for the above
will be transferred to a new
governance structure to
end the programme.
All Non — Strategic Work to
move Horizon to the cloud,
Including supplier work on:
Batch
DMS (non-prod)
Postgres (non-prod)
DV capability
BAL
HBS Counter
HBS Retail
Data Reconciliation
Service (DRS)
Roll Off and Supplier Halts
communications for all
components.
=
Complete the SCC
knowledge transfer to allow
technical support to
continue
Construct a service wrapper
for the Oracle Staging
Server on which the Hl
delivery BRS will depend.
Calculate the final cost
position for Belfast Exit and
agree on the funding
position for the close-down
provision.
Submit funding requests for
reallocation of funds.
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POST OFFICE LIMITED
BOARD REPORT
Title: Tee Matters Programme Meeting Date: I 27% September 2022
Author: pymien Revaldlpy Historical Matters Sponsor: Ben Foat, Group General Counsel
Input Sought: Noting
To Note the updates below on the activities being undertaken on Historical Matters (HM)
workstreams.
Executive Summary
The Strategic priorities for HMU are outlined below with a fuller Operational Summary of HMU
Workstreams detailed later in this update.
© Criminal Appeal Cases
Since the last report, 5 convictions have been overturned by the Court of Appeal (all
cases were conceded by POL) and a further 2 are expected to be lodged imminently
(early indications are that POL will concede both). Following the work with CCRC,
disclosure is now being prepared on a further 15 cases, with 30 more requests expected.
Good progress is being made with the non-POL prosecutors in both Scotland and NI. The
SCCRC are considering 10 cases with a decision expected in September and NI are
considering 2. We continue to make disclosure to assist their consideration of potential
cases.
e Historical Shortfall Scheme (HSS)
The achievement of our target of 80% of outcome letters issued by the end of August
was an excellent result due to the efforts of all involved. Work continues apace to ensure
we keep on this trajectory, but our strategic aim is to ensure that all challenge cohorts
have a clear route to outcome, anticipating that the remaining cases will feature a higher
degree of complexity as we move towards the tail. Alongside HSF we have commenced
a review to forecast and consider what the 5% of cases are anticipated to be post October
2022 to ensure we appreciate and are well prepared to complete these cases as quickly
as possible.
e Late Applications
Our key priority is to gain funding approval to process Late Applications, with a
submission currently with BEIS for consideration. The topic of Late Applications was
raised at the recent Inquiry hearings, where Sir Wyn Williams noted that the failure to
progress these applications was ‘wholly unacceptable’.
¢ Overturned Historical Convictions - ENE Process
We are making good use of the positive outcome form the ENE process to progress the
settlement of non-pecuniary damages both for the 10 postmasters whose cases were
considered by Lord Dyson but also across the broader cohort. All 10 involved in ENE have
accepted the offers made on their non-pecuniary damages and settlement agreements
are close to being finalised. Dr Hudgell indicated that he would send through 5 new non-
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pecuniary claims each week - this has been slow to start but the cases are now starting
to come through.
« Postmaster Detriment - Suspension Payments
Our strategic priority is to complete the delivery of the Operating Model to deal with this
population, followed by final external project assurances, to be delivered by Deloitte,
alongside obtaining the relevant legal assurances of the Consequential Loss Guidelines
and Principles.
HRC
have asked for further information on how the unreconciled balances in general arose
prior to making a decision on this issue, as well as for more detailed information on the
position of those postmasters currently making repayments. Funding conversations are
ongoing with UKGI/BEIS with a meeting scheduled for 15 September to discuss the way
forward. A further paper will be presented to HRC in October.
e Inquiry update
Following the hearings on 6 and 13 July 2022, and Sir Wyn’s Progress Update issued on
15 August, we are working at pace to address his key observations. HRC will be
presented with a number of papers on our recommendation for their consideration on 8
September 2022.
« Cost Challenge
Finance is supporting the work to reduce third party and internal costs in order to return
Historical Matters to the original challenged budget. Options being considered are:
i) HSF contract renegotiation and efficiency savings.
ii) Moving to a ‘POL Remediation Model’ across OHC, and the benefits that would
bring (i.e. the model suggested by KPMG).
iii) Reduced assumption for the number of appellants — 150 (down from 293).
iv) Revised, lower profile of Historical Shortfall Scheme disputes.
v) Internal resource challenges.
Workstream Operational Updates
Criminal Cases: Appeals
1. The total number of overturned historical convictions is currently 81. This comprises 64
overturned by the CACD and 17 conceded at Southwark Crown Court. Within the cohort
of Southwark cases, one is a CPS conviction.
2. In the case of Joanne O'Donnell, who is deceased, POL must file its Respondent's Notice
by 23 September 2022. POL is opposing this appeal. This is because:
a. it is not a classic unexplained shortfall case but rather a Pension & Allowance fraud,
the proof of which was not dependent on Horizon; and
b. there is a strong circumstantial case that Mrs O'Donnell perpetrated the fraud.
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3. The CCRC referred the case of Elena Herd to Southwark Crown Court on 12 August 2022.
This appeal, which is conceded by POL, is due to be listed in September where Ms Herd’s
conviction will be overturned.
4. In the week commencing 29 August 2022, the CACD handed down its judgment in the
case of Grant Allen & Others, which was heard on 25 July 2022. On the day of the hearings,
the CACD formally overturned the five historical convictions in question. The judgment set
out the CACD’s reasoning for these decisions.
5. Since Hamilton, 25 appeals’ to the CACD have been opposed by POL which have then
either been refused permission to appeal (i.e. rejected) by the CACD or abandoned by the
appellants.
Criminal cases: Disclosure - investigation into former employee allegations
6.
7. Following this liaison, on 24 August 2022, P&P made disclosure in the PCDE in relation to
this issue and, on 26 August 2022, the POL Inquiry Team shared the same information
with the Inquiry. The note making this disclosure also set out the results of the NBSC call
log enquiries (and loss of data of these call logs). This disclosure was held back so that
both issues could be dealt with in a single Disclosure Note.
Criminal cases: Other appeals in the pipeline
8. The CCRC is currently considering 26 cases which includes 22 POL-prosecuted cases which
may have relied on Horizon data and 4 non-POL prosecuted cases. One case is likely to
be referred by the CCRC very soon and Hudgell has informed P&P of an imminent appeal
to the CACD. On initial review, POL is likely to concede both appeals.
9. The SCCRC is currently considering 10 cases prosecuted by Crown Office and Procurator
Fiscal Service (‘COPFS’) in Scotland that may have relied on Horizon data (one of which
POL was not previously aware, as it may have been investigated by a National
Multiple/Strategic Partner rather than POL). Decisions are expected in September on
whether they will be referred for appeal. The Public Prosecution Service of Northern
Ireland (‘PPSNI') has been notified directly of two appeals (see further below in NPPs
section regarding other activity in Northern Ireland). PPSNI (or its predecessor) would
have been the prosecutor so POL would not be the Respondent.
Criminal Cases: Potential Future Appellants (PFAs)
10. POL identified 706 individuals who may have been convicted in an historical prosecution
brought by POL which may have relied on Horizon evidence.
1 Twenty-five including the case of Robert Clements, which is not included in the 706 potential future appellant
number on the basis that the conviction was a pre-Horizon case.
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11. The PFA tracing and contact exercise that started in May 2021 has seen POL trace and
contact 97% of all POL PFAs?.
Tracing Results
12. Following mailouts in March and April, 47 PFAs remain uncontacted?:
i. 9 are untraceable with all tracing avenues of enquiry exhausted;
ii. 4 are deceased with no next of kin;
iii. 2 letters have been drafted since the last report to attempt contact with the PFA via
their next of kin (these PFA’s are not deceased);
iv. 15 are under investigation with POL with 4 of these PFA‘s in active tracing;
v. 17 require further investigation by P&P with the results due mid-September.
CCRC involvement in PFA mailing
13. POL and P&P continue to coordinate with the CCRC, with a meeting scheduled to take
place on 8 September 2022 to consider further CCRC mailouts. POL will report on the
progress of, and response to contact attempts. POL and P&P will collaborate on the
content, timing and sequencing of mailouts with the CCRC.
14. On 21 July 2022, POL provided the CCRC with details of the PFAs who had requested no
further contact and those that POL had not been able to trace. The CCRC is considering
how it can use its section 17 powers to aid tracing these PFAs.
15. As of 30 August 2022, we await a disclosure request from 30 PFAs who have had their
identification verified’. Disclosure collation has started following a request from 15 PFAs.
In addition, POL have made disclosure to 140 PFAs whom have not appealed to date. This
is the best indication of potential future appeals.
Criminal cases: Non-POL PFAs
16. There are 279 individuals who were, or may have been, convicted by public prosecutors
(e.g. DWP, CPS) using Horizon evidence provided by POL. Although POL would not be the
Respondent to any appeals and owes no direct legal duty of disclosure to these PFAs, POL
continues to liaise with the non-POL prosecutors (‘NPPs’) to help identify all PFAs, provide
disclosure and ensure consistency of approach. Following proactive steps by POL and P&P,
the CCRC is now liaising directly with the NPPs with a view to the CCRC taking
responsibility for contacting these PFAs.
2 684 PFAs have been traced and contacted, including PFAs engaging POL via their solicitor as well as current and
prior appellants.
2 Due to the unique circumstances in most of these cases, MI reporting will need new categories on Relativity to
maintain reporting integrity and a consistent audit trail in the data. The team are working on defining these
categories in Relativity.
+ Of these 30 PFAs that have had their identification verified, 25 requests are older than six months and 5 are not
more than six months old.
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17. Apart from some HSD Call Logs still awaited from FSL and emails from Mimecast, the
document gathering exercise has largely concluded. As a result, POL/P&P has now made
disclosure to the following NPPs:
a. DWP: Disclosure of 10 sample cases on 3 August 2022;
b. CPS: Disclosure of 8 sample cases on 5 August 2022;
c. SCCRC: Disclosure of additional material identified for 9 existing SCCRC applicants,
and 1 new applicant on 23 August 2022;
d. RMG: Disclosure of all documents identified relevant to RMG PFAs on 24 August 2022.
18. POL/P&P anticipates making disclosure to PPSNI and COPFS during w/c 5 September and
12 September respectively.
19. By way of update regarding each NPPs activity:
a. COPFS® has been able to identify on its own systems any case where POL reported a
case to COPFS. COPFS is reconciling this list and will provide us with any additional
names if there is a difference in the number of PFAs it has identified, compared to
the list compiled from POL’s records.
b. DWP is presently taking advice from counsel regarding its post-conviction disclosure
duties, and has made some discrete requests for information which are being dealt
with by P&P and the disclosure from POL to proceed;
c. There has been significant activity in Northern Ireland, according to PPSNI:
i. Of 23 cases, all PFA’s have been traced with disclosure provided to 9 PFA’s.
ii. Two appeals have been lodged with the NI Court of Appeal, both represented
by Hudgell. No date has been set for either case but the term resumes in
September.
iii. Two individuals have contacted PPSNI in response to PPSNI’s mailout to its
PFAs. One has been provided with disclosure.
iv. One case has been withdrawn: POL was not sure whether this case resulted in
a conviction, but it appears that the individual did not respond to a summons
to appear in court, and in light of the new information in Bates/Hamilton, a
decision was taken not to proceed with the case any further and it was
withdrawn.
v. One case has been returned to the original prosecutor who made the decision
to prosecute, to consider whether in light of the new information in
Bates/Hamilton, the prosecutor would have proceeded to charge the case.
vi. One case has been overturned as a result of a caution being rescinded, on the
basis that the original prosecuting officer considered that the test for
prosecution would not have been met had the information in the latest
judgments been known to him at the time.
d. No further information from RMG despite disclosure being made;
e. CPS indicated that the material that has been disclosed does not appear to be helpful
(given that it is not prosecution material) but that it is in continuing discussions with
the CCRC about how best to contact its PFAs.
i. Of 74 cases, all PFA’s have been traced and contacted with disclosure provided
to 10 PFA’s.
® Crown Office Procurator Fiscal Service (“COPFS”)
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Criminal cases: Caution cases
20,
Criminal cases: PFA triage
22. Subject to funding, HRC has approved:
a. the completion of the review (stages 2 and 3) in respect of those 120 cases;
b. for those cases confirmed as ‘Horizon’, contact by POL with the PFAs to inform them
of POL’s stance if they appealed; and
c. the commencement of the review of the remaining 390 cases.
Overturned Historical Convictions (OHC)
23. HSF and POL continue to process applications for interim payments as they are made by
individuals whose convictions have been overturned.
24. Key strategic points are:
24.1.
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Status of Interim Payments (at 26 August 2022)
25. 80 (out of 81) applications have been made with £100k interim payments made in 69
cases, £75k in 1 case and 3 applications were declined. 6 applicants have been made
offers but are yet to accept them. 1 application has recently been received and is being
assessed by HSF. 1 applicant has indicated he does not intend to make an application.
Settlement Obligations
26. As part of the GLO Settlement, POL agreed to take steps to resolve outstanding issues
with claimants who were suspended, subject to civil proceedings/charging orders and/or
engaged in a bankruptcy process. Completion of these activities has taken time due to
dependencies on third parties (i.e. courts, bankruptcy trustees, the GLO Claimants’
solicitors, and the GLO Claimants themselves). All outstanding steps are now completed
in respect of 73 out of 79 cases, with no further steps needing to be taken in 4 cases
(See Appendix 1). Steps are now being taken to conclude all actions in the remaining 2
cases ASAP one of which sits with POL.
Postmaster Detriment - Suspension payments
ane
Operations Agreement has been written and is currently in the feedback process with
UKGI/BEIS.
28. Programme and Process Assurances are underway with Deloitte and are progressing to
plan. The first draft of the Programme Assurance has been provided and this document
is being finalised prior to then being provide to HMC/HRC for noting. No areas of concern
have been found with this assurance with the report largely green with some yellows
(potential improvement identified) The Process Assurance is expected to be completed
by mid- September and discussions are ongoing regarding the legal aspects of the
process now HSF have produced the Case Assessment and consequential loss Principles.
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Discussions on governance are currently being finalised, such as whether there is an
internal or external panel and papers are due to be presented to HRC on 27 September
2022 for decisions.
29. Suspension Data assurance is now complete with a 100% QA check on all data.
30. The legal case assessment team is being stood up with two LCA’s recruited and a further
LCA to join the team in November. Discussions are ongoing with the legal team to ensure
resource to review CL claims is in place when required.
Postmaster Detriment - Outstanding Balances
31. A meeting is scheduled for 15 September with UKGI/BEIS to agree the way forward in
respect of outstanding balances, however work continues to progress in advance of the
strategic decision being taken.
32. Work continues on products / processes which have been identified that may have given
rise to detriment in the outstanding balance population. There are now 14 such issues
identified. The review of six areas is complete and three are nearing completion, with the
rest to be finalised by the end of October. From these areas, 3 have been confirmed as
actual detriment, 3 as potential detriment and 1 with no detriment. The other items
continue to be investigated.
33. A review of 10 postmaster accounts where payments continue to be made is currently
being undertaken to determine whether POL can identify why payments are being repaid.
This information will be provided to HRC in October to inform further decision making.
Detriment - Significant Risks/Issues
34. Unreconciled Loss (outstanding/repaid balances) Detriment
Given the timescales that have now passed, urgent attention is required on the remaining
detriment and potential detriment populations in order to disclose, present viable
operational solutions and gain funding. This is particularly the case given the very clear
legal advice that POL is acting in breach of the CIJ by continuing to accept payments on
outstanding balances. As noted above, BEIS and UKGI are not prepared to commit to
additional funding for this area until our estimate of the potential detriment is more robust.
We feel unable to assess the potential detriment more accurately without inviting
Postmasters to claim. A proposal to manage this risk, is to try and accommodate this
potential financial detriment exposure within existing funding envelopes such as HSS or
OHC.
35. Suspended Payments Postmaster Detriment
There remains a risk that funding will not be confirmed within the next reporting cycle and
could result in reputational damage given the disclosure of the Suspensions issue has now
been made. UKGI/BEIS expect the final approval once the new Government is in place.
36. There is a risk that Postmasters who have been suspended and are contacted in regard to
redress could seek compensation for shortfalls which resulted in their suspension. These
cases will be dealt with on an individual basis if received and if a claim could have been
made via the HSS, will follow the late applications process as agreed at Board.
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37. There is a risk that Postmasters who have been suspended and are contacted in regard to
redress could seek compensation in relation to the basis of their suspension rather than
just the loss of remuneration. If this crystalises, then these cases will be dealt with on an
individual basis.
Historical Shortfall Scheme (HSS)
38. HSS Pre Offer - Best endeavours are being engaged to deliver a stretch target of 95%
of Offers issued by end of Oct 2022, currently on plan for the stretch target of 87% by
end of September 2022. The external target is to send out 95% of offers by end of 2022.
Risks remain to the delivery of the internal target of 95% of offers by end Oct 2022 (e.g.
Panel capacity, obtaining responses from applicants to requests for information, case
complexity leading to additional work required and governance requirements), however
in mitigation HMC and HRC track performance against forecast on a weekly and two-
weekly basis respectively, including risk and issue review and decision-making support.
39. HSS Post Offer - Progress is continuing to reduce the time Queried and Disputed Offers
spend in the Dispute Resolution process. This includes using experienced POL Senior
Managers (Dispute Resolution Team) to support Applicants, providing a single point of
contact to keep them informed of progress and manage their disputes more effectively.
In addition, an approach has now been agreed with UKGI/BEIS to manage claims
immediately prior to Mediation, which will be implemented on a pilot ‘test case’ basis
subject to HRC (Board sub-committee) approval and similarly during the Mediation
process itself.
Stamp Scheme (SS)
40. The scheme is now 99% complete - of 181 eligible claimants, 180 have received an Offer
(or a suspension letter in 2 cases). Only 1 Offer is left to be sent, which is expected in
September 2022.
41. 2 claims have progressed to dispute resolution of which one was resolved post the Good
Faith Meeting. The other, which is complex and has received HRC attention/direction, is
expected to go to Mediation in late September unless a resolution can be reached before.
42. There is a risk that the complex case which is going to Mediation in late September will
not be settled due to the complexity involved and as a result may go to Arbitration, which
could lead to adverse publicity. Mitigation: Efforts are focused on reaching an appropriate
outcome at Mediation.
43. Project closure activities have commenced ahead of the resolution of the final claim.
Finance
44. POL are awaiting a reforecast of HSF legal costs using the HSF Legal Cost Model
(previously called the KPMG model) with estimates for 22/23 to 24/25. These figures will
determine the forthcoming budgets and be fed into the Cost Challenge model.
45. As highlighted in the Executive Summary, work continues on the Cost Challenge piece of
work with a paper due to be submitted to HRC for discussion in late September.
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Executive Summary
Total actual costs in the month were £4.9m versus a forecast of £5.4m. Costs were lower than forecast in CCRC due to a
delay in appeals, Ops Remediation due to timing of Deloitte assurance and OHC due to timing of ENE costs.
isenbey
Settlement costs in the month totalled £9.3m, which related to HSS settlements of £9.0m and OHC Interim Payments of
£0.3m.
The 3-Year forecast has been updated after the FY22/23 budget, which was approved by the Board on 4th May. The latest
update includes the estimated costs driven by the NBW review and operational costs for Late Applicants. As a result, the
forecast increased by £30m for HMBU over the 3 Year Plan period for the additional expected costs in OHC and
HSS Late Applicants, which are partly offset by efficiency savings driven by Rod Campbell's review.
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Programme Costs (£m) Actual_I Budget _I Variance I Forecast I Variance Actual_I Budget_I Variance I” th2n budget YTD due to lower appeals activity, a
Post GLO-Opsimp.andContrad —- - : - - - - g
fecal + Historical Shortfall Scheme (HSS): GR timing issue resolved in
CCRC/Prosecution Acti 10 07 0.3} 13 03 28 35 07
yeregecttion Activity (02) the month - underspent in P3. Higher than budget YTD due to
lludicial Review - - - - additional independent panel costs.
Post GLO Small Projects 0.0 0.0 (0.0) 0.0 (0.0) O14 0.1 0.0
lAged Balances 5 g a a E 0.0 02 02 + Overturned Historical Convictions (OHC) : Lower than forecast
ea /aeraral ati ax fa a re Ge aa fa re and budget YTD due to delays in offers being made to the initial
8 a . ‘ (test) cases,
Historical Shortfall Scheme 28 18 (1.0) 21 (0.7) 8.6 73 (1.3)
+ Legal / General Advice: Lower than forecast due to timing of
Overturned Historical Convictiof 0.5 os 03 0.9 0.4 24 3.0 09 DSAR / FOIR activity.
IStamps Scheme 0.0 : (0.0) 0.0 0.0 0.0 0.0 0.0
HM Ops Remediation 0.2 Os 0.3 0.4 03 0.6 16 10 + HM Ops Remediation: Lower than forecast and budget YTD due to
HSS Post Offer 02 og 0s Os ot 08 23 15 timing of Deloitte assurance on PM Detriment and HSF advice.
4 Hose 49 49 (ay 54 os 169 198 341. ss Post offer: Lower than forecast and budget due to fewer
$8 - good faith meetings than expected as well as no escalations or
& [Settlement Costs (£m) Actual I Budget I Variance I Forecast I Variance Actual Budget I Variance mediations taking place.
' JOverturned Historical Convictio! 0.3 - (0.3) - (03) > > -
Historical Shortfall Scheme 9.0 18.1 9.4 18.1 94 16.4 685 521 I + Aged Balances: Work has been paused on Aged Balances. Any
Istamps Scheme : . E & 02 (0.2) future remediation is expected to be rolled up into PM Detriment.
‘Total 9.3 18.1 88 18.1 88 16.6 68.5 51.9
+ Settlement Costs: Lower than budgeted HSS payments were
[Total HMBU Gh LeOn en Lae ree Te Ts TOL] Made due to delays in receiving responses from claimants. £600k
of interim payments made in OHC.
[Opex costs (fm) Actual I Budget I Variance I Forecast I Variance Actual_[ Budget I Variance
‘Staff Costs O1 O14 (2.0) 1 (0.0) 03 0.2 (0.1)
[Total o1 OL (0.0) o4 (0.0) 03 02 (0.1)
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+ GR timing issue of £0.6m due to approved budget not being applied to CFS in P3. Higher
than budget YTD due to additional independent panel costs and extra central HMBU + The costs are £0.8m above the 3+9 forecast due to a governance delay,
resources being allocated to HSS, who are assisting with the wider programme. where the approved budget was not applied to CFS, following the Board
meeting on 7% June. As a result two GR transactions failed and now appear
in P4. This is now rectified going forward
+ YTD costs are adverse to budget due to the increased independent panel
fem Fore ar ‘ar costs, which were agreed by HRC in May. Additionally central HMBU
FEES RGD EES Rens Eee resources are charged to the project and will be forecast from P5.
ZvEIOGLL
HSF Legal (03) 14 @4) 5.0
POL Resource 07 04 0.3) 06 (0.4) 23 16 7
Other 06 02 (04) 03 $y) te ee (06)
Total 28 18 (1.0) 20 (0.8) 86 73 (1.3)
Actual Costs by Month - Total Actual Costs by Month - HSF
Historical Shortfall Scheme FY 22/23 (£m) HSF Costs (HSS Pre Offer) FY 22/23 (Em)
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Summary Actual Cost Commentary
+ Slightly reduced costs vs. forecast due to lower dispute volumes.
jsenbey Bulpuny pue ejepdn NWH 1'6 deL
+ Actuals are broadly in line with forecast. The slight reduction is due to
lower dispute volumes. There have been no mediations in the month.
+ The original budget included a significant number of disputes, which have
not yet materialised.
YD
Pm aa bd [Var [Fore I Var I Aa] Bu [Var I
HSF Legal o4 o4 00 o4 0) " 04 ' 04 00
POL Resource o4 02 00 02 oo oa 05 on
Other 00 03 03 o4 00 " oo 7 04 03
Total 02 os 03 os on os 13 05
Actual Costs by Month - Total Actual Costs by Month - HSF
Historical Shortfall Scheme - Post Offer FY 22/23 (£m) HSF Costs (HSS Post Offer) FY 22/23 (Em)
cat em uger cunt budget 10 c.
Post Office” CONFIDENTIAL ye
POL-BSFF-WITN-017-0047945_0175
Zz/60/22-Bunaew pueog 10d
ZvEIO LLL
3.1 Overturned Historical Convictions
POL00448625
POL00448625
ah
Py
o
©
=
=
c
=I
]
a
4
o
s
a
=i
YTD Actual Costs
a
HSF Legal 03 06 03 04 14 1905
Other Legal Cr) 00 = 00 00 «800 «00S
POL Resource on on 00 0) 03 03 0)
Other 02 00 = 2) 09 «605 SOS)
Total os CT 2 ROS LOA We cen Pe
OHC FY 22/23 (£m)
1 120
a 100
2
tulet08~=sO7”=”=Si)S SI oe I as a3 1 7 I 08 I os
SudgetYTD 08 5 2, 30 a7 I 48 I 89) 7d I @2 I 89 I 97 I das
Actuals Commentary
+ Actual costs in the month were £0.4m under forecast due to delays in offers being
made to test cases, partly offset by additional costs of managing the ENE process.
me tudget
Forecast (4+8)
jsanboy
0.0 35 49 84
HSF Legal 00 00
Other 0.0 04 13 13.7 9.0 244
POL Resource 0.0 02 1.3 13 13 44
Total 0.0 44 75 15.0 10.3 36.9
Forecast Commentary
+ Areforecast has been completed, which shows an increase of £17m over
3 years, based on costs paper from NBW to remediate 293 claimants.
+ The forecast will be refined in the coming months, as the costs are
refined for the number of cases.
Post Office”
@
CONFIDENTIAL
POL-BSFF-WITN-017-(
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eve JOBLL
2z/60/22-BuneeW pie0g 10d
3.2 Overturned Historical Convictions Settlement Model Update
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+ The provision has increased to £528m, due to the ENE report from Lord Dyson, resulting in movements in some
non-pecuniary Heads of Loss.
Commentary
* Revised assumptions based on 293 cases.
* — Interest rate treatment is 3.45% compound basis.
* The Quantum per case increased to c. £1.8m.
Overturned Historical Convictions Model Update
Model Assumptions
Number of cases - 293
Quantum per Case - £1.8m
Estimated Cases
ysenbey Bulpun pue a1epdn NWH 1'6 Gel
Ml Increase Ml Decrease Mi Total Potential I Estimates No Of
Exposure
600
500 igher
HSF Worst Case 650
r
400 Average P&P 339
& 300
200
100
0)
June Cases Quantum July
Ne
Post Office” CONFIDENTIAL
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Tab 9.1 HMU Update and Funding Request
POST OFFICE LIMITED
BOARD REPORT
Title: Ppa Funding October Meeting Date: I 27't September 2022
Catherine Connolly, Project
Author:
sae Manager
Sponsor:
Ben Foat, Group General
Counsel
Input Sought: Noting
The Board is requested:
To note without presentation following approval from HMFM: a funding request for
£2.053m (including IVAT) to cover pre-Offer HSS running costs for the month of October
2022 only.
This request includes output from the HSF modelling and subsequent HSF London cost
challenges which were included in the HM budget paper for 2021/2022.
The HSS Pre Offer budget is currently being reviewed as part of Rod Campbell’s challenge
with HSF. It is expected that this challenge will be complete by the end of November 2022
with the potential for savings to be made.
Previous Governance Oversight
« HM Review Group (HMRG) - 1*t September 2022
* HM Funding Meeting (HMFM) - Offline Approval 14” September 2022
Executive Summary
The Historical Shortfall Scheme (HSS) reached its internal stretch target to issue 80% of
Offers by the end of August 2022. The focus has now shifted to hitting the internal stretch
target of 95% of Offers sent out by the end of October 2022.
The Historical Shortfall Scheme was launched on 1st May 2020 and officially closed to
claimants on the 14th of August 2020, though exceptional circumstances led to applications
being allowed until the 27th of November 2020.
POL originally assumed approximately 500 applicants to the scheme but to date there are
2,543 applications. Consequently, this has led to an increase in initial cost estimates to
manage the scheme and extended the timeline for resolution of all claims.
The scheme is being managed using the external legal firm Herbert Smith Freehills (HSF),
wi resource from Post Office operational areas. The core teams are:
HSF - managing the assessment and triage of claims into the scheme and
recommendations to the Independent Advisory Panel (Panel).
POL Case review resource - managing the scheme mailbox and interactions with
Claimants including completing eligibility/IDV and sending offer letters.
POL Claim review team - responsible for the document collation and shortfall analysis
for claims into the scheme
POL Payroll Team - Process payments and calculating PAYE/NIC for current and former
PMs (Project Manager).
Strictly Confidential
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Independent Advisory Panel - review HSF’s output and making recommendations on
claims into the scheme
HM Resource across Legal/PMO and the HSS Project Team
These teams carry out specific tasks but come together to provide the end-to-end scheme
process. Detailed process flows have been drawn up by the HSS project team detailing the
claim lifecycle at a granular level.
In Feb 2021, the HSS project team requested a detailed breakdown of forecasted costs and
activities from HSF for the period June 2021 to February 2022. The forecasts received were
significantly higher than originally anticipated. Following discussions with HMU Legal and
Finance, it was agreed that the tracking of forecast vs actual spend needed to be improved to
ensure POL receives value for money. Controls are in place to review monthly forecasts with
HSF. Once received HSF London invoice content is reviewed with HMU Legal. Any subsequent
challenge on time and costs is then taken up with HSF.
Questions addressed
1. What does the HSS provide?
Administering the HSS provides Post Office with a mechanism to effectively manage its
obligations to Postmasters and reduce the Threat of costly group litigation action and the
adverse media coverage seen previously.
Report
Financial Impact
2. Funding required to ensure that HSS Pre Offer stays within Financial Governance Post
September 2022.
Risk Assessment, Mitigations & Legal Implications
3. Effect on schedule:
Schedule will be delayed without the funding.
4. Effect on resource requirements:
Current resource requirements for October 2022 will not be met without this funding
being approved
5. Effect on other projects /activities /programmes:
Without funding the HSS scheme would not be able to deliver against the current plan,
nor be able to redress claimants, opening the possibility of legal challenges from
claimants. This would impact the organisation both reputationally and financially.
6. Effect on Postmasters of this change to the project:
Without funding claims will not be progressed through to completion according to the
project schedule.
7. — Effect on benefits plan:
Without funding the HSS and POL won't be in a position to deliver against the current
plan and offer redress for those who may have experienced shortfalls related to previous
versions of the Horizon computer system.
Strictly Confidential
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Tab 9.1 HMU Update and Funding Request
8. Effect on risk profile:
Without funding the risk is that HSS operates outside of financial governance beyond
Sept 2022.
Stakeholder Implications
9. Funding to continue the HSS ensures that BEIS/UKGI and POL can provide fair recompense
to impacted Postmasters.
Other Options Considered
10. As the project is moving to issue the final 20% of current HSS claim offers, other options
for delivery are not being considered as this would impact the plan and the goal to reach
internal stretch target of 95% of Offer letters sent out by the end of Oct 2022.
Next Steps & Timelines
11. HSS Pre Offer to submit a further CR in October for additional funding to be approved at
POL Board on the 1*t November.
Strictly Confidential
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Appendix 1
Cost Forecast:
Cost forecast breakdown: October 2022 Funding (Inc. IVAT)
£000 Inc iVAT(where applicable) [Oct 22 I Total
+iVAT*
IHSF Belfast
Claim Assessment,I _ 927
Apportionment to Post OfferI -55
Total HSF Belfast] 872 872
]HSF London - Disbursement
Independent Advisory Panel Costs :I 290
Total HSF Panel Disbursement] 290 290
IHSF London - Legal Advice
Generals 78
Shorffall Assessments «I __27
HSF Independent AdvisoryI 7,
Panel Supports
HSF Governance » 29
UKGI (UK Government Investments) Requests from HSFI___99
Out of scope adhoc HSF Legal Advice »I 20
De minimis » 1
RFS 5
QC Costs 7
HSF London Legal Project Management Feen,I 38
Total HSF LondonI 302 302
POL Resource
POL Programme Resource (PMIBA/PMO/Finance/Legal) I __275
IPOL Operational Resource
POL Case/Claim Review Team nI 204
DSARTeam I __12
[Other
Data Protection Resource « 40
FJARQ (Audit Record Query) Requests ws 6
Oasis Branch File Scanning w 2
Brodies Legal Advice 7
Payroll Team Resource wo 2
KPMG Gost for Relativity Hosting =I 47
Total ResourcesI 689 589
[ [2053]
Strictly Confidential
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Tab 9.1 HMU Update and Funding Request
POST OFFICE LIMITED
BOARD REPORT
Title: HSS Post-Offer Funding Meeting Date: I 27't September 2022
October 2022
Author: Paul Gallagher, Project Manager I Sponsor:
Ben Foat, Group General
Counsel
Input Sought: Noting
The Board is requested to:
To note without presentation following approval from HMFM: a funding request for
£475k (incl. IVAT) to cover HSS Post Offer work stream running costs in October 2022.
This request includes output from the HSF modelling and subsequent HSF London cost
challenges which were included in the HM budget paper for 2021/2022.
Elements of the HSS Post Offer Budget are currently being reviewed as part of Rod Campbells
challenge with HSF. It is expected that this challenge will be complete by the end of
November 22 with the potential for savings to be made.
Previous Governance Oversight
« HM Review Group (HMRG) - 1% September 2022
« HM Funding Meeting (HMFM) - Offline Approval 14" September 2022
Executive Summary
The HSS Post Offer workstream manages and tracks each case from the point the Settlement
Offer is sent to the Applicant. This includes the Disputes Resolution Process which applies
where an Applicant is dissatisfied with the outcome of their Application.
The Dispute Resolution Process drives three main costs in the HSS Post Offer Workstream:
Is Applicant triggered event costs — each stage of the Dispute Resolution Process
(Good Faith Meeting, Escalation Meeting, Mediation, Arbitration) incurs a cost. The
volume and timings of these events can be uncertain due to the factors involved
individual cases. A model is used to forecast events using assumptions provided by
HSF and HM Legal. These assumptions are being challenged as more offers are sent
out.
ii. I HSF Legal costs - these costs are variable, dependent upon the volume of cases
moving through the Dispute Resolution Process.
iii. Running costs - primarily made up of resource costs and HSF e-Discovery costs
from HSF ALT. These costs can be forecast to a degree of certainty.
A cost saving of £1.437m will be realised over the next 3 months (of which c.£479 will be
realised during October), this is primarily driven from changes to assumptions made in terms
of the flow of cases through the dispute resolution process. These changes to assumptions
are driven by two factors:
Strictly Confidential
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@
1. The introduction of a Dispute Resolution Team, which has enabled more cases to be
solved earlier in the Dispute process than previously assumed
2. Underlying changes to applicant behaviour when compared to what was previously
assumed.
The volume of ‘Disputes-in-Progress’ within the DRP is expected to peak at ~270 cases in
early December 2022, which will require the current work stream to be at full strength.
Question addressed
1. I Why is this funding necessary?
Administering the HSS provides Post Office with a mechanism to effectively manage its
obligations to Postmasters and reduce the threat of costly group litigation action and the
adverse media coverage seen previously. Not providing funding for an effective dispute
resolution would inevitably create litigation costs in the future.
Report
Financial Impact
2.
Risk Assessment, Mitigations & Legal Implications
Funding required to ensure that HSS Post Offer stays within Financial Governance Post
September 2022, when current funding runs out.
3:
Effect on schedule:
Schedule will be delayed without the funding, which will impact applicants in dispute
Effect on resource requirements:
Current resource requirements will not be met without this funding being approved
Effect on other projects /activities /programmes:
Without funding the HSS Post Offer Workstream would not be able to provide effective
and fair resolution for claims in dispute. This would impact the organisation both
reputationally and financially.
Effect on Postmasters of this change to the project:
Claims will be progressed through to completion providing closure for impacted
applicants.
Effect on benefits plan:
Without funding HSS and POL will not deliver against the current plan or be able to
effectually resolve claims in dispute for those who may have experienced shortfalls and
other Heads of Loss related to previous versions of the Horizon computer system.
Effect on risk profile:
This will mitigate the risk that HSS stays within financial governance beyond Sept 2022.
Strictly Confidential
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Tab 9.1 HMU Update and Funding Request
@
9. Funding to continue the HSS ensures that BEIS/UKGI and POL can provide fair recompense
to impacted Postmasters without further litigation for disputed cases.
Stakeholder Implications
Other Options Considered
10. Options to use the DRT in other stages of DRP reducing the reliance on external lawyers
is being reviewed.
Next Steps & Timelines
11. HSS Post Offer to submit a further CR in October for additional funding to be approved at
POL Board on the 1*t November.
Strictly Confidential
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Tab 9.1 HMU Update and Funding Request
Appendix 1
Cost Forecast:
£/000s including iVAT where applicable I Oct 22 mete
IDRP Event 1 Good Faith Meeting (GFM): 47 events *
HSF ALT Post offer Project Mgmt & Claim Mgmt time =I 55
HSF - Moderate Good Faith Meetings (GFM) at £900*I 28
HSF - Complex Good Faith Meetings (GFM) at £1500 « Ei
Post GFM Correspondence * 4
Post GFM Correspondence Bespoke Letter * 4
DRT - 4 Senior Managers +1 admin Dispute Res Team Resource * 24
POL Project Team Resource ®I 25
Total] 171 Ea
IDRP Event 2 Escalation Meeting: 9 events ’
DRT-5 Senior Managers +1 Admin Dispute Res Team Resource "I ___43,
POL Project Team Resource ™I 25
TotalI 68 68
IDRP Event 3: Mediation Meetings: 3 events *
Standard Mediations WMS «I 8
Complex Mediations WMS 6
Contfliction Resolution / Mediation Training "I
Mediation Solicitor Fees Moderate ®I 28
Mediation Solicitor Fees Complex “I __24
Mediation Meeting Room Costs" 3
HSF ALT Project Management fee for Mediation Meetings © i
TotalI 76 76
IHSF London - Legal Advice events "
Bi-weekly calls "I 5
Engage with HMU on the DR process (Esc Migs & Med) "I 8
Engage with HMU on elements of the DR process (GFMs) ® 4
Engaging with HMU on applicant rejects and queries * 9
‘Sup ALT answering questions in relation to GFMs I ___20
‘Sup ALT answering questions in relation to Initial Triage ® 1
Total 47 a
IHSF ALT Discovery
HSF ALT eDiscovery Cosis*[ 11
Total 11 m1
POL Resource:
POL Project Team Resource ®I 25
Post Office Operations *I 17
Total 42 42
[20% Internal IAP Recharge Pre to Post Offer ” 60
TotalI 60 60
[Total Funding Requested 475]
4
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@
POST OFFICE LIMITED
BOARD REPORT
Senior Legal
Counsel 3 Ben Foat: Group General
Fintan Canavan: Inquiry 2
Director
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Tab 10.1 Fujitsu Contract Extension
@
POST OFFICE LIMITED
BOARD REPORT
Request for Delegated Authority to
execute the final 1 year extension
‘Wikia of the Fujitsu Horizon Services.
Meeting Date: I 27% September 2022
Dionne Harvey, Head of IT Contract
Management
Jeff Smyth, Enterprise Cloud &
Author: Data Transformation Director
Sponsor:
Input Sought: Approval
The Board is asked to:
1. Delegate authority to the Enterprise Cloud & Data Transformation Director, as Contract
Owner, to execute the final 1 year extension of the Horizon Agreement by an
authorised signatory.
Previous Governance Oversight
¢ Board approval of the 1+1 extension of the Horizon Agreement on the 30" March 2021;
POL automatically enacted the first 1 year extension.
o NB: The original Contract Modification (for the 1+1 extension) & VEAT Notices
were published to the Market (VEAT Reference: 2021/S 000-006992 published
on the 6" April 2021 & the Contract Modification Notice published on the 6'* May
2021) with no challenges received.
e Approved by GE on 14th September 2022.
Executive Summary
Background and Business need
On the 30th of March 2021, following negotiations will Fujitsu, a 1+1 extension was agreed and
approved by Board for the Horizon Agreement; this was subsequently executed under CCN1700
via eCAF and the Agreement extended by 1 year (until the 31°t March 2024).
POL wish to enact the final 1 year extension (which is at POL’s absolute discretion) in order to
allow time for the rollout out of New Branch IT (NBIT).
Key Commercial Terms to note (previously negotiated):
+ There are no further rights for POL to extend the Horizon Agreement beyond 31%t March
2025 and Fujitsu have indicated that they are not prepared to sign up to another
extension.
+ Fujitsu will retain the current pricing for the Services in scope to extend until the end of
the Agreement; subject to annual RPI.
* The indemnity cap for redundancy on termination or expiry of Services was increased to
£4,500,000 (four million and five hundred thousand pounds).
+ No runoff Termination Services are currently available under the Agreement; this will be
the subject of future negotiations if required.
Commercially Sensitive
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Tab 10.1 Fujitsu Contract Extension
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+ The Parent Company Guarantee given by Fujitsu Services Holdings shall not continue
beyond 31st March 2023.
+ Services agreed to expire on the 31st March 2023:
* Digital Development Services - POL have struggled to meet the committed spend
in the last 2 years so this is advantageous to POL.
+ Application Support & Maintenance (“ASM”) committed savings.
* Data Centre Operations Service and Central Network Service - any required
extension will be the subject to Change Control.
* The £10m payment for the Horizon IPR is budgeted and due by 31* March ‘23, after
which time POL will fully own the IPR. NB: This is a contractual obligation under Clause
30.19.
Commercially Sensitive
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Tab 10.2 SPMP Funding Request
POST OFFICE LIMITED
BOARD REPORT
Title: SPMP Oct 22 - Jan 2023 drawdown I Meeting Date: I 27 September 2022 I
“ " Zdravko Mladenov, Group Chief
Author: Gareth Clark, NBIT Director Sponsor: Digital Information Officer I
Input Sought: Noting & Decision
Noting:
e Progress of the SPM programme against the funding previously approved for July to
September
Decisions:
« Approval for programme funding of £21.111M for the planned deliverables from
October 2022 to January 2023 (£11.426m Capex and £9.685m Exceptional)
e Approval to move the programmes end date from 31 March 2024 to 31 March 2025
with a new set of key milestones.
Previous Governance Oversight
MAR '21_ I The Board approved a £4.68M drawdown for the SPM programme, covering the
period March to June 2021
JUL '21 The Board approved a £12.35M drawdown for the SPM programme, covering the
period July to Dec 2021
NOV '21_ I The Board approved a £3.4M drawdown for the SPM programme, covering Jan
2022.
JAN '22 The Board approved a £6.633M drawdown for the SPM programme, covering
Feb & Mar 2022
MAR '22_ I The Board approved a £9.871M drawdown for the SPM programme, covering
April, May and June 2022.
JUN ‘22 I The Board approved a £10.414M drawdown for the SPM programme, covering
July, August and September 2022.
Questions addressed
1. What are the new programme timelines?
2. What is the overall health of the programme and the programme scorecard since the last
funding approval in June 2022?
3. How did the programme perform financially in the last funding period (Jul-Sep 2022)?
4. What are the key deliverables for the next 4-month funding period and what funding is
required?
Confidential
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Tab 10.2 SPMP Funding Request
@
Report
What is the new programme timeline?
1. The programme previously reported that - due to a range of internal and
external factors - it was unlikely that an end date of March 2024 can be met
without scope reductions. The organisation formally noted on 12‘ June at the SPMP
Steering Committee the original timeframe was unlikely to be achieved, following
realisation of several key programme risks. POL Board was notified in the 12 July 2022
session. The programme has since re-baseline the delivery plans targeting an end date
of March 2025. That date is achievable, but still carries material risks and assumptions,
which are detailed below.
2. The‘2025 programme plan’ reflects this new timeline. Details can be found in
Appendix A. This revised plan in anchored on three major Counter Pilot releases to
branches:
e Release 1 (R1) on Android, which is a similar product set to Drop & Collect, but
operates on the Full Counter hardware and POL EPOS software;
e Release 2 (R2), which has all Mails and Banking products and most branch
management (POL EPOS) functionality, and
e Release 3 (R3), which has all remaining products and branch management
functionality.
The rollout is planned to be completed at the end of March 2025. The majority of the
rollout will have to complete before peak trading commences in October 2024. The
period from February to March 2025 is considered contingency for the rollout. The new
key milestones are detailed in Table A below:
Table A - Key Programme Milestones
Key Milestone Date Description
R1 live in branch 29 September 2022 Similar product set to Drop & Collect on full
counter hardware and software; on Android
(open for NEDs on 3
Oct 2022)
R2 live in branch March 2023 All Mails and Banking products, including
cash management; most branch
management functionality
R3 live in branch October 2023 All remaining products and branch
management functionality
Start full rollout February 2024 Migration of all branches from Horizon to
NBIT
Complete rollout Pre-peak trading 2024 I Last Horizon branch migrated onto NBIT
Contingency period February -March 2025 I Allowance for any stragglers to migrate,
preparation for transition to BAU
Close of programme I March 2025 SPM Programme closes, all activity goes to
BAU
2
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While this timeline addresses and mitigates a number of the historic risks and issues
carried by the programme, significant risk remains. Additionally, several important
assumptions have been made to enable the planning. Should those assumptions not
hold, the programme may be at risk of running past the March 2025 timeline. A list of
the key risks and assumptions can be found in Appendix B.
In order to expand the contingency period from 2 months (Feb-Mar 2025) to 5-6
months, a further POL-wide review is underway to identify and evaluate options (so
called ‘big muscle moves’) to further de-risk the plan. Those options would require
modifications in scope and operations that extend well beyond the current remit of the
programme and, thus, require significant cross-POL coordination. Some items under
consideration are: (a) migration during Peak 2024; (b) greater utilisation of Payzone
technology in order not to rebuild products on NBIT; (c) expansion of D&C scope to
reduce training and migration volumes for NBIT; (d) reprioritisation of Belfast Exit
activities to focus more on NBIT-related deliverables; (e) deployment to some branches
outside working hours or on weekends.
The programme's Steering Group is working through the options and the financial and
time implications. Those will be presented at the next Board session as part of the 3-
year strategic plan for POL.
What is the overall health of the programme and the programme scorecard since the
last funding approval in June 2022?
Bs
Overall, as outlined in the above section, the programme is on track to deliver NBIT and
remove Horizon from branches by March 2025. The programme's initial proposition,
Drop & Collect, continues to operate without issues in 28 locations, while Release 1 (see
paragraph 2) is on track for end-of-September deployment.
As of mid-August, ~88% of the work planned in the period has been completed, with
81% of the milestones planned forecast to complete in full. Many others will be largely
completed (e.g., 90%+), but would spill slightly outside the reporting period.
Highlights from this period:
> Drop & Collect Release 2.1 has been deployed, and the NBIT technology in the 28
current Drop & Collect stores continues to run successfully. This is the last Drop &
Collect Release until further decision are made with regard to the scope of the
target Drop & Collect footprint.
>» The primary objective for last period was to deliver Counter Pilot Release 1,
which is on track to deploy to the first branch by end of September 2022. The first
pilot branch has been selected and initial engagement has commenced. Service and
Support structures have already been set up. Training designs are on track for
completion. Subsequent branches on Release 1 will follow during the rest of the
calendar year.
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>» Inthe Tech Delivery space, the focus has been on the conversion from Android
to Windows as the operating system. The conversion of product journeys is on
track for an interim, not-for-live-customers technical release labelled “R1W”.
> Another key achievement is the closing of the tender for the Full Counter
hardware, which has now been awarded and will be seen in Release 1.
> The training approach for the Business Support Centre has been confirmed and
the LMS partner is on track to be appointed before the end of September.
> The Branch Accounting stream (known as BAFTA and OSCAR) has made
significant progress compared to last period. The branch management and finance
Processes are now on track for R2, the branch finance process cutover strategy will
complete by September, and the development of a third-party assurance approach
is underway.
> Engagement with different user groups is ongoing, through the Postmaster IT
working group and other forums, and in particular a large step up in Strategic
Partner engagement. An internal programme communications plan has been
implemented to improve communication and collaboration across the different
teams.
7. The process for Release 1, including the testing, business readiness assessment and
overall release management process, has been immensely valuable and has undoubtedly
helped the programme avoid significant pitfalls with future releases and then the Full
Counter deployment. Formal ‘lessons learned’ sessions have commenced to codify the
learnings and will continue for the remainder of the rollout.
8. Some deliverables will not be met, or are at risk of not being met, this period. A full view
can be found in Appendix C. None of the missed deliverables will cause further delay to
the overall programme timeline. Some examples include (a) several product journeys;
(b) several branch management capabilities; (c) the RFP for the Outreach solution; (d)
the RFP for support for the new hardware; (e) several deliverables in the
Communications and Engagement area (missed due to delays in alignment with the
business on comms and on the approach to a platform identity - NBIT or something
else).
9. There are several ‘big ticket items’, which will be discussed and agreed during the rest of
the calendar year. Those items include primarily the approach and resulting costs of
detailed implementation plans to cover the full network. For example, this includes field
team costs, in-person trainer or in-person training session costs, the impact of ‘making
good’ counters that are removed from branches, etc. Funding for these items sits mostly
outside the drawdown periods covered here, which is why they are not unpacked with
greater granularity, but may affect the overall cost profile of the programme.
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How did the programme perform financially in the last funding period (July-
September 2022)?
10. Over the last period, the programme has completed a significant amount of activity:
>» Activity directly relating to the key deliverables committed in the last drawdown
request
> Activity that has started earlier than planned, specifically we were able to mobilise
Accenture teams to support MVP and UX/UI Design and test preparation more
quickly than anticipated when the previous drawdown request was submitted.
> Activity that has completed or commenced but doesn’t have any associated
milestones in this period
11. In June 2022, the board approved a total spend of £10.414m (including a removal of
£1.2m forecast optimism bias) for the SPM Programme covering the deliverables
committed for Jul-Sep 2022. There was also an underspend of £1.019m from the Apr-
Jun 2022 period, which has been carried forward to complete the outstanding
deliverables from Apr-Jun. We are currently forecasting to spend £12.364m in the Jul-
Sep 2022 period (actuals are only available for one month). Table B below shows the
breakdown of spending and activity for the overrunning deliverables from Apr-Jun, the
committed deliverables for Jul-Sep and the aggregate position of the programme in the
last period.
Table B - Breakdown of spending and activity
a Approval Forecast Spend Approx. %
Deliverables «Mm Jul-sept (em) I Completed I Sent
Overrunning deliverables from Previous ‘ois api i i06
approval (Apr-Jun)
Deliverables from latest approval (Jul- aid Wee si ni
Sept)
Aggregate position covering all spend
and planned delivery in Jul-Sept Period sae i264 bid id
12. The programme has overspent compared to delivery of the committed milestones
(108% vs. 88%) due to having to use more expensive resources to deliver some of the
activity, and due to activity being paid for that is not covered in the committed
milestones. However, this remains inside the overall spending approval due to previous
unspent contingency that has been carried forwards.
As previously raised, the programme has struggled with resourcing key roles, which has
had an impact on delivery. In order to prevent further delays, the programme found
alternative ways, such as commissioning work through 3rd party suppliers instead of
individual contractors, which is more expensive. This is not the preferred route for the
programme; however, in this case it enabled work to continue and allowed the
programme to stay on track against the new timelines. Conversations around resourcing
continue to take place between the programme and the business for a solution to be
identified so this overspend is only short-term and will not continue throughout the
remainder of the programme.
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What funding is required for next 4-month drawdown period and what are the key
deliverables?
13.
14.
15,
The programme is requesting funding for a 4-month period, due to the timing of the
next planned drawdown clashing with the Christmas period. This request and the
associated deliverables therefore cover the period up until the end of January 2023.
The programme is requesting approval of an additional £21.111M required to achieve
the outcomes and deliverables set out above. The costing includes a level of optimism
bias (as was the case in the previous drawdowns) and when reviewed at programme
level by programme leadership it is again considered unlikely that all funds will be
required in the Jul- Sept 2022 funding period. Therefore, a downward adjustment of
£1.1M (5%) has been included.
Delivery in the Oct 22 - Jan 23 funding period focuses on delivering or preparing for
counter pilot releases:
A. Completing the rollout of Counter Pilot Release 1 branches - the first
Counter Pilot Release 1 branch will go live in September, with the remaining pilot
branches planned to go live early in this next reporting period. Although no further
technology development is required, this is a key deliverable as the training,
support and branch readiness activities needed to deploy to these additional
branches will provide the programme with key learnings that will be crucial to the
success of future Counter Pilot releases and beyond.
B. Release 1 Windows (R1W) development - much of the activity in the
technology delivery space throughout the last period has been focused on the
conversion of code from Android to Windows, and this next period will see the
delivery of Release 1 Windows. This is a technical delivery milestone, not a release
that will be deployed to branches, but it represents a significant step in the
technological development of full counter and allows testing to commence on the
Windows code.
C. Preparation for Counter Pilot Release 2 - the next release of counter pilot is
scheduled for end of March. This release is significantly larger and more complex
than R1, with a large expansion in the number of products offered, the back office
functionality required, and the number of branches eventually deployed to. This
means that a significant amount of preparation work will take place this period in
order to prepare for the R2 rollout. The code is on track to be completed on time,
and various stages of testing will be complete or underway. Preparation activities
for R2 will get underway, with support resources and escalation processes
identified, and knowledge articles drafted. The BAFTA and OSCAR workstreams will
deliver the required back office functionality for R2, including cash management,
foreign currency management and finance processes. The Data and Reporting pillar
has been fully stood up and will complete the Reporting Solution Options Paper, as
well as providing the requirements for Postmaster, Back Office and External
reporting to go into development.
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D. Preparation for Counter Pilot Release 3 and beyond —- development of
selected product journeys and processes required for R3 will commence next
period, including various Travel, Money Transfer and Postal Order journeys.
Gathering of lottery requirements will also begin next period. Postmaster and other
user engagement will continue on a range of topics, including migration and
training plans for full rollout. An engagement session is planned for the Field Team
around deployment of Counter Pilot and full rollout.
Achievement of these deliverables is dependent on significant resources joining the
programme in the next period. If recruitment does not happen at the desired rate, some of
the committed deliverables may not be achieved. This has been escalated to the People
Team, and conversations are taking place around increasing the diversity of supply by looking
for other routes to attract contractors.
A detailed list of all deliverables for next period can be found in Appendix C, while the table
below outlines the detailed costs per month and per category.
Nov
Dec Jan Total
Oct
TOTAL
Tech Delivery 2825
1.1 Drop and Collect 29
1.2 NBIT Platform 388
1.3 NBIT Product Journeys 658
1.4 NBIT Branch Mangement 263
1.5 NBIT Integration 156
1.6 NBIT Service & Support 430
1.7 NBIT Enterprise App 135
1.8 NBIT Architecture 336
1.9 Tech Team Management 428
Deployment and Training Costs 482
2.1 Hardware 197
2.2 Deployment Planning 128
2.3 Training Planning and Content Development 157
Business Change 705
3.1 Product Journeys and Business Leadership 357
3.2 ePOS and Branch Management 141
3.3 Project BAFTA/OSCAR 87
3.4 Postmaster Engagement and Communications 120
Programme Costs 647
4.1 Data & Reporting 78
4.2 Service and Support wrap (non IT) 133
4.3 Cost Model 0
4.4 Postmaster Experience v7
4.5 SPMP Programme + BTU Resources 419
Other Costs 425
5.1 Legal & Compliance 148
5.2 Assurance 55
5.3 Procurement & Sourcing 197
5.4 Office Space 0
5.5 Contingency 0
5.6 IVAT & SPO Levy 25
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133
7
ai.
170
151
526
2131 3376 10965
27 29 116
302 383 1448
552 1151 3019
21 292 1023
151 304 m7
343 639 1812
7 133 493
224 335 1211
224 109 1072
204 587 1562
36 181 4g1
42 119 398
27 257 683
797 1020 3605
172 405, 1333
442 351 1407
58 105 338
25 158 526
439 666 2385
52 93 296
39 150 505
0 0 0
wv 26 78
281 396 1506
833, 489 2595
114 165 597
113 190 357
a1 99 528
0 0 0
0 0 0
525 35 112
7
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Appendix A
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Programme Plan and Critical Path
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SPM Programme Plan on a Page (POAP) — Key Milestones
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03 2022 82022 au23 02"23 03°23 as'23 2024 I 2025
‘ul'22 I Aug'2a I Sept'22 I Oct'22 I Nov'22 I Dec'22 I lan'23_I Feb'23 I Mar'23 I ApelI May I Jun I muly I Aug I Sept I Oa I NovI bec I ai] a2 I aa I as a1 I @I as I a
KEY MILESTONES I
Major Releases to Branch ———- > Pretend I Pvveiwerive Soon I A Yoeteee
oo ey
12 sone Dpen a t, rossepwecerancren I TS ' i
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Key Tech Milestones h cvention of tee ¢ wie H I ¢ H ! H
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t t r i t {
Cummulative Maximum 5 H Hi " 4 6" 4 H ia
H % H H
Number of Branches on NBIT. I o M H H * 1 i ¢ 4 Hl 9
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ae
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Key Tech Milestones
ey Business Charge
Dev and test complete
LAT complete
Path tole branch
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KEY MILESTONES.
Major Releases to Branch
Key Tech Milestones
RS Relese Governance and
Deployment to Branch
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Dev and test complete
LAT complete
Path tole branch
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Appendix B
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Key Risks and Assumptions
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Pict brmncnes + Pilot sites will cover DMBs initially then move on to include independent and laterally strategic partner site/s.
* Pilot branches will not include any Outreach or BFPO branches
Operate Gee tiaundedieranches! OFS branches will be converted to POL funded branches before these branches migrate from Horizon to NBIT. The conversion of OFS branches
pe ERENT EGG to POL funded branches will managed and implemented by the Retail team.
rocesses
Counter Numnbereand + SPMP will deploy NBIT to 21.000 counters across the branch network. The work required to reduce the current counter number to 21.000 will
Remediation Warts be undertaken by the Retail team. Agreements with affected Postmasters will be in place before migration.
+ SPMP will not undertake any remedial works to counters and desk in branches.
+ Anew full stock management solution may not be ready in time for R2. We are assuming that we will use an interim / work around approach to
Cash and Stock Management facilitate the sale of stamps for R2.
+ Cash management and supply, for selling and tendering, will be included within R2.
* The majority of product journeys on NBIT (approx. 95%) will not change significantly. Consequently, the need for product based training is very
Changes to Product Journeys limited and training will focus on conversion training (i.e. the differences between Horizon and NBIT) and branch management.
and Resulting Training Needs + The assumption that approx. 95% of product journeys will not change significantly does not include lottery and legacy pre-pay (solutions still
under design)
Demey ana Dpereonst SPMP will not produce a new branch handbook.
Procedure Documents
+ No full stock count (cash and value stock) validated/ witnessed by independent auditors will take place on the day of or before migration.
+ Smart IDs for NBIT, will be using the existing data users have already provided and no new/additional data is needed.
Where resources from across the business are required to deliver SPMP these will be made available (subject to sufficient notice being given by
the programme).
Resource
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timeline
Description
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Mitigation
Payment Accreditation
Scope Creep Including New
Change
Decisions required to design and develop the solution for legacy
pre-pay and lottery are still outstanding. Timelines included in
plan are estimates based on current information.
Payment accreditation required for successful implementation of
R2. Current timelines do not contain any contingency. Successful
accreditation depend on 3° party.
1) Programme unable to recruit required resources in the
necessary timeframe.
2) Resources required by programme from wider business not
yet fully quantified.
Launch of new functionalities in Horizon, changes in Horizon and
introduction as well as changes to products and branch
management processes create moving target of SPPM's final
product.
1) Postmaster might object to migrating from Horizon to NBIT.
Right migration timelines do not include contingency for
negotiations.
+ Decision on way forward for legacy pre-pay to be made by end of
October 2022 (SteerCo on 26 Aug'22)
* Initial engagement on lottery due to commence in early Sept'22
+ An additional resource under recruitment to increase management
capacity to drive solution of issue.
+ Team working very closely with 3rd party to monitor timely delivery
1) Programme working with People team to address recruitment issue.
2) Programme team currently completing identification of resources
required from across the business.
SPMP team working closely with commercial and retail team to align
timelines and reduce amount of change.
1) Migration dates to be communicated to Postmasters in good time.
Engagement with Postmasters to start up to 20 weeks before
migration day.
2) Scope of migration activities under close management. Risk
2) ree for additional activities to be added to assessment to migration timeline to be done for any additional
2 activities requested.
Operating Systems Change 1) The effort of pivoting to windows is bigger than estimated 1) Close monitoring of R1W progress against plan cadence, is being
(Windows Pivot) and Product which may impact R2 deployment timelines. put in place to highlight any challenges as early as possible.
Journeys 2) Product journeys may be more complex than estimated 2) Requirements gathering work on all product groups commencing
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1.1 DROP & COLLECT
Delivery Status
Previous Cycle
Deliverables
Description
None
Description Status Notes
Deploy Drop & Collect Release 2.1 (mid July)
Transition into BAU Support IAll members onboarded. Upskilling in progress
1.2 NBIT CORE PLATFORM.
Delivery Status [3/17 at risk or missed
Previous Cycle
Deliverables
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Description
Postal Services interface - full validation and transformation build & test
completed
Tokeniser & Mails Product API - build & QA completed
July - September Deliverables
Description
Reference Data
MDM -> AWS interface error handling build & QA completed
Payzone/Counter Terminal Device Manager location data AP! build & QA
completed
‘Android Counter Pilot Release 1 reference data ingestion & transformation
build & QA completed
Journey Engine
Journey Engine enhancements: improve Enablers
Journey Engine enhancements: improve Journey Data handling
‘Add capabilities (Navigation, Steps) to support Mails, Banking journeys
Initial platform Windows changes to Journey Engine
Add three additional capabilites to Journey Builder
Enhancements to Device Manager as per new operational requirements
Transaction Processing
Transaction Engine cache Reference data development complete
Automated reconciliation of NBIT transaction records
against Payzone's transaction records development complete
Transfer API deployed to production
Implementation of X-Ray for transaction engine deployed to production
Pouch Delivery (POD), Pouch Collection (POC) and Payment summary
integration development complete
Migrate CFS and Credence jobs from Lambda to Batch deployed to
production
Status
Status
Notes
This was removed from R1 scope following decisions to progress with Android R1 solution - now will be delivered in R2 and broken
Idown into 15 Mails API deliverables by end of November 2022
Notes
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No longer applicable -Decision taken by programme that Release 1 on Android will use the Tactical solution for reference data
[currently used by Drop & Collect
lon track
lon track
[On track
lon track
lon track
lon track
Reference Data API due on 1Sth September, which will allow Transaction Engine build to complete and be ready for E2E testing on
os/11
Requirements to be shared with Payzoneby end of w/c 18th July. Awaiting delivery plan from Payzone. Solution design agreed and
signed off.
Originally in plan for R1 but now moved to R2 and rescheduled for next period
Need to understand approach to platform release planning and target dates for “Release Train’. Will be ready to enter E2E Test at
start of September
lOn track for end of September
Need to understand approach to platform release planning and target dates for “Release Train’. Will be ready to enter E2E Test at
start of September
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‘Additional functionality/capabilities completed:
Development of a Tactical Postcode Lookup Service, as an enabler to Mails
journeys for R2 development
File Splitting Design, required for data reconcili
Horizon
“Client Transaction Summary” File Design, a key output required by finance
team for settlement processes
NBIT CIF file generation Development, which enables sharing of
transactional data with clients in both the parallel-run phase with Horizon,
and the post-Horizon period.
jon on both NBIT and
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Description
Paces Data
Requirements and API Specifications Designs finalised
APIs Build completed for Mails and Banking & Payments
‘APIs QA completed for Mails and Banking & Payments
Journey Engine
Printer Driver integration Package for CT
Scanner Driver integration Package for CT
Simple component changes
Layout changes to support Mails & Banking journeys
changes for simple components and Layouts
ities for Banking developed
Transaction Processing
‘Automatically update the Branch details in NBIT backend - Ready for E2E
testing
‘Access to Transaction Data as enabler for Transaction viewer in Back-office
applications - Ready for E2€ testing
Solution to prevent transaction of duplicate Barcodes from Mails
transactions - Ready for E2€ testing
Security improvement to Transaction service - Ready for E2E testing
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‘API authentication using User ID - Ready for E2E testing
Transaction Engine cache Reference data development complete
Transfer API deployed to production
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1.3 NBIT PRODUCT JOURNEYS
Delivery Status
Previous Cycle
Deliverables
Missed Deliverables April-June
Description
Mails for Counter Pilot
Delivery of remainder of Postage Sale journey
Delivery of Spoilt Labels journey
Delivery of Customer Sale (Philatelic, Individual Stamps, Stamp books, Open
Postage) journey
illPay (including legacy pre-paid)
Stand up team subject to decision on Legacy Pre-Paid and clarity on
solution
July - September Deliverables
Description
AlLJourneys
Agreed architectural decision on technical stack on Windows conversion
Initial components converted to Windows
‘Mails for Count
Android Counter Pilot Release 1 deployed into Production
= delayed
Postponed to next period - included in Postage Sales Journeys deliverable to complete by end of January
Postponed to next period - included in Postage Sales Journeys deliverable to complete by end of January
Postponed to next period - required to complete for R3, build to complete by end of January
I i mobilised and work commenced
Status Notes
]weekPrint Report for Mail Despatch —deployed but awaiting testing due to printing paper availability
I parca Journneys, Item Report and Mails Despatch deployed to INT for RiReturn to Carrier to be deployed to INT this
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Conversion of Android Counter Pilot Release 1 Mails journeys to Windows a in progress
in
Delivery of Windows PED configuration with Ingenico component (not yet lon track
certified)
Delivery of Windows Payment integration component (build & QA Dependent on JE/CT plans to move to Windows
completed)
Delivery of Windows Manual Cash Journey component (build & QA Dependent on JE/CT plans to move to Windows
completed)
avel, Money Transfers and Postal Order
Current product integrations with 3rd party (FRES) reviewed and
incorporated into requirements
October - January Deliverables
Description
‘Mails for Counter Pilot
Postage Sale Journeys - Ready for E2E Test
Postal Address Finder Tool - Ready for E2E Test
Redirections - Lost Application (Lost Items) - Ready for E2E Test
Ordinary COP - Ready for E2E Test
Pre-Paid Stationary - Customer Sale - Ready for E2E Test
Philatelic - Customer Sale - Ready for E2E Test
PPI Bags - Ready for E2E Test
king &
ments
Payments Wireframes Submitted for final UX/UI Approval
Banking Wireframes Submitted for final UX/UI Approval
Payment Integration build & QA completed
(On Line Banking Journeys build & QA completed
Off Line Banking Journeys build & QA comple!
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Travel, Money Transfers and Postal Order
FX Click & Collect Centrally Provisioned - Ready for E2E Test
PO Travel Money Card - Ready for E2E Test
Western Union Digital Money Transfer - Ready for E2E Test
MoneyGram Receive,send - Ready for E2E Test
FX Bureau In Branch Currency - Ready for E2E Test
FX Click & Collect Pre-ordered and made up in branch - Ready for E2E Test
Lottery & Retail
Lottery Sales Instants, On-line Requirements
Lottery Payout Mid-tier payout Requirements
Health Lottery Sales Requirements
Health Lottery Payout Requirements
Bill Pay & Legacy Pre-Pay
Bill Pay HLD completed and signed off at TOA
Government 1D
Finalise product scope
Finalise user stories in Jira and sign off with Product Owner
Payment Receipt and Settlement from Tablet (this includes payments for
Digital passport, SIA, and DV - Ready for E2E Test
DVLA SORN, TVR, Tax Discs, DD ~TDA Sign Off
Passport requirements
Financial Services & Insurance
Over 50s - Ready for E2E Test
Travel insurance Annual or Single (lead and sale) - Ready for E2E Test
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1.4 NBIT BRANCH MANAGEMENT
Delivery Status
Previous Cycle
Deliverables
Missed Deliverables April-June
Description
Delivery of Discrepancy Management component
July - September Deliverables
Description
Branch Management
Branch Management - Product Journey Engine to Counter integration
*Display Menu
start
Commit
*Cash
*Stock
Cash Management — on-screen reporting; transaction corrections; cheques
dispatch; cash transfers
‘Stock Management ~ stock checks; transaction corrections
Basic Transaction Viewer
Deliver basket processing MVP for Android Counter Pilot Release 1
Deliver capabilities to support sales receipts printing for Android Counter
Pilot Release 1
Delivery of Counter and PE integration component
_” delayed
I track for end of October
Status Notes
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Icheques dispatch is moved to post-Sept to bring discrepancy account into scope as it's required at the same time. Covered under
Icash management deliverable for next period.
Stock build has started. Scope is bigger and more complex than expected. Additional Team onboarding and will start sprints
imminently, however activity expected to complete May 2023.
Requirements and UX in place. Build to complete March 2023 for R3
IComplete
Development complete, waiting format approval from business
lComplete
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User Management
Delivery of MVP solution, including build activity on Identity and Access
Management (IDAM) as well as B& DE NBIT build
Description
Branch Management
Cash Management - Development Complete - Ready for E2E Test
‘Stock Management (Rem in and out, Stock Counts and Sale Processing) -
Development complete - Ready for E2E Test
Product Transaction Record (Pilot Only) - Development Complete - Ready
for E2E Test
Basket Processing - Development Complete - Ready for E2E Test
Cash Payment Processing - Development Complete - Ready for E2E Test
User Management
IML User Stories / Epics signed off
End State HLA Approved
End State HLD Approved
MFA Approach Defined and Approved by TDA
1.5 NBIT INTEGRATION
Delivery Status
Previous Cycle
Deliverables
IAwaiting planning from ForgeRock for R2
=
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Description
Data Reconciliation Service for banking transactions and card payments
development complete
Status Notes
Development WIP, delays due to gather of information for POC/Dev activities are in WIP, change in plan agreed by stake holders.
DRS Build ready for integration Test 23/12/22.
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NBIT Automated Payment client file merge service released to production Is) betay in receiving quote from Futeu and POL Information Seréces Team fer completion ffl o-out (2) Ongsing support mede design workdue to ewviee inact of moving 5
[AP lent Fie routing ia NAIF means Futeu wil na longer provide “Gol” level support on these routes. Options pager tobe drafted a dein required from Steerca on how to a
proceed. Target completion of February 2023, but not impacting cea ath of R2 or RB at ths tage. eS
a
July - September Deliverables
Description Status Notes oo
g
8
‘Smart metering Passthrough development complete 10/10 APIs in development. On track 5
g
PODG rollout for the majority routes, re-routing via NBIT Request wit Information Series for quote on PODG / Information Services effor for cvtover, Has been escalated to CDIO asthe cost from Fults is
substantial It won't be delivered by end Sep but won't know a date unti the escalation has concluded, and POL have signed the paperwork and Fujtsu have
confirmed the dates.
AppMod ~ NBIT connectivity Working with AppModteam to establish effective mtlsset up; prevailing view is one cert will be needed per AppModservice -
meaning 10 certs per environment at a cost of ~£450 each. Alternative options being explored to streamline requirements.
COP Travel insurance development complete lComplete
COP Identity services development complete lon track
CDP gift cards development complete Replanned for R3, completion by April 2023,
CDP Integration for Smart Metering released to Production Need to understand approach to platform release planning and target dates for “Release Train’. Will be ready to enter E2E Test at
start of September
AppMod Kahala released to Production Need to understand approach to platform release planning and target dates for “Release Train’. Will be ready to enter E2E Test at
start of September
AppMod Bank Undo released to Production Need to understand approach to platform release planning and target dates for “Release Train’. Will be ready to enter E2E Test at
start of September
AppMod Bank Account Checker released to Production Need to understand approach to platform release planning and target dates for “Release Train”. Will be ready to enter E2E Test at
start of eptember
October - January Deliverables
Description
Platform Integration
AAP Client rollout to send daily transaction files to clients via NBIT
Merging of NBIT transactions in daily transaction files sent to clients E2€
test ready
Client Transaction Summary to be sent to POL finance team E2E test ready
Connection to CDP Identity api- IBV to support identity journey E2E test
ready
Connection to CDP Identity api- ekyc to support identity journey E2€ test
ready
Connection to App Mod DVLA api for Driving license journeys E2£ test ready
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1.6 NBIT TECH SUPPORT
Delivery Status
Previous Cycle
Deliverables
Description
Build out of automated testing for counter pilot release 1
Description
End to End testing plan built and signed off for Android Counter Pilot
Release 1
End to End plan executed with automated testing built for Android Counter,
Pilot Release 1
Service Models for Android Counter Pilot Release 1 agreed
Release process signed off and complete for Android Counter Pilot Release
a
Level 2 and Level 3 support structures for IT Support agreed and signed off
Android Counter Pilot Release 1, alerting, monitoring and logging in place in
tactical solution
Security tooling now b
into pi
ine and measuring performance
Support live D&C Service including AWS environment, licencing, 3rd party
support & operations
‘Service & Support
End to End test plans created, reviewed, and executed for: Pivot to
Windows, IDAM solution, Device Manger
Full End to End testing plan for R2 (March release) built and signed off
IT Operational config (CMDB) design created and agreed
i delayed
Status Notes
Marked as completed in previous IC paper, this covered the te:
Status Notes
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Support Structures Agreed for R2
R2 Alerting, Monitoring and Logging Design agreed
Route to Live checkpoints and process in place
Support live NBIT Counter Pilot and D&C including AWS environment 3rd
party support & operations
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1.7 NBIT ENTERPRISE APPLICATIONS
Delivery Status [0/7 delayed
Previous Cycle I
Deliverables
Wise Detverale Ansan
Description
none
Ny-Sepember Deets
Description Status Notes
‘Arrow Cash Forecasting - UAT Complete Dependent on UAT environment build completion
‘Arrow Non-Cash Forecasting - UAT Complete complete
CFS—Taxation UAT Complete complete
Moneygram and IPSL UAT Complete In progress with the open item account management to be started. IPSL ExellaCR testing to be include
Financial Controls ~ Test Complete Jon track
SCA Rate Card - Deployed complete
Pre-Paid Mails SPM Alignment CR — Deployed [Tested as part of E2E successfully -will be deployed with Rel.1
Description
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Enterprise Applications
EMIS/EPA Integration Test Complete
Discrepancy Mgt Integration Test Complete
Cash Forecasting Integration Test Complete
Cash Processing Integration Test Complete
POL Reconciliation Service
Banking Reconciliation LLD Complete
Card Payments Reconciliation LLD Complete
Banking Reconciliation Build & UT Complete
Card Payments Reconciliation Build & UT Complete
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1.8 NBIT ARCHITECTURE
Delivery Status
Previous Cycle
Deliverables
Missed Deliverables April-June
Description
= delayed
Status Notes
Test and report on POC findings using local devices and our test devices
July - September Deliverables
Description
Enterprise Architecture
Reconciliation Engine Design
Status Notes
Design APOP integration capability for postal orders/vouchers
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AWS well architected review
Design NBIT application and security logging
Assure NBIT Architecture standards conformity
Product Architecture
Banking HLD updated for Release 3
Payments HLD to progress along with Worldline engagement
Bank of Ireland integration solution overview for NBIT.
Mails HLD update aligned to Mails Product Roadmap
Transaction Engine HLD Updates
Counter Terminal HLD updates to support Windows operating system
Product Journey Engine HLD Updated to support enablers added to scope
and decoupled architecture
Insurance products Solution overview for Over 50's & Travel
Design Travel Money Card & FX
Lead Generation HLD signed off at TDA
Loans HLD signed off at TDA
Government and ID Services HLD sign off at TDA
October - January Deliverables
Description
Enterprise Architecture
Design for Audit event publish/subscribe based solution across end to end
NBIT Audit
AWS well architected review for R2 and R3 deliverables
Design Vouchers and Pay-Out solution for NBIT
Design for Prompts and Messages in NBIT
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NBIT Architecture assurance and conformity
Reconciliation Engine Design
Design for Branch Network, Connectivity via Public and Private Networks
Windows operating system design for EPOS Kiosk mode
Windows EPOS and Devices design aligned to Hardware RFP
NBIT Authorisation design for R2 and R3
Design for Device Management for new EPOS and Devices using Intune
Design to support Training environment and Systems (LMS, Simulator and
Help).
Design for immutable transactions - Ledger DB for Transactions
Data model defined for NBIT Platform
Security patterns defined for R3 scope
Product Architecture
Banking HLD - for Release 3
Payments HLD and updates for Release 3
Mails HLD updated for Release 3
Product Journey Engine HLD updated to support Release 3 components
Print and Scanner adapter designs
Insurance products for Release 3 updated in HLD
Transaction engine security improvements design
Travel money, Transfers and Postal Orders design
Lottery design to be start
Cash and Stock management design to be completed
Platform logging and monitoring for Release 3
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DVLA SORN, TVR, Tax Discs, DD Design complete
Passport solution overview/options paper to be completed
Moneygram and Western Union designs to be completed
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2.1 HARDWARE
Delivery Status 12/6 missed
Previous Cycle
Deliverables
Description
none
Description Status Notes
Procure up to 30 bundles of hardware for counter pilot release one IGE are due to approve on 15/8. Contract will be let on 26/8 with first two orders. Delivery should be by 26/9
Main tender - Tender closing date for full counter complete
Commitment Business Case For Full Counter Issued argetting Sept board
Outreach - Report & Recommendations on mobile solutions
Report dropped and under review.
This will not be done. NCR running late and only doing the recommendation demo on 11/8, There will not be enough time to ratify
requirements and release an RFP. Will complete next period.
, IWhilst discussions are underway, the support contract is unlikely to be amended until the architechture for NBIT is agreed and
be pporcoriract flats! Sareuppominewideyiees tasking between EUC and BDE agreed. Will complete next period.
Issue RFP (Request for Proposal) - Outreach solution
Description
Device drawndown - Early Drop - up to 85 Bundles
Issue RFP (Request for Proposal) - Outreach solution
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2.2 DEPLOYMENT PLANNING
Delivery Status 2/8 at risk
Previous Cycle
Deliverables
Description ‘Status Notes
Status Notes
Pilot deployment strategy document produced
Pilot: Deploy hardware into first Pilot Site
Full-counter Strategy First Draft produced
‘Connectivity:
Connectivity Test Environment Established
LMS not yet procured so full testing cannot be achieved but we will do some representative testing on exisiting LMS. Deliverable
Complete Pre-Testing of Learning Management System (LMS) service ioved ta Wax patod,
Complete Pre-Testing of Virtual Instructor-Led Training (VILT) service
Representative testing will have been completed
IMs not procured so full testing cannot be achieved but we will have completed some representative testing on existing system.
‘of Information Management System (IMS) service palivers ble ataved fa Reee pated
Complete Pre-Testi
Complete Pre-Testing of NBIT
Description
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Develop sequence for full rollout
Deployment to remaining agreed R1 branches complete
Send out Invitation to Submit Final Tender (ISFT) for the Implementation
Partner
Connectivity uplift for first batch of satalite sites on contract.
Windows 10 devices tactical build for R2
Complete Pre-Testing of Learning Management System (LMS) service
Complete Pre-Testing of Information Management System (IMS) service
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2.3 TRAINING PLANNING
Delivery Status
Previous Cycle
Deliverables
Missed Deliverables April-June
Description
Agree format of new learning materials and software with BAU Training,
team
Commence Tender & Selection Of Design Partner & Award Contract
Commence design of pilot training materials, with at least 20% of mail
journeys completed. These will have been accepted by BAU training team.
LMS Implementation plan developed and agreed by stakeholders
Tender commenced to select required Information System tool
July - September Deliverables
Description
Confirmation Of Training Approach for Business Support Centre
Learning Management System Partner appointed and Implementation
commenced
Ly 1/9 at risk
Status Notes
IComplete
In progress but delayed due to RIA design. Additional resource focused on this to ensure a partneris identified by the end of
September
training for 20% of mails journeys included in R1 have been built, approval has been gained from BAU training team
LMS procurement process delayed due to additional clarification questions being required by the BAU training team. Now selected
LMS and implementation plan will be drawn up and in progress by end of september
Work in progress. More thinking has been done on IMS solution. Initial direction being rethought and we are exploring whether an
lexisting POL solution can be extended rather than purchasing a new system. Decision will be made by end of September
Status Notes
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Information Approach signed off by key stakeholders
Counter
Training Designs for R1 complete and shared with key stakeholders. I I
October - January Deliverables
Description
LMS preparation requirements identified and resources appointed
Virtual Instructor-Led Training branch testing complete
Agreement with key stakeholders on Inline Help/Information and
requirments submitted to BDE
New onboarding collatoral for Branch Support Centre complete
Training design partner appointed
Upskill existing BAU team in new e-learning authoring tool
Training Delivery Planning schedule complete
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3.1 PRODUCT JOURNEYS AND BUSINESS READINESS
Delivery Status 6/19 missed
Previous Cycle
Deliverables
Missed Deliverables April-June
Description Status Notes
Prepare UAT plan for banking journeys Replanned for R2
Completion of requirements for Bill Pay journeys other than Legacy pre-pay
Bill Pay team only recently stood up. Bill Pay HLD to be completed and signed off at TDA in next period
Validate Bank of Ireland integration plan
Virtual Product Team Leaders recruited and onboarded, and VPTs stood up
for Retail & Lottery and Forex & transactional financial services Deliverable no longer applicable, team structure has changed so there are no longer VPTs
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July - September Deliverables
Description status Notes
Banking & Payments
Payments Product Discovery Complete (requirements, process flows and
user stories complete)
Worldline SoW2 complete (covering Windows C3 Agent integration and
external certification support to pilot ready)
Worldline SoW3 Terms and conditions plus schedules drafted and available
for review with (covering roll out support and BAU services)
Government and ID Services
Elinbee bapa nrt ote Postponed as not in scope for R1, moved to next period. Reported under 1.3 NBIT Product Journeys going forwards
ail gg ke a i i i ll Postponed as not in scope for R1, moved to next period. Reported under 1.3 NBIT Product Journeys going forwards
‘Travel, Money Transfers and Postal Order
Impact assessment of any possible changes required on FRES systems
aligned to B&DE designs
Business Change requirements documented and baselined in Jira as Epics
and User stories.
Business Readiness for Counter Pilot
Model Office requirements for NBIT agreed
‘Agree measures of success for the first phase of the pilot
Choose branches and agree preliminary roll out schedule
Complete updates to postmaster contract documentation
Laie ‘i [On track to complete by send of September
Set up investigation process for discrepancies and ensure resources are in
place to investigate and respond
Agree Business Readiness/sign off process, which will hen inform the sign
off process for further releases
Postponed as not in scope for R1, moved to next period
gal Assurance
IComplete for initial list of commercial contracts, with exception of of notification detail requirements below. A number of new
[contracts have been identified as requiring review, as new contracts are being created still using outdated T&Cs
Identification of Notification period and draft letters has commenced but will not complete this period, as the content will
Jdepending on whether a build or buy decision is made for the ePOS solution. Deferred to October-January
Production of Risk and Due Diligence Reports for commercial contracts
completed
Issue of Notification Letters completed
October -
january Deliverables
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Description
Business Readiness
Business Readiness Process complete for remaining R1 branches
CIA completed for all in scope products and processes
UAT Partner onboarding complete
Change impact assessment template created
Legal Assurance
Complete list of contracts that require legal review
Identify legal contracts in scope for R2
Issue of Notification Letters completed
Commence production of contract review reports for additional commercial
contracts identified
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3.2 EPOS AND BRANCH MANAGEMENT
Delivery Status
Previous Cycle
Deliverables
= delayed
Description
Design and define future solution: Delivery of MVP and end-state High-
Level Design for review and approval at TDA
Draft of end-state business process flows (e.g, login, logout, soft unlock,
hard unlock)
lon track to complete by end of September
Jon track to complete by end of September
Description
Branch Management
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Gap analysis of Buy requirements to Jira backlog
Impact assessment on OS change
Confirmation of R2 scope with OS change
Business Process mapping to support key requirements delivery for MVP
Basket Processing
Business Process mapping to support key requirements delivery for MVP
um
User Management
Commence analysis for upscale of FR solution for End State
Validation of end state requirements
POS Buy subset
Issue of RFP to vendors for Buy option
Vendor presentations completed
Commercial review completed
Preferred ePOS supplier chosen
October - January Deliverables
Description
POS Buy subset
‘Award a contract for
Begin exploratory phase with selected supplier
‘Submit interim report to CDIO on progress of EPOS Buy
NB - Branch Management deliverables covered under 1.4 NBIT Branch
Management
started, but due to a change of structure in the team this couldn't be completed
Analysis has commenced, will conclude Q2 next year
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Delivery Status
Previous Cycle
Deliverables
Missed Deliverables April-June
Description
Foreign Currency - Complete User Stories (Process documentation)
Stock Management - Agreement to change stock management process to
track stock at a more granular level, including preparing the user stories
Other Formats - Outreach Branches, BFPO — As is analysis complete
Business Process UAT and Financial controls assurance strategy and
detailed plan developed
Branch Finance Process Cutover Strategy completed
July - September Deliverables
Description
Finance Transformation (BAFTA)
‘Supporting the EPOS decision - Short-listing, presentations, decision
Validation of all BAFTA User Stories, build, testing, reporting, change
management (Service & Support and Training) for Counter Pilot R1
Finance processes for Counter Pilot R1 - As-Is and To-Be processes
documented, risks and controls documented and agreed
Finance processes for R2 - As-Is and To-Be processes documented, risks and
controls documented and agreed
Stock Mgt Finalise requirements for User Stories for R3
Assurance (OSCAR)
Complete and execute finance assurance plan for Drop & Collect project,
release 2.1 - product development and move to full Service Concession
Finance processes for R1 - As-\s and To-Be processes reviewed
(documented where changes made), risks and controls documented and
Assurance - work around uses of 3rd party data in central finance
processes, central Finance reports and Finance controls by release
Set of prioritised requirements for 3” party data feeding into relevant
products/services delivered to Virtual Product Teams (all except Mails)
‘Support E2€ Testing for Central Finance Processes (Billing, Settlement, PM
Rem) for R1
= delayed
Replanned for Oct-lan period
lon track to complete by Sept
Replanned for Oct-lan period
[On track - superceded by lines 14 and 31 for R2, and lines 44 and 45 for R3
JOn track to complete by Sept
Status Notes
Deliverable no longer applicable - BAFTA were expecting Counter Association to be in R1 but this has been put back to R2
Deliverable no longer applicable - BAFTA were expecting Counter Association to be in R1 but this has been put back to R2
[completed for Banking. Legacy pre-paid this week
Will be derived from the 3'° Party Assurance work
ICommenced UAT Testing 08/08
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Support further Drop & Collect deliverables
Support Enterprise Architecture UAT This is continual
3% Party Assurance
3 party assurance strategic approach developed and procurement activity I I
underway
October - January Deliverables
Description
Finance Transformation (BAFTA)
Validation of all User Stores, build, testing, reporting, change mgt (Service &
Support and Training) for R2
Definition and Documentation for To-Be Processes - [Other Formats -
Outreach Branches, BFPO)
Branch Management (BAFTA) - Definition and documentation for both As-Is
and To-Be processes completed (excluding outreach branches) for: cash
Branch Management (BAFTA) - Definition and documentation for to-be
processes completed (excluding outreach branches) for : foreign currency
Reporting - report requirements for HORice, Horizon, Credence and CFS
written for R2
‘Assurance (OSCAR)
‘Assurance (OSCAR) - Set of prioritised requirements for 3pty data feeding
into relevant products/services delivered to Virtual Product Teams (Excl
Finance processes for R2- As-\s and To-Be processes reviewed
(documented where changes made}, risks and controls documented and
Support Enterprise Architecture UAT
Assurance - Central Finance reports, Finance and IT controls for R2
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3.4 POSTMASTER COMMUNICATIONS AND ENGAGEMENT
Delivery Status 5/12 at risk
Previous Cycle
Deliverables
Missed Deliverables Aprilune
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Description
Recruitment of branch SMEs from agency/franchise network on part-time
and flexible basis,
‘Approach for system identity (name for NBIT) defined and aligned within
POL
Align strategic communications narrative and plan with POL comms and
define timelines
Hold first demonstration events of NBIT (dependent on approval from
Board and POL)
Define approach and plan for tactical messaging linked to segmented
support approach
Notes
Incomplete due to a combination of HR and legal activity to determine PM contract requirements. Work is ongoing but likely to
ldefer to Oct-Jan.
still no agreement on the need for a syster
lapproaches. Defer to Oct-Jan
tity so the SPMP communications team are working through some alternative
Delayed due to Ri delay. Defer to Oct-lan
Description
Finalise and agree Postmaster segmentation model and support for each
segment
Define and agree “pastoral” support roles, Le. the groups who will support
Postmasters in the lead up to go-live and beyond
Ongoing user (Postmaster, strategic partner and/or DMB colleague)
cn prioritised elements from the programme for Jul-Sep period
put
Ongoing field team input on priority programme topics for Jul-Sep period
Commence van-based roadshows, initially for UX/UI testing
Recruitment of DMB colleagues for NBIT roadshow delivery
Delivery of programme communications to stakeholders over Jul-Sep periodI
‘once the approach has been agreed on:
*System Identity
Strategic messaging
Tactical messaging for the Segmented support approach
Status Notes
Will be missed due to decision to delay recruitment of resource for this. Will commence in Oct-Jan. UX/Ul testing with PMs has
lcommenced virtually
JOne person recruited, starting early Sept. Do not anticipate recruiting second person due to wider uncertainty around delivery dates
Imay choose to delay recruitment until next period, or until the new year
ICommunications have been delivered
Description
Work with colleagues and external support as required to deliver a user
engagement activity on the name for NBIT
Manage work with marketing team and external expertise as required to
deliver branding collatoral associated with NBIT
User input on prioritised areas including early sight of R2 journeys,
migration and training plans for full counter rollout
Notes
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Field team input on prioritised areas including early sight of R2 journeys,
‘migration and training plans for full counter rollout
Hold field team engagement event covering deployment plans for Counter
lot and full rollout
‘Commence van-based roadshows, initially for UX/UI testing
Recruitment of branch SMEs from agency/franchise network on part-time
and flexible basis
Approach for system identity (name for NBIT) defined and aligned within
Po
4.1 DATA AND REPORTING
Delivery Status n/a
Previous Cycle n/a
Deliverables
5 OF
I
Description Status Notes
Pillar just stood up - no deliverables reported from July-September period
Description
Reporting Solution: Reporting Solution Option Paper Complete
Data Mgmt: Data Catalogue Template defined (R1)
Data Arch: Data Flow Diagrams (inbound/ outbound) defined (R1)
Digital Data Vault: Proposal development complete
Requirements: Cross release - Postmaster Operational Reporting
requirements captured in backlog
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Post fice Limited - Document Classification: INTERNAL S
a
2
Requirements: Cross release - Postmaster MI Reporting requirements 3
captured in backlog z
Requirements: Cross release - POL Back Office Operational Reporting Ff
captured in backlog
Requirements: Cross release - POL Back Office MI Reporting requirements
captured in backlog
Requirements: Cross release - External Reporting requirements captured in
backlog
Requirements: Cross release - Non Functional Requirements captured in
backlog
4,2 Non-IT SERVICE AND SUPPORT
Delivery Status 1/9 at risk
Previous cycle
Deliverables
Missed Deliverables April-June
Description Status Notes
Business support requirements and collateral for Banking Journeys
captured, identified, understood, documented and agreed with the Banking journeys for Release 2 are identified and will be delivered in line with the revised programme plan.
Business support requirements and collateral for the journeys in scope for Release 1 requirements and collateral in progress, following validation against UAT and will be in place for go live in September
Counter Pilot captured, identified, understood, documented and agreed 2022.
Review and document the changes required under the hardware support
contract for NBIT, commence commercial engagement for support take on. Progressing in line with the Device Strategy and related Procurement activities.
July - September Deliverables
Description Status Notes
Counter Pilot Release 1 resources in post with contact methods established
to support nominated branches lon track
Knowledge articles, support and escalation processes created for Counter
Pilot Release 1 [On track
NBIT Reporting and tooling impact on Business support teams documented, Reporting requirements identified and submitted to Reporting Pillar. Need to confirm approach to Dual Running reporting for Pilot
and requirements captured for input into development branches.
Analysts, investigations and recommendations completed for Case management and Analysis carried out on options forthe surfacing of Knowledge and Information for Support and Postmasters Further work i needed fora solution that meets
‘knowledge/information surfacing for support staff and postmasters needs across all areas including operational processes). Awaiting resource to be onboarded to complete activity. Deliverable moved to next period.
Continue to provide expertise and input into the screen designs, identifying,
process omissions and improvement opportunities to minimise support IOngoing support being provided.
Continue to provide expertise into the Windows 10 and Hardware device
support requirements and service model IComplete.
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Post Office Limited - Document Classification: INTERNAL
Description
Counter Pilot Release 1 lessons learned identified and incorporated into
Release 2 planning and execution.
Counter Pilot Release 2 resources identified with contact methods
established to support nominated branches.
Support and escalation processes identified for Counter Pilot Release 2.
knowledge articles drafted for Counter Pilot Release 2 in preparation for
UAT validation and final imagery.
Analysis, investigations and recommendations completed for Case
‘management and knowledge / information surfacing for support staff and
postmasters.
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Tab 10.3 Procurement
POST OFFICE LIMITED
BOARD REPORT
Title: Procurement Report Meeting Date: I 27 September 2022
Ruther Liam Carroll, Procurement —— Alisdair Cameron, Group Chief
Director Finance Officer
Input Sought: Noting & Approval
Approval of Appendix A - CCS Procurement Gas and Electricity for POL Estate.
Noting of Appendix B - SPMP Branch Point of Sale (POS) Equipment and Peripherals award.
Previous Governance Oversight
e GE on 29 June 2022 and Board on 12 July 2022
« GEon 17 August 2022
¢ GE on 14September
Please see attached appendices for specific governance approvals
Executive Summary
What approvals have been requested as part of this paper?
There are two papers:
Gas and Electricity for POL Estate
Board is asked to approve the award of a contract for Gas and Electricity supply for DMB’s,
Secure Warehouses and Admin Centres for mainland UK via Crown Commercial Services
(“CCS”) Framework RM6011 - Supply of Energy and Ancillary Services. This is a replacement
contract for the current contracts with EDF (Electricity) and Corona (Gas) which are supported
via a separately contracted hedge provider (Enel-X) and are due to expire at the end of March
2023.
With the volatile nature of the energy sector at present opting into the CCS Locked Basket
starting from April 1* 2023 supports our desire to manage the volatility and maintain cost
certainty. In order to opt-in to one of the six month baskets starting in April 2023, we were
required to sign the call off with CCS by 16th September 2022, this was approved by GE at
their meeting on 14 September.
SPMP Branch Point of Sale (POS) Equipment and Peripherals award
Board is asked to note the award of the contract for SPM Branch POS equipment and
peripherals to Specialist Computer Centre (SCC) with their Hewlett Packard (HP) bid via the
HTE Com IT2 Framework. Board delegated contract award approval to GE in March 2022 and
following the successful completion of the procurement exercise GE approved the contract
award decision at their meeting on 17th August 2022.
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Background
Appendix A - Procurement Gas and Electricity for POL Estate
Appendix B - SPMP Branch Point of Sale (POS) Equipment and Peripherals award
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POST OFFICE LIMITED
BOARD REPORT
a Appendix A - CCS Procurement Meeting
Titles Gas and Electricity for POL Estate I Date: 27 September 2022
Stephen Smith - Procurement
. I Steve Norris — Head of Property . Martin Roberts - Group Chief
muthOrs Kate Giles - Property Compliance Sponsor: Retail Officer
and Contracts Manager
Input Sought: Approval
Board is asked to approve the procurement of Gas and Electricity for DMB’s, Secure Warehouses
and Admin Centres for mainland UK.
e Procurement of both Electricity and Gas via Crown Commercial Services (“CCS”)
Framework RM6011 - Supply of Energy and Ancillary Services.
e Length of contracts to be 24-month (April 1st 2023 to March 31st 2025).
¢ The total value of the call off for the 24 months is esti
o Broken down asc. 'YVyear Electricity [IRRELEVANT I Gas.
In order to opt-in to one of the 6 month baskets starting in April 2023, we were required to
sign the call off with CCS by 6th September 2022.
Executive Summary:
POL is responsible for the procurement of Gas and Electric for our DMB’s, Secure Warehouses
and Admin Centres. Franchisees maintain their own arrangements for Utilities and therefore
these do not form part of any POL agreements.
Property have been fully engaged in the development of this strategy and this recommendation
has been agreed with Martin Roberts - Group Chief Retail Officer.
Property, Procurement and CCS have reviewed our historic energy spend and, based on the
rates we have been achieving under our existing contract when compared to the rates which
we would have achieved had we been with CCS, we may have achieved savings of c. 26%
on our combined Gas and Electric costs.
The performance of the new CCS framework is demonstrated in the fact that approximately
50% of all public sector organisations are now operating under the CCS Framework,
including Bolsover District Council, Nuclear Decommissioning Authority & Hertfordshire and
West Essex ICS NHS, BEIS and all other central government departments. This represents
£1.3bn in energy, making CCS the largest energy trader in the UK outside of the big energy
providers.
With the volatile nature of the energy sector at present in mind, Property and Procurement are
recommending that we opt into the CCS Locked 6 Basket starting from April 1*t 2023 as we
believe this strategy supports our desire to manage the volatility and maintain cost certainty.
The contract values referred to herein are estimates only and may be subject to variation.
Approval from GE was obtained on 14 September in order to meet the opt-in deadline described
herein of 16" September 2022.
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Background:
This will be a replacement contract for the current Electricity and Gas provider contracts
currently with EDF (Electricity) and Corona (Gas).
Our independently procured contracts for mainland UK for Gas (Corona) and Electricity (EDF),
which are supported via a separately contracted hedge provider (Enel-X) are due to expire at
the end of March 2023.
particular) wi
‘IRRELEVANT
IRRELEVANT
it is critical that billing is consistently accurate, and levels of customer support are high. Post
Office Property actively monitor all billing and we will remain with EDF as our incumbent
electricity supplier thereby minimising the impact of transition to the new contract.
Although we are confident that the approach of using a hedging organisation has provided value
over the life of the contract, the volatility of the market in recent months has made it
challenging for Enel-X to continue to provide that demonstrable value and therefore, given the
size of the portfolio CCS are responsible for Property/Procurement made contact with CCS to
understand the benefits they were able to offer.
Recommendation for Approval:
With the potential savings balanced with the previous experience and market uncertainty in
mind, we would recommend the approach of calling off against the CCS Framework for Gas and
Electricity and opt into one of their shorter 6 month baskets with an initial plan to stay in for 2
years (but with the option to serve notice sooner should service be poor). These would deliver
the desired stability in pricing as well as gaining access to CCS’s purchasing power whilst
offering flexibility to a) serve notice or b) opt for a longer term basket within the shortest period
of time possible.
Based on historic volumes but using anticipated rates for the first 12 months of the call-off, our
arrangement will have the values of c. ‘or Electricity and c.
Under the CCS Framework, the period of notice required to opt-in to a basket is greater than
we have previously experienced under our independent arrangement or previous CCS call-off.
In order to opt-in to one of the 6 month baskets starting in April 2023, we must agree the call
off with CCS by not later than 16th September 2022. Therefore, with GE approval we entered
into the contract. The period of notice required by CCS allows them to buy our requirements in
advance of delivery, securing our desired cost certainty.
Bill validation will continue to be carried out by Enel X, ensuring bill accuracy highlighting
missing bills, meter reading anomalies etc
Contractual Summary:
Post Office would be required to complete a CCS Customer Access Agreement to call off from
the Framework. The call off does not expire (known as ‘evergreen’). However, the ‘Baskets’ are
2
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what we give notice on (to enter and leave), so, if, after the suitable period, we are dissatisfied
with the arrangement, we can give 6 months’ notice and opt for an alternative. Equally, if we
believe the framework is performing strongly, then, at the appropriate time, we can opt to
migrate to an alternative basket.
Bill validations and carbon reporting will continue to be carried out by incumbent suppliers for
those activities.
10.3
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@
POST OFFICE LIMITED
BOARD REPORT
Appendix B - SPMP Branch Point of Meetin
Title: Sale (POS) Equipment and oe 9 27 September 2022
- Date:
Peripherals award
' Rishi Thaker / Steve Hepburn - . Zdravko Mladenov, Chief
Author: Procurement Spenser: Information and Digital Officer
Input Sought: Noting
Board is asked to note the award of the contract for SPM Branch POS equipment and
peripherals to Specialist Computer Centre (SCC) with their Hewlett Packard (HP) bid via the
HTE Com IT2 Framework, (see appendix 1 for SCC HP POS equipment images).
e Length of contracts to be 48-month term with three optional 12-month extension
e The total value for core counter bundles to be procured via this contract is projected to
be to £48.3m over the 84-month period, with no minimum commitment to spend
e Each call off from the contract will be subject to approval via the CAF process
Previous Governance Oversight
* The sourcing approach was agreed with the Device Governance Forum on 8" February
2022.
The sourcing strategy was approved by SPMP SteerCo on 25 February 2022.
The sourcing strategy was approved by GE and Board on 16 and 29 March 2022.
Board delegated contract award approval to GE if the contract value is below £49.5m.
The contract award decision was approved by the SPMP SteerCo on 22 July 2022
The contract award decision was approved by GE on 17th August 2022
Background
Sufficient equipment bundles are required to support the full counter needs of the 11,500
sites (22,100 units agreed with the Networks team), including spares of up to 2.5%. This
enables the EUC Provider to have access to enough hardware to meet current service level
agreements, key performance indicators, BAU demands and the Networks team
projections. The solution for the replacement of the ~400 outreach “luggable” kit bundles,
where it differs from the full counter devices, will be subject to a separate procurement.
Executive Summary
The contract value is £48.3m over an 84-month term, made up of an initial 48-month term,
with up to three additional 12-month extensions. This will align to the life expectancy of the
assets, to enable the Post Office to refresh the peripherals, if necessary, within the same
contract period i.e., initial delivery, warranty, further orders if required.
SCC have fixed the price of hardware for 12 months from the anticipated start of the contract
(15 October 2022). SCC have re-confirmed that they can meet the delivery schedule outlined
in the RFP and lead times they have committed to for the delivery of the equipment. A full
refund and recourse fee is applicable for items that are not delivered to our timescales.
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There will be no contracted commitment to spend. The approval for the commitment of
funding to draw down the devices will be requested at the Board separately by the SPM
Program.
The £48.3m value is based on core equipment bundles to replace the existing Horizon
equipment in branch. The contract also has pricing for non-core equipment the procurement
of which would be subject to a separate business case but if purchased may will take the
spend above £50m.
Questions Addressed
1. I What equipment is in-scope?
The core device bundle components are:
EPOS unit
Barcode Scanner (wired)
Magnetic Strip Reader (MSR) - possibly integrated with POS.
Keyboard (wired)
Printer(s)
Multifunctional printer, or
= 2x Label Printers
= 1x Receipt Printer(s)
= With optional vertical stacking unit
The Non-core components (optional devices) are:
Barcode Scanner (wireless)
Customer facing screen
Keyboard (wireless)
Mouse (wired/wireless)
External camera
Cash Drawer
2. What was the Procurement Process?
Requirements were gathered via broad range of stakeholders covering the functionality
to ensure the procurement process delivers the correct technology to operate the NBIT
solution. The requirements have been through several reviews by business, technical
and postmaster representatives to validate that they are comprehensive and complete.
They have been signed off by Programme Board before inclusion in the RFP.
A competitive PCR compliant procurement exercise was run via the HTE ComIT2
framework. The award criteria were 60% Business Requirements and 40% Commercial.
SCC achieved the top mark of 91.7%
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Appendix 1 - SCC HP POS Equipment Images
@ Engage One
TOUCHSCREEN gp,
HP engage One Pro AIO
10.3
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HP Engage — direct thermal — receipt printer
oS
=
TM-J200 — Epson Multifunctional Printer
Zebra ZD621
HP Engage 2D Barcode Scanner
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Tab 11.1 Health and Safety Report
POST OFFICE LIMITED
BOARD REPORT
Title: Health & Safety Monthly Report yeeui 27% September 2022
Martin Hopcroft,
‘ Al Cameron,
Author: Director of Health & Safety, Sponsor: pe Fon
Environment and Business Continuity Group Chief Finance Officer
Input Sought: Noting
The Board is asked to note the contents of the report.
Previous Governance Oversight
Safety Sub-Committee 6'" September 2022, next meeting scheduled w/c 18‘ October 2022.
Executive Summary
In Appendix A, we summarise KPI performance over the last few years. We have included a
comparison at P12 with the previous 3 years, together with latest data for P5 (22/23) which
shows a reduction in accidents and lost time accidents to date compared to P5 YTD (21/22).
Following a reduction in accidents in 20/21, we saw a return to pre-COVID levels during the
second half of 21/22. There has been an improvement over the last 6 months compared to
previous (21 vs 27) and a reduction in accidents during 22/23 compared to the same period in
21/22 (17 vs 19). In Directly Managed Branches (DMBs), accident causation is mainly due to
falls indoors, with a marked reduction in those to striking against objects or equipment,
including bumping into or stepping onto objects. There has been a small increase in lifting and
handling related accidents in Supply Chain.
A number of initiatives are being implemented in DMBs to strengthen the hearts and minds
culture, including training for new safety champions and sharing good practice adopted by
Supply Chain in recent years. The H&S Team have delivered face to face Person in Control
(PiC) workshops to all DMB Area Managers, Branch Managers and Supply Chain shift managers
and have undertaken compliance checks of calendarised H&S activities, with manager
declarations informing us that we are 100% compliant.
Government guidance advises that Covid 19 is now part of our everyday lives and will be for
the foreseeable future. From Monday 15" August we took additional steps to adapt to this new
normal and treat Covid 19 in the same way we would treat any other respiratory illness.
Colleagues have been advised that they may return to work with COVID as long as they are
well enough but that they should inform their manager so that a local risk assessment can be
undertaken to ensure protection of any extremely clinically vulnerable colleagues. An action
was agreed at Safety Sub-Committee to review the current level of enhanced cleaning in DMBs,
Supply Chain and central offices. It is proposed to return to a pre-Covid-19 level whilst ensuring
we meet new the guidance and standard that has been issued to businesses.
Due to recent extreme temperatures and red weather alerts, we improved our response, policy
and adverse weather guidance for colleagues across the business. We continued to see warm
weather through August and therefore prioritised the wellbeing of frontline colleagues by
adjusting duties where necessary and provided advice and guidance through regular bulletins.
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Whilst robberies have continued to decline in 22/23, we saw an increase in June compared to
May (7 vs 3), perhaps a one-off, or early signs of the expected increases due to economic
pressures. Robberies remained stable in July (8) but dropped significantly in August (3). It
was agreed at the Safety Sub-Committee that Area Managers will be asked to remind
Postmasters during their visits of basic procedures to mitigate higher risk due to the
economical climate.
There were 3 robberies in August, 8 in July, 7 in June, 3 in May and 6 in April. The number of
reported incidents related to abuse and violence is in line with the average of 33. In view of
the economic difficulties that are anticipated over the winter months, there will be a number of
targeted communication campaigns over the next 4 months providing focused support and
guidance against robbery, abuse, aggression and violence throughout the Post Office Network
At our request, the HSE reviewed our response to the threat of violence, robbery and abuse
against colleagues. Whilst we received positive feedback from the Principle Inspector, a number
of areas have been identified for improvement, including clarity on POLs ‘zero tolerance’ policy,
simplifying the process for reporting incidents and developing and innovating our ‘harassment
by customer’ training materials to ensure clarity and enable consistency of delivery. Asummary
of findings has been included in the report below and in response, an action plan is being
developed by the H&S, Retail and Security teams to be shared with Safety Sub-Committee.
We have reviewed the Supply Chain Safety Plan and are progressing a number of initiatives
including; Alcohol Breath Testing roll-out; enhancing the role of the Safety Champion;
procurement of a lighter secure cash box (Cennox) and; an Occupational Health review of
physical and mental fatigue in CViT.
All statutory and non-statutory inspections are being undertaken and remedials are on track.
Through our Property FM provider, an independent fire risk assessment company is completing
the bi-annual technical assessment programme for all POL properties.
Questions addressed
1. What are the trends on accidents and violence across Post Office?
2. Are there any significant risks emerging and what are we doing to mitigate?
Report
3. We continue to provide wellbeing support to our colleagues, including those who continue
to work from home. Our Mental Health First Aiders have received refresher training and
together with HR Business Partners, they will provide support and raise awareness of our
wellbeing resources over the coming months. Mental health related absences remain
stable and account for 25% (22%) of all absences and 38% (38%) of days lost in P5 Aug.
The number of mental health related absences and lost days are reducing month on month
in line with other absence types. Overall absence reduced to 3.55% in P5 Aug from 4.00%
in P4 July and stands at 3.86% YTD, mainly due to a decrease in absence in DMBs.
4. Robberies have decreased to 3 in P5 (Aug) from 8 in July, 7 in June, 3 in May and 6 in
April compared to a pre-Covid average of 11 robberies per month. There were 274
Grapevine text alerts circulated in P5 plus 17 for CViT related incidents.
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5. In P5 (Aug), of the 3 robberies (10 last year), 2 were successful (5) and 2 involved
weapons (6), including 0 blades (4). There were 0 CViT robbery related incidents (1) and
there were 1 ATM attacks in P5, compared to 0 last year and 1 YTD (1). This is the first
Post Office ATM incident in five months, which was an unsuccessful rip out attempt using
a JCB, police believe low skill level. Industry ATM incidents remain down on pre-Covid
level with a significant decrease to c10 per month over the last 3 months compared to a
norm of c20 per month and c60 per month pre Covid.
6. At our request, the HSE has reviewed our response to the threat of violence, robbery and
abuse against colleagues in branch and CViT. Whilst we have received positive feedback
from the Principle Inspector in respect of the support provided to branch staff by POL post
incident, a number of areas have been identified for improvement;
a. Whilst POL states in its policy that it will not tolerate any abusive or antisocial
behaviour directed towards employees, in practice staff and Postmasters do
tolerate a good deal using their own judgement and recognising that (a) we do
have mentally ill customers (b) banning customers may create more violence -
there are no alternative suppliers! We are therefore going to work on what our
policy wording is and how we support front line staff in making these judgements
and dealing with the more dangerous behaviours without trying to replace their
local judgement with rules.
b. That the inconsistency in reporting at DMB level should be addressed through a
specific briefing/instruction provided to DMB managers.
c. That POL reviews the use of the online incident reporting system, Dymension,
by DMB managers, to both ensure that they fully understand its important role
in the reporting of incidents, and that the request of them in respect of incident
reporting, is reasonable and makes most effective use of their limited time.
d. That POL reviews the delivery and format of the training it provides to DMB staff
e.g. A video format showing scenarios which demonstrate both good and bad
practice when dealing with aggressive or violent situations.
e. That POL allows access to its revised training material to the Agency network.
f. That POL provides a briefing to Postmasters on the post-incident counselling
support available to them and their staff through POL.
g. That POL conducts a study to determine the actual (rather than currently
reported) level of aggressive behaviour from customers, directed towards staff,
in both the DMBs and Agency network.
h. That POL reviews delivery mechanism for the messaging it currently provides to
customers in respect of its stated zero-tolerance policy regarding aggression
directed at its own and Agency branch staff.
7. There were 2 accidents in P5 (22/23) compared to 1 accident in P5 (21/22). There was 1
lost time accident in P5. Accidents/1000 employees are at 5.1 at P5 YTD vs 6.1 at P5 YTD
21/22. We have seen an improving trend in accidents during 22/23 so far. Training for
Safety Champions in DMBs is being prioritised to strengthen good practice, and to share
learnings from Supply Chain’s positive safety culture.
8. The Post Office Lost Time Incident Frequency rate (LTIFR - accidents per 100,000hrs) has
decreased slightly to 0.253 YTD P5 compared to 0.257 YTD P5 (21/22) and outturn 0.281
(21/22), 0.083 (20/21) and 0.150 (19/20). Total lost days per 100,000hrs (LTR) is 6.7
3
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at P5 (22/23) compared to 9.5 at P5 (21/22) and outturn of 8.5 in 21/22, 0.47 in 20/21
and 3.22 in 19/20. There has been 6 lost time accidents YTD compared to 6 at P5 (21/22)
9. Post Office property is statutory compliant and overall risk is low. All statutory and non-
statutory inspections are being undertaken and remedials are on track. The guidelines for
PAT testing have changed and is now based on risk assessments rather than equipment
type. The 3-year network programme is progressing well. None of the PAT inspection that
have taken place have shown any risks of fire or electrocution. Other areas of focus are;
This years’ network signage surveys are due to finish this month, no serious issues have
been found and external fire risk assessments and a fire door inspection is also taking
place to form the sites fire door register. Field and colleagues working from home have
been asked to attend drop-in sessions to have portable equipment checked by engineers.
10. Road traffic incidents for the commercial fleets for the year to date to the end of period 5
are tracking marginally above the corresponding period last year, as are the number of
blameworthy RTIs. The mobile Post Office fleet increased in size by 5 vehicles from July
2021 and the CVIT fleet also increased by 5 vehicles from June 2022 as inbound cash
volumes have continued to rise to record levels. There have been no serious RTIs to report
to date. Following the proof of concept for alcohol breath testing at Hemel and Glasgow,
Supply Chain started the rollout of ABT to the remaining depots in August, advising CWU
of the intention to progress with or without their support. The CWU have registered
disagreement through the Collective Engagement Framework in response. Supply Chain
intend to recommence national rollout once the CEF process has been exhausted late Sept.
Financial Impact
11. The financial impact of the above initiatives has been evaluated / budgets confirmed
Risk Assessment, Mitigations & Legal Implications
12. Our highest risks include; violence and abuse aimed at postmasters and employees. The
security team will continue to strengthen and invest in mitigation. Whilst concern has been
raised due to a small number of road traffic incidents involving drivers using handheld
devices, legal advice is that we should avoid random checks of in-cab CCTV footage due
to privacy law. We reserve the right to use CCTV footage following any incident and have
launched a joint campaign with trade unions to raise awareness.
Stakeholder Implications
13. Training should be provided to new directors and, where required, directors, management
and colleagues of Group subsidiaries.
14. Information - directors should consider the H&S information that flows to the Board to
support directors, subsidiary directors and management teams carrying out their duties.
Next Steps & Timeline
Safety Sub-Committee is held 6 weekly with the next meeting scheduled w/c 18" October 2022.
PO Board and GE reports will include updates, recommendations and decisions made by the
Committee.
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Appendix A - Safety Board Dashboard
Accidents P5 (22/23) and Security P5 (22/23)
Health & Safety 4yr Performance
Year/KPI 18/19 19/20 20/21 21/22 I 21/22 I 22/23
P12 YTD P12 YTD P12 YTD P12 YTD PS YTD PSYTD
All accidents 81 70 40 50 20 17
All accidents / 1000 employees 16.9 18.6 11.8 15.2 61 5.1
DMB 16.7 21.0 22.7 26.9 12.3 10.8
Support 3.4 75 0.7 21 0.0 0.0
Supply Chain 42.0 33.8 15.3 23.5 79 75
Lost Time related accidents 15 10 5 16 6 6
Lost Time related accidents / 1000 3.1 2.6 15 49 18 18
employees
LTIFR (lost time accidents/100,000hrs) 0.184 0.150 0.083 0.281 0.257 0.253
Days lost due to accidents 245 214 28 484 221 158
Days lost / 1000 employees 51 57 8 147 67 47
LTR (Accident days lost/100,000 hrs) 3.0 3.2 0.5 85 95 67
Days lost due to robbery (assault and 220 165 ié = A ace
trauma)
LTR (Total days lost/100,000hrs inc. a a Pe as Os Tr
trauma)
RIDDORS (Employee) 7 2 3 6 a 2
NOTE: It should be noted that one single lost time accident increases LTIFR markedly by
approx. 0.477 in POL per month, LTIFR is the number of incidents / 100,000hrs and should
always be read alongside the Lost Time Rate (LTR) which is the number of lost days /
100,000 hrs and an indication of the seriousness of the accident.
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Tab 11.1 Health and Safety Report
Security Safety Perfor: ce — Period 5 (Aug) 2022/23
CViT Commentary
‘olling 12mth P5 (Aug) 0 CViT robberies compared to 1 last
year, with loss of £0k (£0k). YTD - 2
compared to 3 last year with losses £3k (£0k).
30 There have been 149 cross pavement
observations in Aug. Industry robber
25 decreased with 2 reported GMP G4S and Met
Loomis). YTD is comparible to previous 2yrs.
20
15
10
5
‘i ra I 3 hi
P6 P7 P&S PS P10 P11 P12 P1 P2 P3 P4 PS
New Cennox cash carrying boxes will shortly be
MCVIT Attacks m CVIT Physical Injuries m Physical lost time & Trauma lost time
CViT Attacks and Lost
5 (2022/23)
deployed (Sept onwards) equipped with a
tracker, glue and DNA ink, which will help
reduce risks using a better quality box, but
also is preferred by crewmembers as it is
significantly lighter than the existing box.
Robbery Commentary
P5 (Aug) — 3 robberies compared to 10 last yr,
2 successful (5) with losses of £5k (£8k). 2
involved weapons (6) including 0 blades (4).
YTD ~ 26 robberies (30) with losses £303k v
£59k and 23 with weapons (19), inc 11 blades
(14). There have been 6 injuries (5).
FY forecasted robberies are expected to be
marginaly lower than 3yr average c. 90 vs 95,
however losses are forecasted to be
significantly higher at c. £600k vs £413k
(average/£328k last year). In order to lower
the risks of robbery and keep Postmasters,
i their teams, customers and our field-based
Bobbery lncktents teams safer, the Security Team made 165
bad branch visits during the period providing
6 bespoke security guidance and support. AMs
“ are now checking for open safes/doors during
n their visits, and Sec Managers are conducting a
a ZN\ x, I number of unannounced visits.
I Injuries - Static. The FYF is expected to
outturn at 16 (vs 16 average).
Robbery Profile — P5 (2022/23)
ZZ
i
Abuse / Aggressive Behaviour
Marginal reduction on reported abuse /
aggressive behaviour with 29 vs 31 last month
(average 35).
[[sSrocast mmmCorent 12 Months ——last12 Months] Security equipment activations helping to
mitigate all incident types included: 2 x fogging
units, 17 x panic buttons, and 5 x 3G CCTV (POL
and Retail focused, abuse, robbery & theft).
Ploop2 PS PhO PORT PCCP
ATM Prof
PS (2022/23)
ATM Commentary
P5 (Aug) - 1 ATM attack compared to 0 last
; year. YTD 12 mths - 1 ATM attack (compares
ATM Incidents to 1 in previous 12 mths), & losses of £0k vs
‘ £0k. No ATM incidents for 5 months until Aug
(4) which was an unsuccessful rip out attempt.
FY forecast are likely to be similar to last year,
remaining low unless economic pressures
impact, current FYF is between 5 and 10 attacks
vs an average of 12 per annum (5 last year).
FYF losses are expected to be between £50k and
Ni £65k. Criminals continue to seek softer targets
across the industry, with an upsurge over the
last 6 months against internal ATM door pulls.
°
PL oP2 PBS
POL security standards play a major part in our
6 P78] PD PLP successful position vs industry, because the are
. set back/up against walls to prevent being
[[sssiorecast mmmcurent 12 Months © Last 12 Months lassoed, in addition to ATM trackers, and gas
suppression.
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POST OFFICE LIMITED
BOARD REPORT
Title: DRAFT Internal Control Framework I Meeting Date: I 27" September 2022
Anshu Mathur Interim Group
7 Compliance Director .
Author: Rebecca Barker, Deputy Head of Sponsor: Ben Foat, Group General Counsel
Risk
Input Sought: Noting
This paper provides an overview of the work undertaken to develop a DRAFT POL Control
Framework. This has been presented and discussed at the Risk and Compliance
Committee on 13 September 2022, who agreed to the principles and concepts of the
Framework. This has also been distributed to the GE on 14 September 2022.
Given the cost challenges, this DRAFT framework was approved as a direction of travel,
against which POL can make incremental steps towards control maturity ie the
committee agreed not to associate this with any formal outcomes or timetable.
It was recognised that the principles of the DRAFT Control Framework are being applied
within the assurance approach for ‘Historical Matters’, Technology Change,
Whistleblowing and Investigations.
Executive Summary
A Control Framework provides the Business with a clearand consistent approach against
which its control environment can be maintained but moresimportantly also measured,
monitored, and demonstrated.
The Draft POL Control Framework provides this clarity and sets out the standards and
key building blocks of what constitutes a robust control environment, namely:
* Control Continuum -»A scale against which the business can self-assess their
control environment maturity and direction of travel (to be set by the Board).
« Three lines of defence - Clarifying the roles and responsibilities between the first
line, second line and third line of defence, so that no ambiguity exists and we have
a proportionate assurance model or target operating model that is doable for POL.
e Coverage / Adequacy of.controls to manage business risk - Clear guidance on
what and how a Business function environment should be created to ensure
adequate coverage and identification of business risks and related controls.
« Assurance of controls effectiveness — A defined model against which Controls will
be sampled for checking against evidence, to ensure POL has a continuous
assurance in place which the RCC, GE and ARC understand and can rely on.
More importantly, this should then be the genesis for the creation of integrated
assurance plans to ensure POL coverage of key risk (actual/emerging) and their
remediation is being assessed and monitored.
* POL Compliance Dashboard - A formalised dashboard to measure the state and
direction of travel of POL control environment.
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@
The DRAFT POL Control Framework has been developed in manner in which it provides
clear guidance, yet is not prescriptive, hence allowing the Business Functions the
sufficient flexibility to ensure they can adopt and or choose their approach to
demonstrate adherence to the standards. Given POL’s cost challenge this is imperative.
It also recognises and will leverage the risk and control work already performed and
being monitored via SNOW.
In creating this DRAFT Framework, we have sought guidance and input from Finance,
LCG, Group Risks, and Technology. Their contributions and constructive challenges have
been invaluable.
Next steps
1. Continue to embed the principles with Tech Change, Whistleblowing and
Investigations.
2. Begin to apply the principles of the framework acrossthe organisation, where
capacity exists, in a light touch manner leveraging existing resources and
risk/control activities undertaken.
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DRAFT - POL Control Framework
1. Purpose
This document provides the minimum standards and associated guidance for POL to ensure an
appropriate control environment exists and is maintained. This Framework provides guidance
on the key building blocks of a control environment and clarifies the roles and responsibilities
across the three lines of defence.
As risks and associated controls are a key underpin, this Control Framework is fully aligned to the
Group Risk policy, and is intended to support POL to operate within agreed risk appetites and
tolerances set by the Board.
Implementing the Control Framework will also facilitate the timely and proactive identification of
issues and or exceptions, risk trends, and themes to ensure.these are appropriately monitored,
discussed and challenged at various governance forums such as the Risk Compliance Committee
and Audit & Risk Committee.
This framework is aligned with the COSO framework to ensure POLcan develop a strong, effective
internal control system and will also ensure POL can comply with the provisions of UK Sox.
2. Authority and Responsibility
POL Control Framework is owned by the Group General Colinsel under the delegated authority
of the Board. Executive Management (and their Functions) are responsible for working within
this framework and maintaining sufficient processes, systems and evidence to demonstrate
compliance. (Please refer to Appendix A forthe GRC Framework)
3. Control Environment.Maturity Continuum — Our desired end state
It is the strategic! objective of the PO to operate under_a stable and appropriate control
environment to ensure key risks at an enterprise, intermediate and local levels are being
proactively managed and monitored. A standard control environment maturity continuum scale
is provided below:
Piecemeal and ad- Risk & Control Risk and Control Established risk and A fully integrated
hoc control Framework, Policies activities are controls universe control framework
environment with and Procedures are designed and supported by with real time
limited assurance designed andin embedded. periodic testing and monitoring by
and oversight. place. assurance. management with
continuous
ivenbyissues Risk / Control Risk and Control _ Efficacy and improvement
andincidents and universe not mniverse ismapped reporting of embedded by
‘orregulatory, ‘Mapped to and maintained. controls drivenby design.
Aesislation. organisational first line activity,
design and or Use of GRC toolis with appropriate
activities. embedded. oversight from 2%
Line and 3 Line of
Controls arenot --3 LoDexistsin parts Defenc
adequately and lacks
documented; integration. Integrated
controls mostly ‘Assurance
dependent on Formalised controls providing objective
people training and oversight on
communication. Control
No formal training Environment.
(or communication
of control activities
3
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Tab 11.2 POL Control Framework
Whilst, PO current control environment maturity varies, our strategic operating target for 2025
should be to able to demonstrate a control maturity between ‘Established/Standardised’ and
‘Monitored’.
For this to be achieved, every function within PO will need to be able to demonstrate in a
standardised and consistent manner the following:
Integrated Assurance - How and through what activities do Management gain assurance
that their control environment is mature, and coverage of key risks and their associated
controls remain effective to prevent significant issues / incidents that may cause
reputational, financial, commercial and or operational damage to the PO.
This Framework defines and explains the PO ‘Three lines of defence’ model to ensure the
business embeds a robust, efficient and integrated asSurance approach within which the
roles and responsibilities of the first line, second line and third line are clear and
understood. Please refer to Section 4 below,
© Adequate Coverage - A key requirement of a mature control environment is to be able
to demonstrate key risks and associated controls and how these provide adequate
coverage over all key activities, related, processes and proceduresie POL universe.
Please refer to Section 5 below, which provides guidance on how Management should
create, and then maintain theinuniverse, and associated risks and controls.
4. Three Lines of Defence Model
The IIA Three Lines of'Defence (3LoD) model ensureSiclarity anda structured approach for the
overall management of risk and exercising control within an organisation, thus minimising gaps
in risk management and unnecessary duplication of risk coverage and or assurance activi
The 3LoD.model is recognised/as bestipractice for risk and control management, and accordingly
is the basis for POLControl Framework.
The Institute of Internal Auditors’ Three Lines Model is provided below:
© First line of defence - Functions that
‘own and manage risks & controls
* Second line of defence - Functions that
monitor / oversee or who specialise in
compliance or the management of risk
© Third line of defence - Functions that
provide independent assurance
y
q
Z
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The table below operationalises the above IIA model to how the three lines of defence should
operate and be embedded within POL. This clarifies the activities and roles/responsibilities
between the first, second and third lines of defence.
POL — Three Lines of Defence — Roles and Responsibi
First Line
Functions that own and manage risks
Business Process Operators:
Functional Compliance Leads
‘Accountable for executing
business controls and
embedding the POL Control
Framework
Maintain required evidence of
control execution
Develop and execute
mitigations for control failures
Support Compliance Review
and or Deep dives
Defined ownership for risk and
controls.
Risk and Controls subject to
regular review and monitoring
at GE Leadership Team
Operate within Board set risk
appetite and tolerances to
deliver strategic objectives
Escalate to Second line
concerns for viability of
existing risk appetite
Up to date Risk and Control
Universe:
«Issues and incidents
* People, Process & system
changes
© CSA failures
‘Adequate repository of risk,
and evidence of control
execution.
© Support second and third line
assurance reviews and or
investigations
Inform Functional Compliance
& Risk Leads of material
changes to People, Process
and systems.
Confidential
Responsible for embedding
POL Control Framework
within Functions
Ensure risk and control
approach / methodology
align with Group Risk Policies
Continue reassessing
controls and processes on
ongoing basis
Perform and support control
testing, monitoring
Perform functional deep
dives and RCA’s
Coordinate and monitor
mitigation plans for failures
Identify emerging trends.
Report to Group Compliance
on CSA outcomes and
progress against
remediations plans
Report overall status via
monthly Functional
dashboards
Appointed Functional Risk &
Compliance Leads.
Maintain oversight of
changes to people, process
and systems to assure
efficacy of risk and control
environment
Support Functional or
Execute ‘Control Self
Assessments’ (CSA)
© Ensure appropriate CSA
coverage and frequency
© CSA failures are tracked
and monitored till
remediation
Update Control Dashboard -
Key risk indicators, KPI's, CSA
results, Issues / incidents /
Root causes etc to
demonstrate state of control
environment and related
trends / themes or emerging
risks.
Perform investigations and
Reviews.
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The effective implementation of the above model would provide a sound basis for assuring the GE,
ARCand Board that POL is robustly managing their risk and maintaining an appropriate risk and control
environment.
5. Control Universe
A) Universe — key activities and or processes
Akey first step in assessing risks and controls is Management being able to demonstrate their
understanding and coverage of their ‘universe’ of key activities and processes. An illustrative
example of how management should document their universe and ensure adequate
coverage can be found in Appendix B.
‘As several methods can be adopted to create, evidence and maintain a ‘Universe’, this
framework does not prescribe how this should be done, however Management should be
able to clearly demonstrate:
¢ How or what basis has their universe been created - Particularly to ensure
appropriate coverage; a few examples of what an Universe can be based on are:
organisational structures/design (CEO minus -3 or 4), (business units and support
departments), service/product lines, customer journeys or touch points, regulatory or
legal requirements etc.
¢ To what business activity andior process level is the universe mapped to
For eg. The level of detail at which,a universe can be based on, can range from an
entity level (level 0 or 1) toa key stroke view (leVel 4/5). Usually a mid-range is
preferable as this. provides a good balance between capturing key activities vs too
much detail.
¢ How the universe is maintained
For eg. How are.changes improcess, activity and or org design managed and reflected
in the Universe i.e. change control, continuing assessment of risks & control etc.
* What assurance exists
What assurance)activities/are undertaken to provide Management a view that their
Universe is complete, and reflects business activities and the associated inherent /
residual risks profiles.
In a mature control environment an integrated assurance plan would be created
between the3 LoD’s.
Management's universe should also be the basis on which their Enterprise Risk Management
and the PO Risk Framework is applied to measure, monitor, and report against Board set risk
appetite/tolerance.
B) Identification of Controls
‘As mentioned above, Management are accountable for ensuring a robust control
environment exists within POL which operates within Board agreed risks appetites and
tolerance.
To discharge their accountability, Management should be able to demonstrate that their
controls are not only identifiable but are also being managed in a diligent, consistent
manner and can be mapped back to their risk.
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6.
To ensure an appropriate universe of controls exists to manage risk the following key
principles should be applied in the identification of controls.
Apply PO Risk management process in identifying, and measuring risks materiality.
Please refer to Appendix D where the risk management process has been illustrated.
«Assess risk identified at an ‘Inherent Level’ only ie assuming no controls exists.
* Document controls that manage the inherent risk.
Controls documented should be SMART and not a process or procedure.
Controls Identified and documented should be key controls (defined in
Section 6A)
Control owners are clearly identified.
© Processes and procedures capture the requirements to evidence and document
controls.
Ensure controls continue to remain effective through regular assessment. (refer to 6
below)
Ensure controls are reflected in SNOW/and can be linked and mapped to risk.
Assessing control effectiveness
As mentioned above it is Management accountability to ensure an ‘appropriate control
environment exists and is maintained. Whilst capturing key controls is an eSsential first step,
their regular assessment, monitoringiand embedding Continuous learning from issues/incidents
are equally important.
A) Definition of key controls
The POL Control Framework should be)balanced and proportionate. The goal is not to reach
absolute coverage or monitor or provide/assurance on @very activity or process within an
organisation, as this would be untenable, inefficient and very challenging to embed, maintain
and monitor.
Consequently, Management need to be aware of their key controls (derived from their
universe refer to Section 5 above). A control will be deemed key if it meets the following
criteria:
®\ reduces or eliminates key risk or multiple risks
ensures the delivery of key outcomes
¢ isappropriate to the risk appetite of the function
* protectsome area of the business/expose a potential area of failure
they are regularly tested or audited for effectiveness
The definition of key risks summarised below has been extracted from the PO Risk Policy
‘Harm Table’ (Please refer to Appendix C). A risk will deemed key if meets the following
criteria:
© Impact delivery of strategic priori
e Severely impact Commercial/Financial/Operational stability
e Lead to Postmaster/customer detriment and/or severe Reputational Damage
S
In the identification, and subsequent monitoring of Key Controls, management should ensure
that the controls are designed in accordance to the principles stated in Section 5B above.
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What benefits will we gain from risk and control mapping?
Efficiency — one control can mitigate any number of risks. Mapping controls to risks will
identify duplication of effort across different teams, and allows new risks to be assessed
against an existing menu of controls so mitigation doesn’t start from scratch
Effectiveness — mapping risks to controls allows the business to understand the full impact
ofa control changing or failing
Assurance - Enables aggregated assurance to be developed, resulting in more insightful MI
= better decision making at a higher level.
Completeness — all risks are connected to their mitigating control(s), giving clarity around
how they are managed, and enabling those charged with oversight to identify gaps or
weaknesses. Also, reduced or archived risks may mean thatthe associated controls can be
reduced or stopped, which might translate into resoufce savings for the business.
First Line - Management Control Self-Assessments/Self Attestations (CSA)
The CSA’s comprise periodic control testing, carried out by thé Functional Teams under the
guidance and supervision of the Functional Compliance Leads to,ensure that controls are
designed adequately and operate as designed. It focusses on the keyicontrols mitigating the
gross risks (inherent risks) to ensure POL compliance with its obligations rated significant,
major and significant in line with PO Risk Policy.
The frequency of CSA should be determined by a combination of the gross impact of the risk,
and the frequency of the controls operation. This will allow PO to deploy resources efficiently
and effectively. In;summary management should Consider:
© Type of control — Manual/ System driven
Frequency of control— daily, weekly, monthly, quarterly, etc
Nature of risks being managed - PMdetriment, Regulatory, H&S etc
*ephistory of incidents and orissues
Please refer to Appendix E CSA Test Methodology
Sufficient evidence should be retained by Functional Teams/ Functional Compliance leads to
substantiate the outcomes. The risks and key controls subject to CSA’s should be regularly
reviewed pat least quarterly, to ensure that all ‘inherent risks are captured.
Changes to CSA can be driven by new, emerging, or evolving regulatory obligations, risks or
control/processes, ‘The Functional Compliance Leads will share the changes and rationale for
changes to key controls and SA with the Group Compliance Team.
Where possible and appropriate Functional Teams should consider the identification of E2E
controls and CSAs for risk that are cross functional.
Where control failures are identified, these should be appropriately reflected in SNOW (non-
compliant), and the root causes should be investigated and remediated through to
completion. The testing frequency of controls that fail a CSA should be increased to provide
assurance that the root cause(s) are sustainably addressed.
To assess and regularly monitor the state of controls a Functional dashboard should be
created, and shared with Group Compliance. The functional dashboard should comprise key
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¢
D
risk indicators, KPI's, CSA results, issues / incidents / root causes etc to demonstrate state of
control environment and related trends / themes or emerging risks. These Functional
dashboards will be a key underpin to the creation / collation of the POL Group Compliance
Dashboard (Please refer to Appendix F)
‘A CSA coverage plan should be prepared on an annual basis, and shared with Group
Compliance and Group Risks.
Second Line Assurance — Group Compliance Team and Group Risk
The central compliance team will periodically review and or test the output of the Functional
Compliance Teams to ensure quality of testing, and documentation is maintained.
The Group Compliance team can perform sample checks to objectively assure that
appropriate evidence exists to demonstrate execution of the control and that Management
are on plan to ensure adequate controls coverage for a period. This can also be achieved
through the Group compliance/risk assurance plan.
The Group Compliance and Group Risk Teams, should annually create, deliver an integrated
Compliance & Risk Coverage Programme. The programme should be\created in consultation
with the first line functional compliance leads, and the third line to ensure the following:
¢ Integrated Assurance - activities ‘are“aligned between the LoD ie avoiding
duplication or significant gaps.
Adequate, timely and appropriate assurance maintained on high risk areas.
Reviews performed with first line to proactively remediate risks and design
controlspif any gaps identified
These Compliance Coverage Programme will be approved and monitored by ARC on an
annual basis.
The outputs ofthe compliance & risk Coverage programme, along with the results of CSA’s
would be considered by Group Risk when assessing the management of associated.
The Group Compliance Team will aggregate functional Compliance Dashboards and report to
the GE and ARC on a monthly and quarterly basis respectively, to assess overall trends,
themes (current and emerging) to monitor the health of PO Control Environment (Please
refer to Appendix F).
Third Line Assurance — Group Internal Audit
The role of Internal Audit is to understand the key risks of the organisation and to
provide independent assurance to management and the Board over the adequacy and
effectiveness of the frameworks of risk management and internal control operated by
Post Office. This is done through an annual risk based audit programme as approved by the
ARC. The programme will include an appraisal of the effectiveness of Second Line activities
as well as in depth reviews of First Line activities.
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ppendices
DRAFT
Appendix A — Governance Risk & Compliance Framework ;
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IOMAWEI IONUOD 1Od ZL GEL
Good governance
practices, audit
results, industry
practice
Internal and External
risks, threats,
vulnerabilities
Laws, regulations,
statutes, standards,
audit results, industry
practice
—EE
Governance processes
Risk management
processes
Compliance Processes
XN GRC Program y
Business
operations, goals,
objectives,
policies,
procedures,
staffing,
technology.
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Appendix B - Control and Risk Universe
DRAFT
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Company
IOMAWEI IONUOD 1Od ZL GEL
Company
(Post Office)
Business Unit
(Post Office)
Business Unit
(GE)
(GE)
Department
(GE -1)
Business Entity
(GE -2)
\ Control Universe ]
Department
(GE -1)
\ Risk Universe }
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Tab 11.2 POL Control Framework
ih if
Hl
a
DRAFT
Appendix C ~ Post Office Corporate Harm Table
Hy
i
lel Ii ile
a i
a I na i
i
i
iu
~ PNIMOTIOM BHA 40 (3HOH WO) BNO 38 GTNOD ONISTIMGAY NST BL 40 LOVEE BAL AVENE
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3
&
Ss
v
Q
9
Appendix C ~ Post Office Corporate Harm Table DRAFT
7
g
(ii) LIKELIHOOD SCALE g
I SCORE RATING DESCRIPTION 2
—
ALMOST * _ Risk likely to materialise very frequently unless action taken
“ CERTAIN/VERY HIGH . Risk could be expected to materialise almost 100% of the time
a
@
8 * Risk likely to materialise frequently if events follow normal patterns and
mitigating action Is not taken.
2 © Risk could be expected to materialise say 51%-99% of the time
a °
54
F a * — Risk unlikely to materialise but it is possible
ea ve ope S tle Risk could be expected to materialise infrequently/irregularly/sporadically (say
FS} 26%-50% of the time)
ae
5 =
I * Risk very unlikely to materialise
I 7 UNLIKELY/LOW * Risk could materialise intermittently (say 1%-25% of the time)
I of
iy
=<
a
* —Aremote likelihood that risk would materialise
RARE/VERY LOW . Almost inconceivable that risk would occur
13
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Appendix D — Risk Management Process
Appendix E — Control Self-Assessment Sampling (CSA) Methodology
Risk Analysis
The table below provides the CSA frequency and sampling methodology:
Functional Compliance Team.
Control Testing Minimum Sample ‘Sample Period
Frequency Frequency _I Size
Annual Annual 1 (Annually - 1) Prior 12 months
Quarterly 6 Monthly 1 (Annually - 2) Prior 6 months
Monthly Quarterly 1 (Annually - 3) Prior 3 months
Weekly Monthly 1 (Annually - 6) Prior Month
Daily Monthly 2 (Annually - 6) Prior Month
Automated* I Annually 1 (Annually - 1) Prior 12 Months
‘Ad-hoc Obtain guidance from the Group Compliance Team for minimum sample size and
frequency.
*Automated controls are'those thatrequire no manual intervention and or monitoring.
Group Compliance and Group Risk can also perform sampling to ensure and assess Control
Framework Standards and principles are being adhered to. The sample size may vary depending on
issues/incidents and or breaches.
The direction of travel Should be to reduce sampling checks by Group and replace with an integrated
second line assurance plans, This will be contingent on Functional Compliance Teams being able to
demonstrate that the POL CF has been embedded in a consistent manner. This transition would be
ratified by the RCC.
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Appendix F — Illustrative example of a POL Group Compliance Dashboard:
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Area Measure Month I yrp I Prior Year Target Explanation / Commentary
Tone from the top/Ways of
Working This would be sourced from the people engagement score
canara ball (Are GE displaying the right >XX% or Score I Will need to agree with GE which Questions this would be based on
ASH Renae behaviours, values and (Consider Metrics of REMCO)
cultures)
= Sourced from L&D and metrics sued on a monthly basis
Training Completion e a Highlighting functional exceptions
Regulatory Breaches # Reducing Trend adantetoel cuihamte
\
\sgpl's Reesiatoly [sever and Incidents Es AAll Regulatory issues and Incidents should be tracked in Functions in which they are
Remediations Overdue o
‘ewhed and there should be a remediation plan
. fi Soureed from Functional Dashboards
Issues and Incidents # PPvcing trend I ignieDMng trends and thematic
Repeats # @ Focussing on RCA and efficacy of remediations (ifn place]
Operational Issues and incidents i 7 iB af lin place}
PM Detriment # RBiucing Trend _I_'entifving if any isues/incidents has led to or could have led to PM detriment
Remediations Overdue 0 Sourced from Functional Dashboards
Policy Compliance and Breaches Level of Non-compliance‘ Sourced from Issues and incidents (ie may be an overlap) and from policy reviews
Technology Releases/Changes. P1/P2 incidents # Summarising RCA for PI and P2’s, and identifying RCA and trends/thematic.
Overdue Internal Audit Management Actions Overdue Actions#> 3 months Sourced from Internal Audit, with exceptions highlighted if represent material risks
Reducing Trend
Overdue Group Compliance Management Actions I Overdue Actions # > @minths Reducing Trend _I Ifand when Group Compliance have an integrated Assurance plan.
ee ee CSA due vs completed W/E 295% Sourced from Functional Dashboards
Pass rate 96 395% With failures summarised and tracked as excepti
Control Self-Assessment — Group Compliance Pass rate % 100% This is the results of the Group Compliance sampling
Enterprise Risk- FOOT No ne Reducing Trend I Tracked from the GE and sourced from Group Risk. Expect to have OOT risk but then
remediation plan) ais Shas we should have remediations unless OOT has been accepted by Board
Risk Management iipediste Risk - # OO NA Reducing Trend I Tracked from the GE and sourced from Group Risk
No remediation plan)
Local Riski# OOT (# No j
temed ier) Na Reducing Trend I Probably not for this dashboard but should be part of GE Functional Dashboards.
Dia enipeie enum aa Not sure but I think may be needed once we have a Data Management Committee
and aligned data maturity strategy and delivery plan
‘alia Fasbueiew on HElorial Ga Te ‘Again not sure but feel in the short term this may be needed to be monitored
separately.
NB: Once agreed, this dashboard will be submitted to the GE on a monthly basis. The measures will be RAGed to ease identification of exceptions. Also if
and when agreed we will need time to operationalise this to weed out any operational data issues and embed this efficiently across the functions and or
Group.
Confidential
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Tab 11.3 IDG Update
POST OFFICE LIMITED
BOARD REPORT
Title: IDG Update Meeting Date: I 27" September 2022
7 Jo Welch, IDG Secretariat ss Dan Zinner, Inquiry Improvement
Author: Dan Zinner, IDG Chair Sparsars Delivery Chair
Input Sought: Noting
The Board are asked to note:
i. Progress made and priorities for operational, cultural and Horizon improvements as
tracked through the IDG in preparation for the Inquiry.
Previous Governance Oversight
e IDG Board Updates: 12 July 2022, 29 May 2022, 3 June 2021, 6 May 2021, 25 Mar 2021
e IDG updates in CEO Report to Board
Executive Summary
Over the summer, since the last IDG Board update in July, there has been a small change to
tracked improvements: a total of 542 items, 94% (511) items reporting closed (complete,
incomplete or transferred) and 63% (342) verified through IA. Of the remaining 6% (33
items) IDG is tracking to complete (in July this was 56 items), there is a relatively even split
between CIJ (17 items) and HIJ (16 items). CIJ focus is mostly in potential detriment, where
good progress has been made over the summer.
For HIJ, the business has agreed an overarching scope of work, specifically: Branch Hub on
Horizon; the Branch Reporting Suite on Branch Hub; ensuring the least Privileged Access
Management model is in place; a possible NRF programmatic review; an externally led audit
of Fujitsu concentrating on Privileged Access Management/Remote Access Management; and
a provisional list of 10 system usability improvements. This list is currently undergoing final
challenge to ensure we are prioritising the right actions at the right time. Once planning for 11.3
these items is completed the exact number of HIJ items tracked will be updated through
proper governance.
CIJ Phase 5 Internal Audit scope has been finalised and field work has commenced with the
final reported expected by end Oct 2022.
Questions addressed
1. What is the latest position on tracked improvement items since July Board?
2. What CIJ improvements are remaining and what progress has been made on potential
detriment?
3. I What is the current Phase 3 HIJ improvements list currently approved and being
planned?
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Tab 11.3 IDG Update
Report
What is the latest position on tracked improvement items since March Board?
4. At Board on 12 July March 2022, IDG reported tracking 525 improvement items (which
includes parts/stages of improvements), 84% (443 items) of which had be “closed as
completed” by programmes and 65% (342 items) had been verified through IA.
5. Over the summer holiday period, there has not been a significant change in overall metrics
with IDG currently reporting 542 total improvement items (increase due to new Phase 3
HIJ scope and 1 potential detriment issue), of which 87% (473 items) had been “closed
as completed” by programmes and no change to the list of IA verified items.
6. New categories have been added to the tracker. 3% (16 items) have been “closed as
incomplete*” (no longer actioned, ratified by IDG) and 4% (20 items) have “transition to
BAU ownership” as part of continuous improvement efforts to ensure sustainability.
7. Of the remaining 6% of tracked items (33 items) that are not currently closed, 17 are for
CIJ and 16 are for HIJ.
What CIJ improvements have been recently completed and what is the focus going forward?
8. Of the 5 CIJ related programmes delivering IDG tracked improvements:
a. 2 have now closed (Postmaster Service Improvement programme; Culture
Transformation) and remaining improvements transferred to BAU and monitored
through continuous improvement
b. The Supply Chain Improvement Programme is in closure with IDG agreeing any
remaining improvements are now owned by Supply Chain to determine the most
appropriate time to deliver and requesting change funding to make this happen
c. Branch Hub will continue as a programme, however, IDG will not monitor Branch
Hub moving forward, as confident these improvements will be prioritised and
delivered appropriately.
d. Thus the main CIJ related programme being monitored by IDG is the Detriment
Remediation Programme (12 items).
9. Since the last Board, IDG has approved the closure of the 20 items through the “transition
to BAU ownership,” as part of continuous improvement efforts to ensure sustainability,
including:
a. 6 Culture Transformation improvements that have been approved to transition
to BAU, which include the continual improvement of service training
b. 5 Supply Chain Improvement Programme items transferred to Supply Chain BAU
continuous improvement/change
10. This leaves a total of 17 CIJ related improvements being tracked, most of which (12
items) are in the Detriment Remediation programme.
11. Good progress has been made in investigating potential detriment issues. A detailed list
of information on the current status can be found in Appendix 1. As reported at the last
IDG on 16 September 2022, of the 14 potential detriment areas:
a. 3 areas of detriment found (Maintained Error Limits, Savings Remuneration,
Postal Orders)
b. 2 area of potential detriment found (FX counterfeit, ATM shortfall)
c. 3 areas of no detriment expected (Obsolete Stock, SmartPost, Counterfeit GBP)
d. 6 areas that have yet to be fully concluded
+1 “Closed as incomplete”: Activity removed from scope by agreement by programme steering committee and ratified by IDG.
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Tab 11.3 IDG Update
@
12. The HM team are managing the potential detriment investigation process, which includes
the 6 outstanding items related to Aged Balances discussed at the last Board. More details
can be provided by the HM team when the full investigation process has completed. All
areas are also brought to the HMC for proper governance approval and remediation
activities would be part of Funding Pot B, as requested with the shareholder.
13. Of the remaining 5 items not in the Detriment Remediation Programme:
a. 2 items due to complete imminently, pending governance approval, specifically:
NFSP GFA update completion; Established Losses.
b. 2 items to be completed in H2: Stock management training; Strategic Partner
guide for “how to run your branch” relevant to specific SPs
c. There is 1 item suggested by Deloitte (“Entire IT Systems landscape review with
a single PM View delivered”) “On Hold” which may have potential to cause harm
(“Red” impact rating) as our systems are not all connected. IDG took a view to
keep on hold given amount of IT change currently and lack of funding to execute.
14. 76% of CIJ Improvements (13) are currently on track to deliver this financial year, 3 are
“Amber” where the route to on track delivery has been defined and 1 Red is delayed. All
3 items at risk or delayed items relate to Detriment Remediation and sit within funding
pot B, which is still to be approved by the shareholder.
What is the current Phase 3 HIJ improvements list currently approved and being planned?
15. The Horizon Issues Remediation Programme Phase 3 draft list of activities, found in
Appendix 2, has not yet been finalised. However, the business has agreed an
overarching scope of work, in 2 separate approval processes.
16. In July, the business agreed that the programme should focus on 5 main areas: Branch
Hub on Horizon; the Branch Reporting Suite on Branch Hub; ensuring the least Privileged
Access Management model is in place; a possible NRF programmatic review; and an
externally led audit of Fujitsu concentrating on Privileged Access Management/Remote
Access Management. The review is still under consideration at the moment.
17. In September, the business agreed a further 10 system usability improvements to prevent
user errors and reduce transaction corrections while minimising front office disruption.
This was completed cross-functionally, in conjunction with NRF. This includes changes to
IRRELEVANT.
IRRELEVANT
18. “Once the programmes Tull planii a
the total list of HIJ items tracked by IDG may change. At this time, the original Phase 2
list has been “closed as incomplete” and a new, provisional Phase 3 list of 16 items has
been added to our IDG tracker.
Next Steps & Timelines
19. The IDG will continue to track, prioritise and guide improvements to put postmasters at
the heart of our business.
20. The IDG's work is most likely to be relevant to Phases 6 and 7 of the Inquiry. In the event
that the Inquiry requests that a witness attend from POL to give evidence about the IDG’s
work, the Inquiry will first issue a Rule 9 request for a witness statement and, potentially,
subsequently invite the statement maker to give oral evidence.
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Appendix 1
Detriment Area
Maintained Error Limits
Fully remediated
Conclusion
Detriment
FX Counterfeit and outmoded notes
Concluded (awaiting funding)
Potential Detriment { n
AT™ Shortfall Process
Concluded (awaiting funding)
Potential Detriment
Savings remuneration
Concluded (awaiting quantification)
Detriment (£TBC)
Obsolete Stock
Concluded (HCR ratified)
No detriment
Counterfeit Sterling
Investigation complete awaiting legal review
No detriment expected
FX BAU Issue Under Investigation -
Postal Orders Complete - under legal review Potential Detrimen:
Paystation Under Investigation -
‘SmartPost Investigation complete awaiting legal review No detriment expected
MoneyGram Under Investigation -
Lottery trx/scratch cards To be assigned =
Branch Closures To be assigned -
Stamp Remuneration To be assigned .
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+ Security Phase 3 deliverables - V2.0 Idam process improvements and remote / privileged access audit - being planned
5
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Tab 11.4 Pensions — Augmentations to RMPP
POST OFFICE LIMITED
BOARD REPORT
Project (Pensions) Assurance -
Title: Post Office Section Royal Mail Meeting Date: I 27" September 2022
Pensions Plan (RMPP)
David Scothern, Interim
Programme Manager ~—- i
Author: Paul Wood, Group Reward Director I Sponsor: Angela Willams, Interim Group
mae Chief People Officer
Laurence O'Neill, Head of Legal
HR/IR
Input Sought: For noting and approval
«The Board is asked to approve the signing by the CEO and CFO of the Memorandum of
Understanding (MoU), which is uploaded in the reading room.
« The Board is asked to note:
°
°
°
Previous Governance Oversight
« 22 September 2020: ARC endorsed the earlier decision of RCC to report the pension
data issues to The Pension Regulator (TPR), which was done on 9 October 2020.
« ARC recommended that the matter be escalated to Board so that they have visibility.
e GE Paper of 14 October 2020 to inform of progress towards the resolution of the errors
and notification of TPR.
e 27 July 2021: Board updated and gave delegated authority to reach a negotiated
settlement with the RMPP Trustee to the value of
the progress of the rectification project and POL’s negotiations with the Trustee
how the project is tracking against resolving this issue for the existing
mandate
the next steps and the remaining foreseeable risks.
e Further updates have been given periodically in response to ongoing actions raised at
these committees.
« The paper was approved by RCC on 13th September 2022 and approved by ARC on
26th September 2022.
Executive Summary
In July 2020, ARC was advised of material errors uncovered in pensions data in the Royal Mail
Pension Plan (RMPP), the actions being taken to resolve them and the next steps. Some of the
errors resulted in RMPP members (current and some former POL employees) having their
pension benefits overstated or overpaid. There were also examples where benefits had been
understated or underpaid. In June 2021 POL advised its employees of the errors and the Trustee
notified the wider membership.
The Trustee’s actuary estimated the costs for correcting the benefits. The T
areas where it expects POL to contribute financially. These were i
which included an estimate of costs from the Trustee of }
le range i
IRRELEVANT! The Trustee also_,
These figures have since been moderated. The Trustee is requesting from POL
lect the increased liability inherent in certain augmentations
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The Trustee and POL have formalised the agreement of these augmentation costs in a
Memorandum of Understanding (MoU), which is uploaded in the reading room. The MoU also
sets out the parties’ agreed interpretation of the pension data and associated application of the
scheme rules. The MoU must be signed as a deed by two Post Office Directors. This paper
recommends the Mou for signature.
There are a number of additional matters to resolve that could result in further cost to POL
(Additional Matters). Key is the sum POL should pay towards the Trustee's own costs
obligation to pay is capped a 1 iRRELE
the Trustee’s view. The subje
Once signed the MoU provides the certainty needed for the Trustee to calculate correct benefits,
notify members how they have been individually affected, and process corrections. POL has
secured for itself under the MoU a right to review and to contribute to bulk member
communications, and will manage employee comms sensitively. Any resulting member
complaints will be managed by the Trustee. Members’ ultimate recourse will be to the Pension
Ombudsman. With the mitigations in place we do not envisage material penalties or censure
by the Ombudsman. We hope to have informed all members by Jan or Feb of 2023 and to have
corrected benefits by Spring 2023. We would expect to have dealt with the most
vociferous/knee-jerk member complaints by Summer 2023. If there is any material press
attention this will therefore land Jan to June 2023. The team will work closely with comms and
Inquiry team to manage messaging around this time.
One of the early risks associated with these pension errors was that, if they prevented us from
completing partial buy out by March 2022, we would lose favourable commercial terms
negotiated with Rothesay at the stage of buy in. Rothesay has since agreed to extend the
current buyout terms until the end of 2023. This is the new target date for achieving partial
buy out, agreed by the Trustee and Rothesay.
Questions addressed
1. Recap - What went wrong and why?
2. What has been the extent of the investigation and negotiations to date?
3. I What does the attached draft MoU do and why do we recommend it for signature?
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4. What are the Additional Matters to be resolved that could result in financial costs for POL
and the risk that we will exceed the existing £3m mandate?
5. What are the next steps and future risks?
Report
Recap - What went wrong and why?
1. In 2017 POL embarked on an exercise to move its rights and liabilities under the Royal
Mail Pension Plan (RMPP) to an insurance backed arrangement. The first phase of the
buyout known as partial buyout, transfers 85% of the liabilities for the scheme to Rothesay
Life. Full buyout transfers the remainder, breaks the link with final salary, and transfers
the administration responsibility to the insurer. This is known as a pension “buy out”.
Whilst seeking to “true up” pension data for that purpose it was discovered that data and
calculations of pensionable pay provided by POL to the RMPP administrators had
overstated some pay elements and understated others. The majority of the errors
resulted in members (current and former POL employees) having their pension benefits
overstated or, where they were in payment, overpaid. There were limited occasions where
the errors resulted in benefits being understated or, where in payment, underpaid. An
illustration of the approximate number of scheme members impacted and how is at
Appendix 1.
What has been the extent of the investigation and negotiations to date?
2. Post Office and the Trustee’s teams have worked closely to identify and fix the errors, and
now agree that the reconstructed pensionable earnings data is fit to be used for the
recalculations of member benefits. The Trustee has shared a timetable for this and expects
to be writing to members in January and February 2023 to advise them of their revised
benefits. The parties voluntarily reported the issue to the Pension Regulator in October
2020.
3. Negotiations between POL and the Trustee have focussed on agreeing the augmentation
to benefits and associated one-off contribution to the fund that POL should make. The
Trustee was requesting contributions in the range of { IRRELE'
costs of {~ I The Trustee also asked POL to consi
pensions to their current overpaid/overstated levels at a cost of rather than
correcting them as is the standard approach. At board in July 202: agreed that
POL should negotiate a more reasonable and realistic contribution. The Board/ARC agreed
with the recommendation that POL should press for the correction of overstated or
overpaid benefits where such payments exceeded a de minimis amount.
4. POL has now agreed in principle to contribute to the value of
so we don’t need to claw back
(plus a tolerance of +/- 10%
* an augmentation to waive historical overpay.
members): value
range Z
* an augmentation to avoid the need to correct for the future the pensions in payment
for those with small overpayments of less th annum (de minimis) (so we
associated with past transfe id d in service: value
tolerance of +/- 10% range
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5. POL has declined to continue to overpay pensions going forward; where pensions are
overpaid/overstated above the de minimis amount they will be corrected. Any
underpayments identified must, and will be, paid in full where the beneficiary can be
traced and will be covered by the scheme insurer.
What does the attached MoU do and why do we recommend it for signature?
6. Asignificant part of POL’s and the Trustee’s work to date is captured in the attached MoU.
At a high level, this:
(i) codifies pension data rules: Following the reconstruction work, it is important
that both POL and the Trustee should agree in writing their new common
understanding of how to work together to administer the benefits correctly, to
minimise the possibility of a recurrence.
(ii) delivers those benefit augmentations which are reasonable: POL has agreed
to augment affected members’ benefits within the RMPP to mitigate the overall
impact of correction of benefits on individual members, as explained above. The MoU
is the formal written record of these arrangements.
(iii) sets out POL’s contribution to augmentation liabilities: Having agreed how POL
and the Trustee will augment benefits within the RMPP to mitigate the impact on
members, that agreement, and the amount that POL would pay for such
augmentations, needed to be documented to modify the general provisions of the
existing Trust Deed and Rules, to fix the amount payable, and to remove any doubt
that POL should make that payment despite the terms of a 2017 agreement limiting
POL’s contributions. This will enable the Trustee to rectify benefits with certainty and
on a correct legal footing.
7. Further explanation of what the MoU does and does not do is at Appendix 2. The MoU
itself is in the reading room.
What are the Additional Matters to be resolved that could result in financial costs for
POL and the risk that we will exceed the existing ‘=
8. There are a number of additional matters which, when added to the
the MoU, could result in POL’s total contribution exceed the existing :
These matters are set out below. Please note the estimates of value stated below are very
approximate at this stage.
The Trustee's rectification costs I
9. The Trustee puts their estimated rectification costs a but those costs continue to
rise. Typically, the costs to administer a pension scheme, including error correction, can
be paid from the scheme itself. Indeed, the 2018 Triennial Valuation of the RMPP contained
an expense reserve of for the purposes of scheme administration costs.
Notwithstanding the i e Trustee expects to have spent, POL believes that its
liability to indemnify the Trustee’s costs is capped at, at most, T per the terms of a
2015 Administration Agreement. POL wrote to the Trustee in September 2021 outlining
its intention to settle costs in accordance with its interpretation of the agreement, but it
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That dispute could result in material
delay, including to members receiving their correct benefits.
10. POAL (est. tsUnder the RMPP rules, a change of election for purchase of annual
leave (POAL) r March 2014 could detrimentally affect the value of benefits earned after
April 2014. This effect was not understood or flagged to employees. Additional costs may
therefore arise if employees (or former employees) have suffered detriment. This risk is
unchanged since it was reported in July 2021. 75 members are potentially impacted. The
impacts of this will be known at the end of 2022 following the benefit recalculations.
Uncertain liability for RMSPS underpayments (Trustee estimate :
11. Since this risk was reported in July 2021 the Cabinet Office who manage the RMSPS
scheme has indicated that it will be seeking to recover any costs to the scheme of
rectification and the value of back-payments to correct historic underpayments arising
from CVit skills allowances that should have been accounted for pension purposes. The
costs of rectification and the value of the historic underpayment will be known at the end
of 2022 following the benefit recalculations. We believe it is sensible for POL to pay the
rectification costs but think that, had the shortfall been known in 2012, the value would
have been accounted for when RMSPS took over liabilities for this scheme from RMPP. As
a result, RMPP retained assets that should have been transferred to RMSPS and should
now meet that additional cost.
One-off cases where benefits cannot be corrected {
12. POL has agreed that if the Trustee is of the opinion that a member has come forward with
a viable defence to correction of their benefits or demonstrated that correction would have
a disproportionately detrimental effect on them such that correction would be
unconscionable, POL will look "in good faith" at making a contribution towards the
additional liability inherent in limiting correction. Any such claims are likely to arise in
Spring 2023 or later following the roll out of communications to members about the
corrections.
13. The table at Appendix 3 shows the range of costs (£m) associated with the Additional
Matters, which are between POL intends to work towards settlement
of all of these matters within the existing {mswmandate. It will update the Board on its
progress and may seek an increased mandate to contribute to the Trustee's costs if that
is considered the right thing to do in all the circumstances.
What are the next steps and future risks?
14. After signing the MoU there are a number of further steps to take, including:
14.1.
I ELEVANT.
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14.4.
° IRRELEVANT
14.7.
14.8.
15. Additionally, there are a number of risks that may arise as follows:
Member complaints, including to Pension Ombudsman
16. Once members are advised how they have been individually affected this may prompt
member complaints. POL has attempted to mitigate against the number of complaints by
securing for itself under the MoU a right to review and contribute to bulk member
communications to ensure the messages are clear and well landed. POL will also plan
sensitive engagement with its own employees. Complaints that do arise will be managed
by the Trustee. Members’ ultimate recourse will be to the Pension Ombudsman. A claim
for the original, higher, incorrect benefit level is unlikely to succeed, but compensation
may be due for distress and inconvenience in the way the notification and rectification
process was run by the Trustee. While most claims should lie directly against the Trustee,
the Ombudsman could, amongst other options, choose to order POL to pay a small amount
of compensation for any disproportionate distress and inconvenience caused by POL’s own
activities. This remediation project has been run, funded and managed with a view to
mitigate this particular risk so, we do not envisage material penalties or censure by the
Ombudsman.
Negative press and PR
17. The one-off nature of the errors, and the approach taken by POL to fixing the errors,
meant that POL was not required to inform the Pension Regulator, although we did report
it voluntarily. No action has been taken or proposed by the Regulator. This issue has not
made the press despite the facts that both POL and the Trustee have already informed
employees and members and the CWU had commented publicly. While the pensions trade
press may note the fact of a rectification exercise, as a matter of technical interest and
with the focus generally on the administrator (PSC/Capita), such stories are relatively
commonplace in the pension arena and do not excite much comment. The biggest press
risk is of the mainstream press trying to make a link to the Horizon or Inquiry issues.
18. A key matter that could be picked up on is the matter of any shortfall between the
Trustee's costs and POL’s contribution towards those costs. If POL adheres to the terms
of the indemnity and does not pay all of the Trustee’s costs, the Unions may seek to
characterise the idea of any rectification costs coming from the scheme fund as amounting
to POL penalizing employees and members for its mistakes. This is somewhat mitigated
6
Strictly Confidential
300 of 342 POL Board Meetir
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Tab 11.4 Pensions — Augmentations to RMPP
@
by the fact that there is such a large surplus in the RMPP and by POL's overall settlement
which demonstrates that POL has met the cost of the historic additional liabilities created
by these errors and their rectification, paid the Trustee’s costs in accordance with its
obligations, and that no beneficiary will receive less than their legal entitlement.
19. The Trustee hopes to have informed all affected beneficiaries by Jan or Feb of 2023 and
to have corrected benefits by Spring 2023. Member complaints could arise at any time
over the next three years, but we expect to have dealt with the most knee-jerk complaints
by Summer 2023. If there is any material press attention, this is expected to land between
January and June 2023. The team will work closely with comms and Inquiry team to
manage the messaging around this time.
Further errors are identified
20. The parties’ agreement under the MOU is limited to the payroll data errors identified over
the last two years of investigation. If a separate set of errors were later to come to light
forcing further changes to benefits, they would need to be dealt with separately. The
possibility of further errors coming to light cannot be eliminated and could arise from
reasons other than those identified in this project such as the unintended
consequences/implementation of future pay awards. Such errors will not be eliminated
until full buyout of the scheme has been completed and the responsibility for the
administration passes to Rothesay Life. However, controls have been put in place such as
using a calculator, developed by a POL actuarial secondee, to calculate changes in
pensionable earnings and the checking of the results to reduce the risk of future errors.
Further contributions to RMPP
21. The triennial valuation will be based on the revised benefit calculations. As these
valuations are the trigger for an assessment of required funding, there is, in principle, a
risk that the increased value of liabilities exhausts the funding surplus, requiring POL to
make future contributions to RMPP. The Trustee's scheme actuary estimates that there
would be a reduction in surplus of:'*evstias a result of correcting post March-17 leavers
benefits (pre-March-17 costs will be borne by insurance with Rothesay Life). The scheme
currently has a surplus of ca. so a new funding requirement appears extremely
unlikely but cannot be ruled o1
Strictly Confidential
POL Board Meeting-27/09/22 301 of 342
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Tab 11.4 Pensions — Augmentations to RMPP
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@
Appendix 1 - Member Impact
The table below shows the number of members impacted by changes to their RMPP pensions. It should
be treated as indicative only as it is based on a simplified calculation of benefits by the Trustee.
Impact on RMPP Members
Combined (FS +CSDB)__I %
Increase in benefits
No Change*
Decrease in benefits
N/A
Total
Status of those with Decrease
Active
Deferred (whole or part) **
Pensioner (whole or part)***
Sub Total
IRRELEVANT.
* includes those within the deminimis threshold of
** includes two members who have died
“*7 pensioners will have a decrease for both CSDB and FS
Strictly Confidential
302 of 342
POL Board Meeting-27/09/22
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@
Appendix 2 - High level summary of legal
commitments in MoU
Legal background
Strictly Confidential
POL-BSFF-WITN-017-0047945_0302
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Strictly Confidential
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a
@ :
a
Summary of agreed POL Fund augmentations and exercises of discretionary powers and associated contributions a
6
nsion eriod Excess Principles agreed
Overpayments I POL award of award of value of actual overpayments (so no need to recoup) (clause 8(a)) I
Pansions'lh before Correction I I
payment at the I Date Trustee exercise of discretion not to correct (so no need to recoup) (clause 10(a) or 11)
Correction i
Date and POL award of pension at current overstated rate in payment, so no need to correct (clause 8(b))
benefits on pS ;
death before I ee I Where the member has a defence to correction — Trustee intends to exercise discretion not to I
Correction : i correct (clause 10(b)) i
Date ‘orrection Date I
'Ifno defence to correction - benefit to be reduced to correct enlillement on Correction Date
Transfer Transfers before _I!RRELEVANT!POL award of award of value of actual excess on transfer payments (so no need to recoup) I
payments Correction Date (clause 9) I
Pensions and
lump sums
coming into
payment after
the Correction
Date
All overpayments
POL augmentation to current overstated value (so no need to correct) (clause 8(c))
Where the member has a defence to correction — Trustee intends to exercise discretion not to
correct (clause 10(b)).
{If no defence to correction - benefit to be reduced to correct entitlement on Correction Date
Total
Element of contribution
ddW¥ 9} suone}
IRRELEVANT
Notes:
* Correction Date varies by member/beneficiary — for Trustee to determine, but delays do not increase POL liability
« Final Salary and CSDB entitlements are considered separately
« “Defence to correction” in this table is shorthand for any circumstances peculiar to a particular member which in the reasonable opinion of the Trustee would
justify an exercise of the Trustee’s power to compromise the right to correct that member's benefit e.g. because of detrimental reliance or particular hardship
Strictly Confidential
11
POL-BSFF-WITN-017-0047945_0304
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Tab 11.4 Pensions — Augmentations to RMPP
@
Appendix 3 — Estimated Potential Range of expense
for Additional Matters
Item Low Case. [ Best Estimate I Worst Case
MoU i
Trustee Costs
= IRRELEVANT
One-Off Payments
Total
12
Strictly Confidential
306 of 342 POL Board Meeting-27/09/22
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PUBOGYSEG IH /MIO SLL GEL
Board Report
Period 5
3
g
a
A
é
:
27* September 2022
bE JO LOE
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Contents of the Board ClJ Dashboard
Training and Onboarding:
- Onboarding satisfaction and duration.
- Confidence after training
- Confidence after go live (available soon)
- Number of views of training videos and collateral
- % capacity filled in training sessions.
Postmaster Complaints:
- Number of complaints received
- % resolved within 10 days
- Top 5 themes
Cash Management:
- Volume and value of outward cash discrepancies
- Volume, value of shortages, surpluses and counterfeit notes
- Number of requests to view CCTV footage by Postmasters
- Percentage of successful cash declarations
Transaction Corrections:
- Volume, value and reason of issued transaction corrections
Discrepancies and Postmaster Accounts:
- Volume and value of reported discrepancies
- Amount provisioned for postmaster balances
Accounting Dispute Resolution:
- Volume and value of discrepancies received for investigation
- Average days to resolve
- Investigated cases root cause
Network Monitoring and Audit Support:
- Number of Network Monitoring cases
- Number of audit activities
The 4 Contract policies:
- Number of suspensions, with reasons and number of
reinstatements
- Number of terminations, with reasons
- Decision reviews and outcomes
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4
co
Board ClJ Dashboard RAG Status
SS (a
=
Training and Confidence after go live (available soon)
Onboarding
Number of views of training videos and collateral
Volume and value of reported discrepancies Ontrack =>
Discrepancies and
Postmaster Accounts Needs
Amount provisioned for postmaster balances -»>
=
S
*
Volume and value of discrepancies received for Needs
investigation
% capacity filled in training sessions Offtrack mo
Resolution
-
=
g
Number of complaints received On track t
Investigated cases root cause
$i
Postmaster 9% resolved within 10 days
Complaints
Number of Network Monitoring cases
[ae Greeting Network Monitoring work
and Audit Support
Volume and value of outward cash discrepancies Number of audit activities
Volume, value of shortages, surpluses and counterfeit Number of suspensions, with reasons and number of
Cash Notes reinstatements
Management 5
ie Number of requests to view CCTV footage by he peli Number of terminations, with reasons
Postmasters policies
Percentage of successful cash declarations Decision reviews and outcomes
Corrections corrections
Transaction Volume, value and reason of issued transaction t
On track
*This performance summary is work in progress. The RAG status may change in future as we continue work to clearly define targets for each of these key metrics.
POL-BSFF-WITN-017-0047945_0308
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Q
a
o
8
2z/60/L2-
What actions are being implemented to improve performance
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Lege
Q
=
o
I eee ea ies Mele ne aes ace
Training and Onboarding
Training and Onboarding
Postmaster Complaints
Cash management
Discrepancies and
Postmaster Accounts
Accounting Dispute
Resolution
Accounting Dispute Resolution
Network Monitoring and
Audit Support
Number of views of training
videos and collateral
% capacity filled in training
sessions
% resolved within 10 days
Percentage of successful cash
declarations
Amount provisioned for
postmaster balances
Volume and value of
discrepancies received for
investigation
Average days to resolve
Number of Network Monitoring
cases
Needs
work
Offtrack 7
Further communications to postmasters and updates to Area Managers and on-site trainers to ensure
knowledge of what's available
Regional Training Leads are attending Regional Manager meetings each month to advocate classroom courses
with their teams
‘Area Managers and BSMs to promote both eLearning and classroom courses
New Branch Hub learning centre will include a link to the classroom registration form and instructions on how
to register (launch in early P7)
P6 is tracking at 45% presently pre-cancellations
More streamlined process for IT complaints being implemented which will improve resolution time
Further communications campaigns being explored, and consideration also being given as to whether we
‘mandate’ completion or possibly provide more note counters.
Established loss GE subgroup being arranged to review process and agree whether any changes should be made
to enable grater recovery of losses.
Where discrepancies have occurred and we cannot contact the postmasters, AM’s now being utilised.
Encourage Postmasters to learn how to investigate themselves. New investigations tool on Branch Reporting
Suite being piloted shortly.
3 new team members now in place within Dispute Resolution Team so we should see this decrease.
Additional resource being explored.
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Postmaster Onboarding
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Onboarding time (days) Onboarding time (days)
150
i mT UUEEL
Commentary
Satisfaction has improved and
average time has reduced by
almost two weeks
Additional finance resource now
in place to speed up financial
assessment reviews.
og og?
we ost os ge ge gf Puzzel phone system has now
. 7 : 7 i a . ‘ m . been implemented in onboarding
allowing detailed monitoring of
Onboarding overall I Onboarding overall satisfaction rating call handling.
satisfaction rating
80%
Previous period: 78%
a
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Postmaster Training
New PM training -
confidence after
e-learning
94.0%
Previous period: 96.0%
New PM training -
confidence after
classroom learning
95.6%
Previous period: 98.9%
Views of videos and
training guides via
BH and LMS
1013
Previous period: 1367
Refresher training -
% capacity
35.9%
Previous period: 34.2%
New PM - confidence after e-learning and classroom training
@ Confidence after e-learning @Confidence after classroom
95% 100% = 100% 100% «,
S :
BOS og og
oo ww f° es ra oe 4 oo
Pcs
Refresher training - % capacity
51% 52% St% 55% oe
47% 48%
40% 30%
il i j [ in
a
)
ws
Ce a i
we ye ee Big Bg BN ig Bra oe ye ee ‘oh Ba Ba ev oe oe
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Commentary
3.3% drop in post classroom confidence
score due to 3 delegates stating they were
not confident and required time to practice
in their branch.
View of video/training guides have fallen by
25% compared to previous period due to a
fall in Branch Hub views, but PS was stil
higher than the average for the year by just
over 100 views.
Refresher classroom utilisation has seen a
marginal improvement on previous period
(+2%). Early data from new cancellation
tracking process indicates that late
cancellations are depressing utilisation rates.
The cancellation rate in this early data is 16%
with three quarters of those being a week or
less from the date of the classroom
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Postmaster Complaints
pueoqyseg PH /MO SLL Gel
No. of new complaints % of complaints resolved Complaints created by type - Top 5 (Latest period)
within 10 days
Peripheral 242
roe ean 75.7% Vo a -
Previous period: 79.0% Royal Mail == -
Parcelforce
Commentary
4% decrease in service levels in PS with 75.7% of complaints resolved within the 10 day SLA.
Changes are underway to amend the process for handling IT related complaints by BSC that relate to an open incident. This will result in a smoother experience for the postmaster, who
will be able to liaise with IT directly, and is expected to positively influence SLA performance with fewer complaints remaining open for issues already under investigation.
+ Aperipheral is a device used with a computer. This includes printers.
* Target is 82% of complaints resolved within 10 days
=
=
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ari
Cash Management
Cash and Stock Management 1 pouches contained a discrepan ro
Outward Cash Discrepancies
Previous Period: 102%
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Cash Management (continued)
Pueoquseg PH /PIO SLL GEL
Cash and Stock Management
CCTV Requests Number of CCTV Viewing Requests by Period
2122 21
riod
135 CCTV Viewing requests, up 2 on previou
133135
02 9910 -
Requests to view CCTV footage follow the trend of the number
B eal O I I of discrepancies identified and the volume of cash returned to the cash
zaza 7223. 2223. 2223
centres.
No of CCTV Requests eo om
135 Saf
Previous Period: 133
=PO1 - PO;
Cash declarations
22 PueOg 1Od
Percentage of Successful
Cash Declarations
% '
iS i
i 88.7% 4 I
Previous Period: 88.6% I
Commentary
The percentage of successful cash declarations made remains consistent. Further analysis is required, but this does point to the fact the July campaign to highlight the importance
ash declarations has not been successful, so this will need to be revisited to find alternative ways to encourage conformance.
oe
2
g
8
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Transaction Corrections
No. of Transaction No. of Transaction Corrections Issued
Corrections Issued Product @All Other
10.9K
12,5844
Previous Period: 16,419
6K
Value of Transaction
Corrections Issued
No. of Transaction Corrections for Cash
Period @
Value is debit and credit figures totalled together (not net)
sh Rams Branch
Rems from Branch and National Lottery
10.1K
29K
2.4K
PO I
No. of Transaction Corrections for Other Top 10 Products
208 @:
49 26h
181 175
his i: = EB
Suspense Bureau
Period
Cheques Online Automat - Dropand
ToIPSL Banking Payments NonRem Go
72K
aK
2.6K
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Commentary
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Transaction corrections for cash,
Camelot and other areas are consistent
with previous 4-week periods.
Cash Rems continue to be the highest %
of all TCs issued — 66% in PS V 72% in Pa
(6% reduction). This is due to branches
counting cash incorrectly before
returning it to the Cash Centre.
10% of Cash TCs were issued to
50 branches and phone calls continue to
be made to these 50, to support in
reducing the volume of TCs received.
Feedback will be provided in P6
commentary in terms of how successful
this has been.
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Discrepancies and Postmaster Accounts
Total No. of Discrepancies I [ Total Value of Discrepancies
Declared at Trading Period Declared at Trading Period
End End
4,910 ¥v £4.6M 4
Previous Period: 5,188 Previous Period: £4.5M
No. of Declared
Discrepancies Balanced at
Trading Period End
cae 2 Ale 4
Previous Period: 4,494
Value of Declared
Discrepancies Balanced at
Trading Period End
£2.2M 4
Previous Period: £1.6M
No. of Review or Dispute
Discrepancies Declared at
Value of Review or Dispute
Discrepancies Declared at
Trading Period End Trading Period End
3
635 ¥ £2.4M ¥
Previous Period: 694 Previous Period: £2.9M
‘Current Postmaster Provision
£7.41M4
Previous Period: £6.78M
Former Postmaster Provi
“£15.45Ma
Previous Period: £15.29M
No. of Discrepancies Declared
52k 52k
49k 69K SOK ak 9K 49K 50K 50K 49K 49K
2021PO5 202106 2021PO7 2021PO8 2021PO9 2021PI0 2021PI1 2021PI2 202201 202202 2022P03 2022P04 2022P05
Value of Discrepancies by Type
General Type @Discreoances Setted Locally @Review/Disoute
£62M
274M
61M
ae 55M
46M 45M £46M
£40M
£29M 28M
= Ba
2021PO5 2021P06 2021P07 2021POB 202107 2021PIO z0z1PI1 202112 2022P01 2022P02 2022P03 2022P04 2022P05
Discrepancy figures are negative and positive totalled together (not net)
Total Discrepancies (4910/£4.6m) is the total number of discrepancies declared by branches on their trading report when they balanced in PS.
2.Discrepancies Balanced refers to the proportion of total declared discrepancies where the Postmaster has balanced by putting in the cash or taking it out
3.Review or Dispute discrepancies are the proportion of total declared discrepancies where the Postmaster has pressed the “Review/Dispute” button.
4.Provision for former and current postmasters is the amount we provide for on our books for expected losses.
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pueoqused PH /TID SLL Gel
+ Total discrepancies are
consistent with previous 4-
week periods
Review/Dispute button
presses have decreased this
period to 635.
There is an increase of
£790k to the current and
former postmaster provision.
* Many branches are
not contacting us after
pressing the button and we're
unable to establish contact
with the branch.
* Positive steps are being taken
wherever possible
by engaging with
‘Area Managers and sharing
relative information relating to
the branch position which will
aim to increase recoveries of
Established Losses.
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Accounting Dispute Resolution
No. of discrepancy cases assigned for investigation and resolved, by period?
@Volume Assigned @Volume Resolved
579
479
434 438
385
350-4336 345 361
ses 2670271
09 30 B99
156 174
102 nog Jo ns Hin 12 a
2021/22 2021/22 2021/22 2021/22 2021/22 2021/22 2021/22 2022/23 2022/23 2022/23 2022/23 2022/23
-PO6 -PO7 -POS -PO9 -PIO -PI1 -PI2 -POl -PO2 -PO3 -PO4 -POS
3
Absolute value of discrepancy cases assigned for investigation
1.62M 1.60
1.07M
095M
083M 080M 076m
o7im 079M
036M
2oz1/22 2021/22 2021/22 2021/22 2021/22 2021/22 2021/22 2022/23 2022/23 2022/23 2022/23 2022/23
-PO6 -PO7 -PO8 -PO9 -PIO -PIl -PI2 -PO1 -PO2 -P03 -PO4 -POS
=
=
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pueoqysed PIH (PID SLL Wel
+ Volume reduced by 18% compared to P4 [5-week period] with 361 new cases
assigned. Compared to the same period last year [220], volume is 64% higher.
* Cases escalated through Review/Dispute on Horizon [635 on previous slide]
continue to influence escalated volumes [button presses are 52% higher than
same period last year].
+ Value of discrepancies reduced by 0.36M. A session is being held with finance
to agree how we share data more efficiently.
olved figures are not a true reflection as they don’t account for complet stigations that
onto another team and josed by them. A solution to this is being worked on.
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Accounting Dispute Resolution (continued)
‘Avg. days to resolve
"1 28
2 28 . =
%
20 20
18
[ I i
(I i
202122 2028/22 2021/22 2021/22 2021/22 2021/22 2021/22 2022/23 2022/23 2022/23 2022/23 2022/23
POC -PO7 -POB. «-PO9-PIO. -PI1-PI2-POT «PO POS. POA = POS
Investigated Cases resolved by root cause (Top 5 by L2, Latest period)
Lotter & ‘
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Commentary
328 cases resolved for P5 and the average days to handle has reduced
to 18 working days.
The team achieved SLA with 74% of cases resolved in 10-days [88%
within 20].
The common cause of discrepancies [based on cases closed]
continues to be inaccurate accounting [67% YTD]. Cash remains the
main driver of volume.
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Network Monitoring and Audit Support
Network Monitoring pro-actively supports Postmasters, focusing on reducing losses and driving compliance.
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A risk model highlights branches failing to perform compliance tasks, such as completing a Trading Period or failing cash declarations. If a branch is flagged in any
category, Network Monitoring will create a case and look at all areas of compliance at that branch.
If the results indicate that the branch needs support, the most suitable support will be offered (i.e. a call to coach the branch on the issue, a SPEAR call or visit or
an audit).
No. of Network Monitoring
Cases
206 ¥
Previous Period: 312
No. of Network Monitoring Cases
250 247
ae 32
258 2 . 209
242 236
222 A 204 — 206
2021P0S 2021P06 202107 2021PO8 2021P0R 2021P10 202111 z0z1P12 202201 2022P02 2022P03 2022P06 2022P0S
No. of Risk Based Audit I No, of Risk Based Audit Activities by Type!
Activities No. of SPEARS @No. of Audits
n n Pr
é 9 Ey sa se Pr ai sa
v “0 P a
. + 7 20 a ee = 1 S bo wid =
Previous Period: 93 87 B _ i i f oH Bo
= 8 zz .. I
2021P0S 202106 202107 202108 202109 2021P10 2021P11 2021P12 2022P01 2022P02 2022P03 202204 2022P05
1. Note that there is a lag between Audits/SPEAR visits and calls being an outcome in the top graph and being carried out
2. Calls or visit that Support, Prevent, Educate, Advise and Resolve
=
=
Audit Support
‘Audit and SPEAR activity down slightly
on previous periods due to annual
leave commitments in August
A discrepancy of -{IRRELEVANTPn tified
at New Cross (stock related
discrepancy)
frscieme} of excess cash and {sel of
excess stock returned through SPEAR
visits
14
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a
3
is
g
z
H o
Contract Suspensions z
:
g
Contract suspensions Suspensions by reason* a
Escalating Discrepancies
Unexplained Discrepancy
Admitted use of Post Office funds
Police Investigation
Civil proceedings - alcohol licence remo...
La Civil proceedings - enforced closure no’
nd a
o “) Company Irregularities
ee 8 ca g® gs aos Sg
FN a a oo ® i We KP oe ms we Conviction for embezzlement
S
Loss of Valid Property Interest
Matters of personal conduct
Pal
Contract reinstatements* see
YY Stock Discrepancies
4 Suspected use of Post Office funds 1
Unable to offer Post Office service (bran... 1
"Rolling last 12 periods
Increase in suspensions cases to four during the period, including New Cross where a discrepancy of -£793,861 identified (stock related discrepancy) .
The losses across the remaining three suspensions totalled £51,672.
One branch suspension following an admitted use of Post Office funds with the matter being referred to the Central Investigations Unit to determine an action from their perspective (in
addition to action being taken in respect of the breach of agreement by the postmaster).
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Contract Terminations and Decision Review Panel Cases
pueoqyseg IH /MIO SLL Gel
Contract terminations (by notice and immediate) Terminations by reason*
@ Contract Terminations (By Notice) @Contract Terminations (Immediate) Decision review panel sat in
Abandonment of service August and reviewed five
suspensions, upholding the
Loss of Valid Property interest
Mutual agreement 12 months’ notice Still the one termination
decision challenged in the
ees past 12 months (4
criminal conicton A termination decisions
challenged in total since the
panel was established).
Branch performance issues
Decision reviews Decision review outcomes*
@Suspension @ Termination No contract termination
decision signed off in PS
with three cases with legal
Upheld review.
@ Suspension Decisions Reviewed @ Termination Decisions Challenged
Further Review w
1
“Rolling last 12 periods
POL-BSFF-WITN-017-0047945_0321
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Tab 11.6 Investig
POST OFFICE LIMITED
BOARD REPORT
Post Office Investigations: Next:
Title: Meeting Date: I 27't September 2022
Steps
Sarah Gray, Group Legal
Author: I Director Spoweted Ben Foat, Group General
John Bartlett, Head of Central
Investigations Unit
Counsel
Input Sought: Noting
The Board is asked to note:
« POL, POL Staff, Postmasters, and Postmasters’ staff all being within the remit of the Post
Office Investigation Branch.
e CIU to conduct criminal investigations
e¢ Mobilizing a new partnership model with the relevant bodies across the UK to facilitate the
investigation and referral of suspected criminal misconduct.
Previous Governance Oversight
ARC approval of Law Enforcement Policy
Group Executive Tactical Meeting of 5 May 2021
Group Executive Tactical Meeting of 15 September 2021
Group Executive Tactical Meeting of 20 April 2022
Group Executive Tactical Meeting of 06 July 2022 — Approval for onward submission to
Board
Executive Summary
e CIU will be staffed’ from September 2022 and fully operational by January 2023.
e CIU is working with other departments to identify the types of cases likely to be escalated
to CIU, identify potential sources of digital evidence, and to test the reliability of that
evidence.
e A virtual Post Office Investigations Branch develops a one-team approach to Post Office
investigations, ensuring the application of best practice across the organisation.
« CIU provides investigative training, mentoring, and coaching to the de-centralised teams;
will introduce and carry out quality assurance of the lower risk investigations; and conduct
the higher risk or more complex investigations.
e It is proposed that the Investigations Branch’s remit includes POL and POL staff,
Postmasters, and Postmaster’s staff for a range of matters based on employment,
ownership of property, and practical factors.
e Post Office has no appetite to pursue private prosecutions. However, it is proposed that
Post Office investigators conduct investigations into suspected criminality and to report
what has been evidenced to law enforcement and prosecutors in all four nations of the
UK. The rationale being to act as a deterrent and to seek financial restitution through the
independent and external criminal justice system.
1x Head of CIU, 2x Senior Investigations Managers
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e At present, Post Office is at risk of not discharging our duty as an organisation in receipt
of public funds to investigate and then refer suspected criminal conduct. The Cooperation
with Law Enforcement Policy permits reporting to law enforcement, but criminal
investigations are not currently actual practice which is preventing pro-active reports
being made to law enforcement. The solution to the broader context within which Post
Office operates is to discontinue the practice of not performing criminal investigations, but
rather to ensure they are carried out correctly by appropriately qualified and experienced
individuals, working closely with the relevant external bodies and to report matters to the
appropriate authorities if and when evidence has been established.
« BEIS assistance is to be sought to establish strategic relationships with law enforcement
and public prosecutors in the three UK jurisdictions.
Questions addressed
* How has the establishment of the investigation model progressed?
e How should Post Office manage criminal investigations?
Report
1. Operating Model - Current Status Up-date
1.1. Post Office is committed to undertake ethically executed, evidence-led, and
transparent investigations which can withstand internal and external scrutiny. We
will apply best practice, applicable laws, and guidance so that we instil confidence in
those who would consider themselves as being investigated that they are being
treated fairly, and to external agencies that we have applied the highest possible
standards in the conduct of our investigations.
1.2. As part of this commitment, GE agreed on 20 April 2022 to the forming of the virtual
Post Office investigations Branch (1B). This will consist, starting in September 2022,
of two levels of investigative capability within Post Office®. The first level is a small
group of experienced and trained professional investigators who set standards for
investigations across POL, provide a quality assurance role, and conduct
investigations into matters presenting the greatest risk to Post Office or which are
the most complex to carry out (e.g. failings of critical processes or allegations of
senior staff misconduct). The CIU forms this group of investigators.
1.3. The other strata of investigators are based in the business and will continue to either
conduct volume investigations as part of their BAU (e.g. in to shortfalls), or conduct
2 2The Post Office Investigations Branch was the first recognised investigation unit in the world dating back to near the foundation of the Post
Office itself. It has an unblemished reputation. It's motto was Suaviter in Modo, Fortiter in Re meaning Gentle in Manner, Resolute in Deed
which is very much in keeping with the intended approach of the new investigation function. The IB underwent many changes over the years
and the name fell out of use in the mid 20th century.
3 As well as proposing a central investigative function, the KPMG review examined the investigative activity conducted by the following teams:
Network Monitoring, PM Dispute Resolution, PM Complaints, Contracts, Customer Complaints, Financial Crime, Conduct Compliance,
Whistleblowing, Data Protection, and Cyber, as well as those under HR’s remit eg Grievances, Code of Conduct, and Dignity at Work
complaints.
2
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6 Investig
investigations less frequently and/or carry lower risk. These investigators will be
trained where appropriate to the best standards as set by CIU.
1.4. Moreover, the CIU will be the escalation point for the other teams.
1.5. The de-centralised investigative activity continues under their existing reporting lines
but for investigative activity they have a dotted line to the centralised team. The IB
as a whole will perform to the same standards and methodologies adjusted for the
complexity of the cases in-hand. By using the IB brand the aim is to foster a one
team approach in the conduct of investigations.
1.6. The CIU will set standards, provide coaching, and conduct quality assurance of lower-
risk and/or volume investigations conducted by the de-centralised staff. Within
appropriate parameters and with suitable support, those not in the central team can
conduct quality investigations that meet the requirements of Post Office best
practice.
1.7. Once the additional CIU staff start in September 2022 there will be sufficient capacity
and capability to start increasing the volume of investigations suited to the CIU but
currently carried out by a Speak Up investigator and the Head of CIU. At the same
time, CIU and Triage will develop processes, procedures, systems, thresholds, and
internal and external stakeholder relationships to operate the model. The aim is to
be fully operating the model from January 2023.
1.8. The Disputes Resolution Team have provided some scenarios for CIU to sand box in
order to understand how these cases would flow between the teams and what QA
framework would be appropriate. A group of events from the last 18 months is being
identified by the Disputes team which may have been suitable for escalation to CIU
for discussion.
1.9. CIU is also working with the Horizon and GLO IT team, IT Security (Retail & Controls),
and Legal colleagues to identify sources of evidence, how digital evidence can be
accessed, and the level of reliability for use in case work.
2. Operating Model - Extent of Investigative Remit
2.1. For an internal investigation function, the Post office is not a straightforward
organisation. Normally, the full extent of a corporate’s activities and all “staff” would
fall within the function’s remit. However, the Post Office is a more complex
environment for an investigation function to engage with.
2.2. Given this complexity, it is proposed that GE selects one of the below options (or
another variation) as the remit for the investigation function for the first 12 months
that it is in place and that this decision is reviewed at the one-year marker’.
“The Whistleblowing team sits outside this decision as those types of investigations are determined by the Public Interest Disclosure Act 1998
and laid out in the Whistleblowing Policy.
3
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2.3. This appetite would then help define the purpose of the IB e.g.: The investigation
function conducts structured, transparent, objective, fair, and evidence-based
collection and assessment of information with the intent to prove or disprove the
suspicion of wrong-doing, or assertion of a particular chain of events, that has or
could affect (insert applicable categories from the table below)
Option Extent I POLEAOL I Postmaster I Posimastery I POC I Customers I Post Ofce
ot
Stat Sasi ata port wee
fem I I peers “chee Vato
i vilyv v v v v
2 voy v v ¥
3 Ve v v
4 2a BE v
s v v
6 v
* Denotes current investigative activity. However, investigations which consider
Postmaster conduct or activities, such as that governed by the Dispute Resolution
Committee, are limited in scope.
2.4. It is our recommendation that the minimum remit of the investigation function is
Option 4°. This would allow POL to act in determining facts relating to situations
ranging from allegations of theft or fraud by Postmasters and/or their staff
using/misusing POL systems or functions where either or both POL and the
Postmaster are victims, through to misconduct or process failings in POL and the
subsidiaries. The Horizon issue identified a failure to investigate beyond the
Postmaster in determining culpability. Best practice (and in some situations, law)
requires all reasonable lines of enquiry to be followed, whether they point away or
towards the considered investigative hypothesis as it is the truth that is sought, not
that a case is to be made against a selected individual. By investigating wider than
the Postmasters, for example their staff when relevant, we demonstrate that POL
has learned from the past and would seek to determine actual culpability, if any,
which is treating the Postmasters fairly. Allegations of misconduct by Postmasters
would be explicitly included in the proposed remit.
2.5. There may be situations where it is suitable for the investigation function to conduct
an evidential investigation building on intelligence work conducted by Financial
Intelligence Officers in Compliance e.g. when a post office is the venue of a serious
and/or series of frauds or money laundering which uses Post Office infrastructure to
facilitate the offence. Cooperation and liaison with other organisations and agencies
would be essential in these circumstances.
2.6. POL investigators do not have the power of detention, seizure or arrest and so will
not over-reach and seize personal property, will enter and remain on property only
in in accordance with the law, and will not seek to compel attendance to under-
caution interviews but will inform interviewees that they are free to leave at any time
if they do consent to a voluntary interview. The IB is not a constabulary and will not
act as one.
5 Peters & Peters have been advised of this paper and the proposed approach to criminal matters.
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Tab 11.6 Investig
2.7. It is our view that more exploratory work is required to better understand the
investigation needs of Post Office’s on-line presence before proposing an
investigative remit in this space.
3. Operating Model - Criminal Investigations
3.1. Speak Up / CIU already conduct non-criminal investigations that touch Postmasters
as well as POL itself. These include significant process and policy failures, root-cause
analysis of significant events, allegations of discrimination, allegations of bullying and
harassment, and activity which could cause reputational damage to POL. These case
types will continue to be investigated once CIU is established and are assumed to
continue to fall within CIU’s investigative remit.
3.2. However, data from Speak Up reporting shows that c50% of reported matters relate
to potential criminal offences. Analysis of Dispute Resolution information shows a
regular and continuous identification of sometimes sizable shortfalls which may result
from criminal activity conducted by Postmasters and/or their staff. Recent events
around stamps shows other criminally-exploited vulnerabilities, and working with the
Contracts team we are aware of multiple other potential criminal activities such as
theft of cash pouches, compensation frauds against RMG, and manipulation of inputs
into terminals to facilitate thefts or frauds. Resolution of these event types are
currently viewed from a contractual perspective. We are proposing that these are
instead viewed through a criminal investigation and referral lens. Without a criminal
investigation and referral capability, POL cannot effectively provide a counter to these
potential losses of public funds. Project Oberon is a clear example of where a lack of
a criminal investigation and referral capability was detrimental to POL and to the
interests of justice.
3.3. A policy decision was taken that Post Office would cease to act as a private prosecutor
of alleged criminal offences in England & Wales. This paper does not seek to change
that decision. The Cooperation with Law Enforcement Policy® (CLEP) sets out POL's
intent to report suspected criminality to law enforcement, how we support police
investigations with evidence when requested by the police, and sets minimum control
standards for doing so. It is silent on whether POL investigators may conduct criminal
investigations in advance of applying the policy. The Group Investigations Policy is
not explicit on this matter and is primarily concerned, in respect of criminal matters,
with disclosure of information, referencing the CLEP.
3.4. As a wholly government-owned corporation in receipt of government funds, it may
be viewed that we have a duty to investigate as well as report suspected criminal
events to the relevant authority. We may be criticised for not doing so, particularly
where POL funds have been misappropriated (and so by inference public funds are
lost) and where we seek only a commercial outcome to these events. For example,
where evidence obtained via an investigation supports a suspicion of someone having
defrauded POL, they should be reported to the police irrespective as to whether or
not the loss has been made good so that a credible deterrence may be established.
© A brief summary of the CLEP forms Appendix A
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Tab 11.6 Investig
Existing policies facilitates the reporting to police but not the preceding internal
investigation. This paper asks Board to note that CIU staff are to conduct criminal
investigations within the IB’s remit and report these matters to police when
appropriate and in accordance with the CLEP.
4. Operating Model - Criminal Referrals & Strategic Partnerships
4.1. As a government organisation, Post Office is viewed by law enforcement (LEA)
differently from a privately owned company. It is unfortunately fact that LEAs de-
prioritise most reports of crime made by government-linked organisations if made in
the traditional way. There is an expectation that a degree of self-sufficiency exists.
Without recourse to private prosecutions an alternative is required if the interests of
Post Office, Postmasters, our staff, our shareholder, and the public are to be
protected.
4.2. Suspected offences with an element of criminal dishonesty would form the vast
majority, if not all, of our criminal investigations and potential referrals. This would
include theft, fraud of all types, and money laundering. These types of offences are
those which most LEAs do not have sufficient, nor sufficiently skilled, resource
allocated, and which are lengthy to investigate, often resulting in them not being
prioritised. If we do not investigate these matters prior to referral then the likelihood
of preventing the loss of public money significantly diminishes, as does any
deterrence factor.
Jurisdiction is also relevant. Typically, authorities in Scotland are less inclined to
adopt evidence collected by non-LEA investigators. England & Wales LEAs expect an
almost complete case in an admissible format and Northern Ireland is likely to be
somewhere between the two.
It is proposed that ahead of any specific case referrals (other than in extremis):
4.3. England & Wales:
e A CEO letter to BEIS, and then on with a Minister’s endorsement, requests
assistance from the Commissioner of the City of London Police’s (CoLP)
Economic Crime Directorate (ECD) (the national lead force for fraud and other
economic crime) to work in partnership with CIU to investigate and then refer
to the Crown Prosecution Service all strong cases of dishonesty-based offences
above a certain level of complexity or monetary loss;
« Adedicated team to be formed within CoLP ECD to work closely with CIU under
a MoU would be the best-case scenario - its size would be dependent upon
volumes and budget;
«Post Office or BEIS may be asked to contribute to the cost of this team
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6 Investig
4.4, Scotland:
e ACEO letter to BEIS and then on, with a Minister’s endorsement, to the Crown
Office and Procurator Fiscal Service and the Chief Constable of Police Scotland
seeking a similar arrangement to England & Wales; OR
e the HCIU and CIU Senior Investigator for Scotland engage Police Scotland and
seek a solution at a more operational level with their ECD;
4.5. Northern Ireland
e ACEO letter to BEIS and then on, with a Minister’s endorsement, to the Public
Prosecution Service Northern Ireland (PPSNI) and the Chief Constable of the
Police Service of Northern Ireland (PSNI) seeking a similar arrangement to
England & Wales; OR
« the HCIU and CIU Senior Investigator for Northern Ireland engage PSNI and
seek a solution at a more operational level with their ECD
4.6. The purpose, as ever with criminal case work, is to act as a deterrent to prevent or
limit future loss, seek punishment, and to seek compensation for the victim(s)
(including Postmasters where they are the victims). By working with and through
LEAs we could achieve all three, but this outcome is less predictable if we take an ad
hoc approach to LEA referrals.
4.7. By seeking partnership working in this way, POL demonstrates that we do not operate
as victim, investigator, and prosecutor. Conceptually, the police and the prosecutors
will decide on the strength of evidence what they will (or will not) progress through
the criminal justice system, not POL. To get to that point, POL will need to collect
admissible evidence to assist over-stretched LEAs and that requires competent,
evidence-led, ethical investigators.
5. Next Steps
5.1. If the approach is agreed, CEO letters to be drafted and sent to BEIS for the relevant
authorities in all three jurisdictions.
5.2. Based on approvals given and decisions made as a result of this paper, The Group
Investigations Policy and The Cooperation with Law Enforcement Policy will require
significant up-dating.
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Appendix A
The Co-operation with Law Enforcement Policy's Post Office’s approach to cooperating with Law
Enforcement Agencies is based upon the following core principles:
¢ Post Office is committed to supporting Law Enforcement Agencies in the prevention,
detection, investigation and potential prosecution of alleged offences;
e Post Office will as far as possible cooperate with Law Enforcement Agencies and
voluntarily provide information and evidence on request;
e Post Office is committed to ensuring that prosecutions are fair and that Prosecution
Teams are made aware of, and provided with, Disclosable Material in Post Office’s
possession;
¢ Post Office will manage the risks associated with providing such cooperation, by
ensuring that appropriate controls are in place in relation to the provision of information.
In accordance with these principles, and subject to the controls described in the policy, Post
Office:
e will make a Victim Crime Report to the police where suspected criminal misconduct is
identified in its business operations;
will not conduct private prosecutions (Post Office’s shareholder must be consulted and
approval obtained from the Post Office Board if any deviation from this is contemplated);
¢ will provide information to Law Enforcement Agencies to assist the prevention,
detection, investigation and potential prosecution of crime:
o voluntarily for intelligence purposes, accompanied by an Advisory Note if
required to describe any known issue/s which might affect the reliability of the
information;
o voluntarily for use as evidence, where it is classified by Legal and Compliance
as ‘low risk data’ for the purpose of this policy (see Appendix 1);
© voluntarily for use as evidence, if approved by Post Office Legal or any
Nominated Criminal Law Advisors acting for Post Office; or
© as required by a Mandatory Order or otherwise approved by the Post Office
Board.
8
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Tab 12.1 Officer Changes
@
POST OFFICE LIMITED
BOARD REPORT
Title: Officer Changes Meeting Date: I 27 September 2022
. Rachel Scarrabelotti, Group .
Author: Company Secretary Sponsor: N/A
Input Sought: Noting and Approval
The Board is asked to note:
i. The Chairman of the Board Tim Parker is due to step down from the Board on 30
September 2022;
ii. IThe shareholder has appointed Henry Staunton as the new Chair of the Board, with a
start date of 1 December 2022.
The Board is asked to approve:
iii. The appointment of Ben Tidswell as interim Chair of the Board, for a period
commencing on 1 October 2022 and expiring on 30 November 2022.
Executive Summary
The second term of the Chairman of the Board Tim Parker is due to expire on 30 September.
The new Chair of the Board, as selected by the shareholder, is not due to commence with the
Board until 1 December 2022. During this intervening period the shareholder has agreed that
Ben Tidswell be appointed as Chair of the Board.
Ben Tidswell joined the Board in July 2021 as Legal NED, and is appointed as Chair of the
Historical Remediation Committee.
The Board is asked to approve the appointment of Ben Tidswell as interim Chair of the Board
for a 2 month period commencing 1 October 2022 and completing on 30 November 2022.
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@
POST OFFICE LIMITED
BOARD REPORT
Title: Appointments to Board Committees I Meeting Date: I 27 September 2022
7 Cordelia Hagan, Company . Rachel Scarrabelotti, Group
Author: Secretariat Administrator Sparisars Company Secretary
Input Sought: Decision
The Board is asked to approve:
i. The appointment of Lisa Harrington as interim Chair of the Nominations Committee;
ii. The appointment of Safaraz Ismail to the POL Nominations Committee;
iii. The appointment of Elliot Jacobs to the POL Audit, Risk and Compliance Committee;
and,
iv. The appointment of Brian Gaunt to the POL Remuneration Committee.
Executive Summary
Pursuant to the Nominations Committee’s Terms of Reference, the Committee can recommend
to the Board new appointments to Committees, as required from time to time.
Appointment of Lisa Harrington - Chair of Nominations Committee
The current Chair of the Nominations Committee, also Chairman of the Board, is due to step
down on 30 September 2022. The new Chair of the Board, who will also Chair the Nominations
Committee, is not due to commence in office until 1 December 2022. Given this, the Board is
asked to approve the appointment of Lisa Harrington as interim Chair of the Nominations
Committee for the period 1 October 2022 until 30 November 2022.
Lisa Harrington joined the Board in April 2020 and has been a member of the Committee since
this time. Lisa currently chairs the Nominations Committee pursuant to her external
appointment at Digital 9 Infrastructure Plc.
Appointment of Saf Ismail - Nominations Committee
The Board is asked to approve the appointment of Saf Ismail as a member of the Nominations
Committee. Saf is a passionate advocate of Diversity, Equity and Inclusion. Additionally, as a
serving Postmaster, Saf will bring unique views to the Committee. Saf joined the Board in June
2021 and is not currently serving on any Board Committees.
The Board is asked to note that the UK Corporate Governance Code 2018 (provision 18)
requires that a majority of members of the committee should be independent non-executive
directors. This provision is currently satisfied given the existing composition, with the Chairman
and Lisa Harrington constituting independent non-executive directors, whilst Tom Cooper does
not qualify as an independent non-executive director. The appointment of Saf Ismail to the
Committee would mean that the Committee composition would no longer satisfy this criteria.
The practical consequences of this are a disclosure will be required in the Governance Report
in the Company’s Annual Report and Consolidated Financial Statements detailing the departure
and the reason, being the Company's uniquely composed Board requires that the Board’s
Committees are reflective of this.
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Tab 12.2 Committee Memberships
@
Appointment of Elliot Jacobs —- Audit, Risk and Compliance Committee
The Board is asked to approve the appointment of Elliot Jacobs as a member of the Audit, Risk
and Compliance Committee. Elliot currently is not appointed to any Board Committees, and
similarly to Saf, as a serving Postmaster, has the potential to bring unique views to the work
of the Audit, Risk and Compliance Committee.
The Board is asked to note that the UK Corporate Governance Code (provision 24) provides
that the Audit, Risk and Compliance Committee should be composed of independent non-
executive directors. This provision is currently not satisfied given Tom Cooper, as shareholder
representative, is a member of the Audit, Risk and Compliance Committee, and disclosure to
this effect is made in the Company’s Annual Report and Consolidated Financial Statements. A
similar disclosure would be required in respect of Elliot.
Appointment of Brian Gaunt - Remuneration Committee
The Board is asked to approve the appointment of Brian Gaunt as a member of the
Remuneration Committee. Brian joined the Board in January 2022 and is currently not a
member of any Board Committees. Brian’s appointment may provide Brian with further
opportunities to establish himself.
The Board is asked to note that the UK Corporate Governance Code (provision 32) provides
that the Remuneration Committee should be composed of independent non-executive directors.
This provision is currently not satisfied given Tom Cooper, as shareholder representative, is a
member of the Remuneration Committee, and disclosure to this effect is made in the Company’s
Annual Report and Consolidated Financial Statements.
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Tab 12.3 Sealings Report
@
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POST OFFICE LIMITED
BOARD REPORT
Input Sought: Approval
The Directors are invited to consider the Register of Sealings and to approve the affixing of
the Common Seal of the Company to the documents set out against items number 2146 -
2155 inclusive in the Register of Sealings.
Executive Summary
For the Directors to resolve that the affixing of the Common Seal of the Company to the
documents set out against items numbered 2146 — 2155 inclusive in the Sealings Register are
hereby confirmed.
Strictly Confidential
334 of 342
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Title: Sealings Report Meeting Date: I 27't September 2022
. I Rubia Khanom, Company ‘ Rachel Scarrabelotti, Company
aia Secretariat Administrator Sebieer Secretary
12.3
POL-BSFF-WITN-017-0047945_0333
2Z/60/22-Bunee~W pseog 10d
Ze 40 Gee
Date Created
16/09/2022
Post Office Limited
Register of Sealings
POL00448625
POL00448625
8S ZL GEL
Company Number
2154540
yodey sBul
‘Seal Number
[File Ref.
Date of
Sealing
Date of
Authority
Description of Document
Persons Attesting
To Document
Destination of
Document
2146 / Lease
Renewal
2147 / Side
Letter
2148 / Lease
2149/ Side
Letter
2150 / Licence
for alterations
11/07/2022
11/07/2022
19/07/2022
19/07/2022
19/07/2022
Strictly Confidential
13/06/2022
13/06/2022
18/07/2022
18/07/2022
Lease renewal relating to Property at 351 and 353 Kings Road London,
I SW3 5EX between The Mayor and Burgesses of the Royal Borough of
Kensington and Chelsea situated at The Town Hall Homton Street
London W8 7NX ("the Landlord"), and Post Office Limited (incorporated
and registered in England and Wales under company registration number
02154540), the registered office of which is at Finsbury Dials, 20 Finsbury
Street, London EC2Y 9AQ (the "Tenant’)
Side Letter in respect of the lease relating to property at 351 and 353
Kings Road London, SW3 SEX between THE MAYOR AND BURGESSES
OF THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA of The
Town Hall Horton Street London W8 7NX ("the Landlord”), and Post
Office Limited (incorporated and registered in England and Wales under
company registration number 02154540), the registered office of which is
at Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ (the "Tenant".
Side letter will signed by the Landlord upon completion. i
Lease of part of a retail building relating to 79B Hampstead High Street,
London, NW3 1QL between: Post Office Limited (with company number
2154540) whose registered office is Finsbury Dials, 20 Finsbury Street,
London, EC2Y 9AQ (Landlord); Sisu Clinic UK Limited (with company
number 13922412) whose registered office is Redland House, 157
Redland Road, Redland, Bristol BS6 6YE (Tenant); Sempiternal
Aesthetics Limited (with company number FC036443) an overseas
company incorporated in Ireland whose registered office is 60 Oliver
Plunkett Street, Cork, Ireland (Guarantor)
Side Letter in respect of the lease relating to part of a retail building at
I 798 Hampstead High Street, London, NW3 1QL between: Post Office
18/07/2022
Limited (with register company number 2154540) whose registered office
is Finsbury Dials 20 Finsbury Street, London, EC2Y 9AQ; Sisu Clinic UK
Limited (with registered company number 13922412) whose registered
office is Redland House, 157 Redland Road, Redland, Bristol BS6 6YE;
Sempiternal Aesthetics Limited (with registered company number
FC036443) an overseas company incorporated in Ireland whose
registered office is 60 Oliver Plunkett Street, Cork, Ireland
/ Licence for alterations relating to part of a retail building at 79B
Hampstead High Street, London, NW3 1QL between: Post Office Limited
(with registered company number 2154540) whose registered office is
Finsbury Dials 20 Finsbury Street, London, EC2Y 9AQ (Landlord); Sisu
Clinic UK Limited (with registered company number 13922412) whose
registered office is Redland House, 157 Redland Road, Redland, Bristol
BS6 6YE (Tenant); Sempitemal Aesthetics Limited (with company number
FC036443) an overseas company incorporated in Ireland whose
I Rachel Scarrabelot
Rachel Scarrabelotti (Company
Secretary), Alisdair Cameron
(Director)
IThe Landlord
(Company
Secretary), Alisdair Cameron,
(Director)
I Rachel Scarrabelotti (Company
Secretary),
(Director)
Cameron,
I Rachel Scarrabelotti (Company
Secretary), Alisdair Cameron,
(Director)
Karima Karger (Legal)
I Karimer Karger (Legal)
I Karima Karger (Legal)
I Karima Karger (Legal)
I Karima Karger (Legal)
POL-BSFF-WITN-017-0047945_0334
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Date of Date of Persons Attesting Destination of a
Sealing Authority Description of Document To Document Document a
registered office is 60 Oliver Plunkett Street, Cork, Ireland (Tenant's sg
Guarantor). 8
2151/ Lease 12/08/2022 10/08/2022 I Lease of Whole - Unit 20 Nursling Industrial Estate, Majestic Road, ‘Sarah Koniarski, Senior Assistant Karima Karger Legal and Womble
De
surrender
Nursling, Southampton SO16 OYT between Aviva Life and Pensions UK
Limited (Landlord) and Post Office Limited (Tenant). Executed under
Company Seal 2151(x2).
Company Secretary
Bond Dickinson
Deed of Surrender of Underlease ‘May 2021 - Unit 20 Nursling
Industrial Estate, Majestic Road, Nursling, Southampton SO16 OYT
between Loomis UK Limited (Landlord) and Post Office Limited (Tenant).
Executed under Company Seal No 2152(x2),
‘Sarah Koniarski, Senior Assistant
Company Secretary
Karima Karger (Legal) and Wor
Bond Dickinson
2153 / Floating
charge
confirmation
12/08/2022
10/08/2022
Letter of non-crystallisation: Premises at Unit 20 Nursling Industrial
Estate, Majestic Road, Nursling, Southampton S016 OYT - Debenture
over the property of Post Office Limited. Executed under Company Seal
No. 2153,
Post Office Limited hereby confirm that, in relation to the debenture in
favour of The Secretary of State for Trade and Industry dated 17th
October 2003, and the debenture in favour of Alliance and Leicester PLC
dated 4 April 2007, so far as we are aware none of the events that would
give rise to the crystallisation of the said debenture have occurred.
‘Sarah Koniarski, Senior Assistant
Company Secretary
Karima Karger (Legal) and Womble
Bond Dickinson
2154 / Lease 01/09/2022
31/08/2022
Lease Renewal in respect of Unit 6 on the Ground Floor of Peninsula
Apartments ,4 Praed Street West End Quay, Paddington, London W2 1JE
between WEST END QUAY LIMITED with registered number 584778, of
Les Echelons Court, Les Echelons, St Peter Port, Guernsey, GY1 1AR
(Landlord) and Post Office Limited with registered company number
02154540, whose registered office is at Finsbury Dials 20 Finsbury Street,
London, EC2Y 9AQ (Tenant),
Rachel Scarrabelotti, Company
Secretary and Alisdair Cameron,
Director
Karima Karger, Legal and Womble
Bond Dickison
2155 / Side
Letter
01/09/2022
Strictly Confidential
31/08/2022
Side letter relating to the Lease Renewal of Unit 6 on the Ground Floor of
Peninsula Apartments ,4 Praed Street West End Quay, Paddington,
London W2 1JE between WEST END QUAY LIMITED (Landlord) and
Post Office Limited (Tenant).
Rachel Scarrabelotti, Company
Secretary and Alisdair Cameron,
Director
Karima Karger, Legal and Womble
Bond Dickison
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Tab 12.4 Future Meeting Dates
POST OFFICE LIMITED
BOARD REPORT
Title: Future Meeting Dates Meeting Date: I 27'" September 2022
Rubia Khanom, Company Rachel Scarrabelotti, Company
Secretariat Administrator Secretary
Author:
Sponsor:
Input Sought: Noting
The Directors are requested to note the future meetings dates scheduled in respect of Post
Office Limited Board and Committee meetings.
2022
Date Time Meeting
Friday 08 September 2022] 10:00 - 12:00 I Historical Remediation
Committee’
Monday 26 September 2022] 15:00- 17:30 I ARC
Tuesday 27 September 2022 I 10:00- 11:00 I Nominations Committee
Tuesday 27 September 2022I 11:00- 12:30 I Remuneration Committee
Tuesday 27 September 2022 I 13:00- 17:30 I Board
Thursday 29 September 2022 I 08:30- 11:00 I Historical Remediation
Committee’?
Monday 10 October 2022 I 14:00 - 16:00 I Historical Remediation
Committee*
Tuesday 01 November 2022] 10:00- 15:30 I Board
Monday 21 November 2022 I 09:30- 11:30 I Historical Remediation
Committee®>
Monday 05 December 2022] 15:00- 17:30 I ARC
Tuesday 06 December 2022 I 10:00- 11:00 I Nominations Committee
Tuesday 06 December 2022 I 11:00- 12:30 I Remuneration Committee
Tuesday 06 December 2022} 13:00- 17:30 I Board
1 We are collapsing the HRC meetings on the 1* and 16" September into one single meeting to be held on 8 September.
2 Occurs every 2 weeks on Thursday effective 06/01/2022 from 08:30 - 10:30
3 HRC Members have agreed to extend this meeting by 30 minutes and to allocate additional agenda time to discuss the level of
disputes, lessons learnt and other priority items.
* Due to NED diary clashes, the meeting on Thursday 13" October has been moved to 10" October.
5 Due to NED diary clashes, the meeting on Thursday 24" November has been moved to 21* November.
Strictly Confidential 1
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Tab 12.4 Future Meeting Dates
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2023
Date Time Meeting
Monday 23 January® 2023} 14:30- 17:00 I ARC
Tuesday 24 January 2023 10:00- 15:00 I Board
Tuesday 28 February 2023 I 09:30 - 12:30 I Additional Board to discuss the
initial review of the 2023/24
budget
Tuesday 28 February 2023 I 13:00- 14:00 I Nominations Committee
Tuesday 28 February 2023} 14:00 - 15:30 I Remuneration Committee
Tuesday 28 March 2023 10:00- 12:30 I ARC
Tuesday 28 March 2023 I 13:00- 17:30 I Board
Tuesday 16 May 2023I 09:00- 11:30 I ARC
Tuesday 06 June 2023 I 09:30 - 10:30 I Nominations Committee
Tuesday 06 June 2023} 10:30- 12:00 I Remuneration Committee
Tuesday 06 June 2023 12:30- 17:30 I Board
Monday 10 July 2023I 14:30- 17:00 I ARC
Tuesday 11 July 2023 I 09:30 - 14:00 I Board
Tuesday 11 July 2023 I 14:45- 18:00 I Board Strategy Away Day - 1
Wednesday 12 July 2023 I 08:30- 17:00 I Board Strategy Away Day - 2
Monday 25 September 2023I 14:30- 17:00 I ARC
Tuesday 26 September 2023 I 09:30- 10:30 I Nominations Committee
Tuesday 26 September 2023 I 10:30- 12:00 I Remuneration Committee
Tuesday 26 September 2023 12:30- 17:30 I Board
Tuesday 31 October 2023} 10:00- 15:00 I Board
Monday 27 November’ 2023I 14:30- 17:00 I ARC
Tuesday 28 November 2023 I 10:00- 11:00 I Nominations Committee
Tuesday 28 November 2023 I 11:00- 12:30 I Remuneration Committee
Tuesday 28 November 2023 I 13:00- 17:30 I Board
© In January 2023 and January 2024, there is an Internal Audit session from 17:00 - 17:30.
7 In November 2023, there is an External Audit session from 13:30 — 14:00.
Strictly Confidential
338 of 342
POL Board Meeting-27/09/22
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Tab 12.4 Future Meeting Dates
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2024
Date ‘ime Meeting
Monday 29 January® 2024} 14:00- 17:00 I ARC
Tuesday 30 January 2024I 10:00- 15:00 I Board
Tuesday 20 February 2024 I 09:30 - 12:30 I Additional Board to discuss the
initial review of the 2024/25
budget
Tuesday 20 February 2024} 13:00- 14:00 I Nominations Committee
Tuesday 20 February 2024] 14:00 - 15:30 I Remuneration Committee
Tuesday 26 March 2024I 10:00- 12:30 I ARC
Tuesday 26 March 2024I 13:00- 17:30 I Board
12.4
® In January 2023 and January 2024, there is an Internal Audit session from 17:00 — 17:30
Strictly Confidential
POL Board Meeting-27/09/22
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Post office Limited I
‘Board Governance Map & Forward Plan 2022/23 (mb tems are shaded where the item or date is tenttive) Ff
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STANDING ITEMS FOR PRESENTATION
[Welcome and Conflict of Interest I Companies Act 2005 8.177 Grr Noting x x x x x x x x
Minutes from previous meeting Tera of Reference Company Secretary —I Approval x x x x x x x x
Matters Arising WA Company Secretary Noting x x x x x x x x
Committe report (verbal) Te of Reference Commitee Chairs ting x x x x xX x x x
eo report Terms of Reference ceo Noting & diecast I x x x x x x x x
Financial Performance Report
(Rortered perder Terms of Reference cro Noting 8 discussion I x x x x x x x x
STANDING ITEMS FOR NOTING (NO PRESENTATION)
Health & Safety Report Terms of Reference cro Noting x x x x x x x x
[Setery, Environment and Business
[concivutty attends for these item.
Historical Matters: HMU and Public MU and Inaury
seit Terms of Reference Cae Noting x x x x x x x x
Governance ems: Farwar
Eevernance ems Tens of Reference Company Secretary Noting x x x x x x x x
: ; The strategic procurement is acheduled ex
apecenin pend eves sae Terms of Reference fxecutve Ten Noting x x x Je iecussion item periodically and this tem
- - jis attended by the Director of Procurement.
CYCLICAL ITEMS: (annual unless other ‘stated Tn columny_
oprava Tor Dra Sore aR wr TS
Budget and performance agsinet Terms of Reference cro sabmigsonto I x x x approve in March for submission to the
1 ‘Shareholder IShareholder.
Free-pear pan fesnle wl ‘ecmeniaen ra Revere for Draft approved or submission to the
[Government Spending review) Ppenils Sharehoaern August 2023
(Quarterly Deep Dive 2022/23 Board Request - Board Meeting of
Quarter us oo cro Discusion x x
FY yearend 31 March, deadine for fling 31
Annual Report and Accounts Terms of Reference ARC chair CO Approval x December bit must at be adn Parent.
Dicaesion ard
Dedicated strategy sessions Terms of Reference executive Team Roped of scheduled for 192,
recommendstons
. = Network Strategy Delivery usualy each septermber/ October. The Report
Network Performance Report Terms of Reference Statesy Approval x usualy each Sepember/ Oc
Governance Repart (terms of
Treterence review, register of
aferaten ravi reglabar ot Terms of Reference Company Secretary I Approval x x
Idelegated authorities)
X(Boerd
Discusion and Review Ihe Bord and Committee Evaluations shouldbe
pprval of Progress ‘erally fcitated every third yar to comply
board and Committee Evalustions Terms of Reference company Secretary I Aprovalef, I garnet I ema fectiacd olay sie yon te
actors Recommend ble Sector gudance on corporate governance
tions)
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‘Strategic Platform Modernisation
[Programme
Zéravko Mladenov email 30/05/22
Business Transformation
rector
GE Decision, ROC &
'ARC (noting with
loresentation), BoardI
(noting without
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I Suh peocraton}
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Updated Proposal: GE on 12th October, RCC on
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Board Action from 12 July 2022
CO/ Commercial
Strategy & Planning
Director
Noting
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