POL00448669
POL00448669
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON TUESDAY 30 MARCH
2021 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ BY CONFERENCE CALL AT 11:45 AM?
Present: Tim Parker Chairman (TP)
Nick Read Group Chief Executive Officer (NR)
Tom Cooper Non-Executive Director (TC)
Carla Stent Non-Executive Director (CS)
Lisa Harrington Non-Executive Director (LH)
Zarin Patel Non-Executive Director (ZP)
Alisdair Cameron Group Chief Finance Officer (AC)
In attendance: Veronica Branton Company Secretary (VB)
Max Jacobi Strategic Financial Planning and Analysis Director (MJ)
(Item 5.)
Dan Zinner Group Chief Operating Officer (DZ) (Items 5. & 6.)
Owen Woodley Group Chief Commercial Officer (OW) (Items 5. & 6.)
Martin Kearsley Product Portfolio Director — Banking, Payments &
Transactional Products (MK) (item 6.1)
Tom Wasilewski Head of Commercial Development (Item 6.2)
Mark Siviter Product Portfolio Director - Mails, PUDO, Retail & Gov
Services (MS) (Item 6.2)
2dravko Mladenov Head of Business Transformation Unit (ZM) (Item 6.3)
Catherine Stalker Independent Audit (CST) (item 7.)
Richard Sheath Independent Audit (RS) (Item 7.)
Jeff Smyth Chief Information Officer (JS) (items 8.4 - 8.6)
Apologies: Ken McCall Senior Independent Director (KM)
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. Minutes and Matters Arising
The Board APPROVED the minutes of the Board meetings held on 26" January and 26"
February 2021.
The Board NOTED the action log and status of the actions shown.
3. Appointment of Tom Cooper as a member of the Nominations Committee
The Board APPROVED the appointment of Tom Cooper as a member of the Nominations
Committee.
4. CEO Report
Nick Read reported that overall performance had been good and provided an update on
the trends, noting that there had been no major changes from a trading or branch network
perspective, as well as in the financial services or insurance businesses during the period.
The core deliverables of the Telco sale, the Amazon trial progressing, the publication of the
Annual Report and Accounts for 2019/20 and the approval of the security documents had
+ 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.
Page 1 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21 1 of 56
POL-BSFF-WITN-013-0000055
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
2 0f 56
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
been completed. The coverage of the Annual Report and Accounts 2019/20 had been
balanced but with questions raised about POL's ability to fund the litigation costs. Activity
was focussed on the Improvement Development Group work, including the key and urgent
priorities identified in the Deloitte report. The work from the KPMG team had been
disappointing initially but NR was having weekly conversations with the senior partner,
and the work and resources provided were much improved.
The Board had asked questions about the work we were doing on culture, this included:
“adopt an area” for senior leaders; a “Week in the life of a Postmaster” training sessions
for all colleagues; “Stronger together” events to better define our ways of working, all of
which were leading to an all colleague conference at the end of April 2021. Our
expectations of colleagues at different levels of the organisation would be set out with a
framework to drive better performance. The work we were doing with Postmasters and to
support Postmasters had been outlined to the Board by Amanda Jones, including the
engagement with the senior team and how we were addressing issues raised, with a focus
on fixing the issues that were within our control.
The key priorities from the Postmaster consultation were outlined. We needed to improve
our communications cascade. NR noted that he had held conversations with a number of
public figures about the Public Inquiry and they all agreed that we needed to make a clear
distinction between the past and the present but that we could not “keep our heads
down” and had to communicate actively. Tim Parker noted that most of the problems had
occurred when Post Office was still part of Royal Mail Group.
NR reported that the interaction with the Inquiry Secretariat continued to be positive but
the requests and timelines for the provision of information were not consistently
structured. We were working through how colleagues could participate in the Public
Inquiry’s work most effectively and were supported in this regard by Lexington. We
needed to keep reminding people that the Post Office colleagues today were working to
make improvements. The reporting of the CACD judgments was likely to be
uncomfortable and we needed to be proactive in our communications, making clear the
distinction between the POL of the past and the POL of today. NR would be engaging in
communication activities over the next few weeks to be transparent about what we were
doing to manage today and tomorrow effectively. TP noted that it might be helpful to
refer to historical Post Office to draw the distinction clearly.
NR noted the people challenge in the organisation as individuals were being asked to do
more and to work quickly. We recognised this pressure but saw it as tied to the Public
Inquiry timeline. However, while we could “run” as an organisation we did not have the
capability to produce the changes needed in the longer-term.
A number of points were raised and addressed:
«Tim Parker asked about BEIS’s thinking on the Judicial Review application of which they
had been notified. Tom Cooper reported that BEIS had received a letter from Alan
Bates and his lawyers stating that the Public Inquiry should be a statutory inquiry and
setting out the reasons for that.
© Tim Parker was interested in the Postmasters’ views on the Horizon system specifically.
NR reported that criticisms were largely about the processes that wrapped around the
platform which made operating Horizon complicated, rather than the system per se.
TP noted that the gap between perception and reality vis-a-vis the Horizon system was
critical. Al Cameron noted that he had been preparing for the Public Inquiry and the
team had referred to a paper about the IT system which had described it as “not fit for
purpose” but tracking back this had been do with the cost and sustainability of the
system rather than its current operation. NR agreed that it was an expensive system to
Page 2 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21
POL00448669
POL00448669
POL-BSFF-WITN-013-0000055_0001
POL00448669
POL00448669
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
run, that it was “clunky” but that it worked. TP noted that we also needed to
distinguish clearly between the different versions of Horizon.
* Lisa Harrington asked about the return to office work. She noted that the organisation
she was working for was trying to encourage people back into the office where this was
important for creativity and collaboration. NR thought it was important to talk to
colleagues about the approach and get their views, which we were doing. We would
start more face-to-face working on an ad-hoc basis after 21* June 2021; however, our
focus was on the Public Inquiry, and July and August should also be a time to give the
senior team some scope to take holiday and come back refreshed for September. Carla
Stent noted that in planning for the Public Inquiry some face-to-face discussions could
be helpful.
* Carla Sent raised the controls around the Amazon trial and for engaging with further
partners as the devices used were outside the Horizon system. NR reported that he
had asked Mark Siviter and Zdravko Mladenov to address these concerns in their
sessions later today. Lisa Harrington added that it was the integration rather than the
device per se that was the issue.
* Carla Stent asked whether participation of 1,700 Postmasters in the consultation was a
low number. NR thought not, given the historical levels of engagement but we needed
to keep building our engagement levels. TP added that typical surveys drew in those
with polarised views but it would be beneficial to increase Postmaster engagement
levels overall.
© Zarin Patel raised a number of points:
- with reference to the organisation “running hot” it seemed as though Dan Zinner
was addressing the requirements to improve the Postmaster experience but she
wondered who on the GE was able to step back and consider the overall risk and
controls impact of the changes we were making. NR thought that for risk
management there was an open question on whether we should bring audit and
risks together in a GE level role. ZP noted that she had been thinking more about
who the lateral thinkers on these issues would be on the GE. Carla Stent added that
we should be bringing Internal Audit into more of the conversations about change,
while a lot of the role sat with Al Cameron and Ben Foat. Al Cameron noted that
outstanding audit and risk professionals were rare and if we wanted a strategic role
for audit and risk we would need to approach this differently. Over the last year
risk and audit had been affected partly by bandwidth and partly by a lack of
confidence in being able to change the future. Tim Parker noted that first and
foremost you needed good people in roles and one of the key challenges for POL
was getting the right people in place responsible for taking the key decisions.
- ZP wanted to understand our digital strategy on Mails following our current focus
on the Public Inquiry as she was concerned that we were late to market. NR
reported that he had asked to understand the BAU change management
requirements in more detail. We had been slow to market and were working on
PUDO and customer journeys at the same time. POL investments over the past few
years had been focussed on the platform services.
- ZP would like to have a discussion at the Board on the Postmaster consultation and Action: VB to
the sense coming out of this that some Postmasters would prefer to be employees __ flag with
- ZP agreed that it was right to be proactive in our communications but wondered Amanda Jones
whether we would truly resolve the historical matters without an approach akinto 2nd add to
a truth and reconciliation commission. Al Cameron noted that some of the forward
Postmasters involved in the historical debate were seeking to obtain compensation 72°?
from BEIS. POL should be agnostic about the type of Inquiry run but be clear that
we would support whatever type of inquiry was run. NR added that we should be
clear that we thought Postmasters should be compensated where there had been
Page 3 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21 3 of 56
POL-BSFF-WITN-013-0000055_0002
5.2
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
an injustice. TP noted that all parties had an interest in resolving the position of the
past.
Finance
Financial Performance Report
Al Cameron introduced the budget plan for 2021/21. The team had reviewed this in detail
with UKGI/ BEIS. We were not projecting a very positive trajectory for the reasons set out
in the paper on trading uncertainties and the limited scope for cost reductions as it was
not the right time to take significant costs out of the business nor would we want to
reduce Postmaster remuneration. We had deliberately stopped further work on
considering outsourcing options for Supply Chain. DMB franchising was linked to the
affordability of change spend. While we could remove c400 roles from functions it would
take a year to deliver on automation requirements and resources were focussed on the
Public Inquiry work. The trading profit assumption was £4m better than it had been in
January 2021.
Overperformance had been declining over time. NR noted that he had spoken with
directors about this individually. Costs would be incurred addressing the Public Inquiry
recommendations and the work also needed to take place in advance of the Public Inquiry.
Tranches 3 and 4 of the Organisation Design (OD) would not happen this year. The revenue
numbers were subject to variability and we were facing some significant headwinds. TP
noted that this uncertainty in travel was true for Samsonite as well.
A number of points were raised and addressed:
* Tom Cooper thought the trading profit figure should be higher notwithstanding that we
would not be able to remove significant costs this year and the trading uncertainty
because of travel market and so forth. He did not want to set an unrealistic target but
did want it to be challenging as a reward incentive. Al Cameron agreed that what was
or not within our control should be recognised by the Remuneration Committee so if
Page 4 of 17
STRICTLY CONFIDENTIAL
POL00448669
POL00448669
POL-BSFF-WITN-013-0000055_0003
POL00448669
POL00448669
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
we received an additional sum from FRES that had not been assumed that should not
increase the figures from a bonus perspective
* Zarin Patel asked about the Mails and Banking figures set out in appendix 11 of the
paper and why the Mails market outlook was not as positive as it had been when
agreeing the 4-year plan and whether were we being too prudent in our assumptions.
Lisa Harrington noted that she had the same question but wondered whether it was
primarily a timing issue. Al Cameron agreed that it could be a timing issue; volumes
would increase after the trial period with Amazon but would not deliver significant
profits immediately and the margins in Mails were low. Owen Woodley noted that the
figures were better in the outer years of the plan. Max Jacobi added that Mails was
one of the few areas better off from a trading perspective during the past year;
however, the material upside in Mails had been offset by the impact of lockdown on
the other businesses. OW added that it was difficult to anticipate the impact of
lockdown on Mails in the future, for example, the benefits of home shopping appeared
to be tailing off. Lisa Harrington noted that there would still be a material change in
buying patterns into the future. Tim Parker noted that it would be important to track
the changes under MDA2. Nick Read reported that we wanted to drive a different
sales behaviour in Postmasters supported by Area Manager briefings but we were
being prudent in our assumptions. Al Cameron added that there had been limited
active sales among Postmasters historically so it would not be prudent to assume a
radical shift in this pattern. TP explained that his point was more about RMG seeking
to take business away from POL. NR noted that this was the biggest threat felt by
Postmasters. ZP suggested that the Board look at delta on Mails at the end of Qi
trading to test whether our assumptions were too conservative.
© Carla Stent asked about the investment spend and prioritisation set out in appendix 8.
Dan Zinner reported that we had taken out £36m of change spend this month. This
linked to the deferral of OD changes and the slowing down of the DMB franchising
programme. We would be prioritising any improvements linked to conforming with
the judgments and £13-14m of spend linked to HNGA. DZ explained that some project
names had changed and elements of work had moved around. Carla Stent noted that it
would be helpful to show changes such as this.
* Dan Zinner explained that the £34m coming out of CIO costs related to headcount in
response to a question from Carla Stent.
* Carla Stent asked whether we were still focussing on the strategic measures we had
discussed in July 2020. NR confirmed that we were still focussing on Mails, Cash and
Banking but we had less investment money available to us. We had changed our
outlook on headcount for the reasons discussed already. Our assumptions had been
more optimistic in July 2020 when we had not absorbed the implications of the Public
Inquiry fully and had not assumed lockdown 2 and 3. Some of the changes were where
we had targeted for self-serve arrangements for Postmasters, headcount reductions
and greater speed of DMB franchising which would not be prudent now though the
position could change in the future.
* AlCameron noted that UKGI and Tom Cooper had challenged the HMBU budget and he
agreed that the legal costs needed to be controlled. Some of the contractors in HMBU
were paid above market rates. The trajectory was higher than the budget and this
would be worked through. This might be a zero-sum game but should result in better
controls.
© Tim Parker noted that there had been four or five meetings with UKGI/ BEIS about the
budget but asked whether we were still in a position where it would be difficult for
Tom Cooper to recommend the budget to the Minister with the trading profit
assumption currently shown. Tom Cooper reported that he had shared the views that
he had raised with the Board on the revenue line with UKGI/ BEIS. In aggregate the
Action: AC/
M
Page 5 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21 5 of 56
POL-BSFF-WITN-013-0000055_0004
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
6 of 56
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
revenue lines seemed conservative; he had no particular issue with the cost line but
thought the budget should be set in the region of £50-60m. We needed the Team to
focus on a stretching target. Legal costs remained an issue of concern and UKGI/ BEIS
had been flagging this since the summer. It was important that we avoid conflating the
budget with an open and honest discussion on pay. TP asked what the next steps
would be if the Board approved a budget which the Minister thought too low. TC
explained that UKGI/ BEIS would have to provide advice to the Minister on whether or
not to approve the budget. TP referred to the recent letter from UKGI which had raised
historical outperformance, an apparent incremental £26m of benefits and the
underlying performance of the budget being worse. He asked what we would do if we
accepted a higher budget and then the team were significantly behind at end of Q1 as
we wanted a budget that would be motivating for the Team while representing a
challenging target. POL had a reasonably fixed cost structure outside of its legal costs.
The real unknown issue was revenue. We could accept, for example, a higher
assumption for Travel, if we took a view that that market would pick up significantly
but a £60m budget was significantly higher than the £38m proposed. AC noted that
the legal costs were an important issue but did not change the position on trading
profit. There was a question of what levers we had to improve performance but AC did
not think these existed to increase trading profit by an additional £10-20m and was not
clear what we could do differently as an executive team. Tom Cooper suggested there
should be a range to reflect a range of possible outcomes with outperformance not
achieved until the top of that range had been reached; he felt it was a mistake not to
set out the legal costs in this document and have a full discussion about this now. AC
noted that we also had to reflect that we had a number of declining business lines and
Max Jacobi reported that he had taken the UKG! team through the benefits, which
were not entirely driven by project benefits. We had tried to be clear on how project Action: AC/
benefits flowed through the business. TP noted that we needed to understand the MI
declining elements clearly.
TP noted that POL had consistently taken people out of the business over the last few
years and struggled to understand any inefficiencies creeping into the business. NR
reported that POL had around 3,500 employees, 1,000 plus worked in DMBs and circa
800 worked in Supply Chain but, at previously discussed, there were reasons for not
progressing with options for outsourcing now. Ultimately, we wanted to reach a figure
of c 1,600 ~ 1,700 employees. NR agreed that we needed to manage the legal costs
differently and we would be addressing the issue.
Carla Stent noted that there was material uncertainty around a number of factors and
this made it difficult to produce a budget. We should work with the knowledge that
we have, focus on investment spend, set a trading profit target that was stretching but
achievable but look at this after the first quarter and second quarter and review the
remuneration position following this. Tim Parker noted that we either accepted the
fixed costs or we did not. We may not have the right answers on Mails and Banking but
the team had provided their view on this. The one element we could take a view on
was Travel and adjust the budgets if our assumptions on this were wrong. We had to
back the Team and TP did not think there should be a range of figures. Al Cameron
noted that the profit drop from FRES last year was circa £30m and the Travel market
would not revive in Q1 this year but we could be clear on the profit assumptions for
FRES and this was a binary output. TP noted that it was clear that there was disquiet at
BEIS about an outcome that was lower this year than last but he was not comfortable
with increasing the assumptions as much as proposed by BEIS. Al Cameron added that
we were not assuming that we would make less money ona like-for-like basis this year
than last year. We had sold the Telco business and had included £9m for declining
business areas. Our starting point was £29m down. Dan Zinner added that we had an
Page 6 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21
POL00448669
POL00448669
POL-BSFF-WITN-013-0000055_0005
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
6.1
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
existential threat posed by the litigation and we had to fix all the issues we were
uncovering. The cost structure would come under more pressure rather than less. Tim
Parker noted that he would like to reach a position that the BEIS Team was likely to
support.
The Board AGREED that a range of scenarios/ outcomes should be included for FRES and
this would be worked through over the next few days. Otherwise, the draft budget for
2021/22 was APPROVED for submission to BEIS. The assumptions for Mails, in particular,
would be reviewed at the end of Q1. The legal costs for HMBU would be addressed.
Strategy Updates
Banking Framework 3
Owen Woodley introduced paper. Today’s focus was on agreeing a general approach to
the next stage of the discussions with the banks and developments of the pricing
framework. There was a “sweet spot” between the provision of counter services and
maximising the value of the services provided, as well as addressing the reaction of the
banks to BF2 and developments of alternatives to Post Office for deposits and
withdrawals. Banking services were critical to POL revenue flows.
Martin Kearsley reported that the income for Postmasters from the sion of banking
services had increased over the past few years. BF2 generated circalmcicvmria year. A range
of j r was included over three years for BF3 and the thinking behind the range
was explained. It was proposed that we move from a stepped approach for numbers of
transactions to a curve which was designed to encourage volume and moving withdrawals
closer to a market rate to incre etitiveness and discourage any banks from
leaving the Banking Framework. 'was likely to take up the option to stay on BF2
rates. We wanted to avoid providing the banks with an ultimatum and to improve levels of
trust. The final deal would be brought back to the Board for approval in June 2021.
Nadia Farr explained the approach to the work Accenture had undertaken. Phase 1 had
been focussed on external findings and we now had a good overarching view of the
market trends. There had be dive into the views of the banks on the counter
service role POL provided and “had looked at the alternatives for service
provision the banks had in place or could develop. Postmasters generally thought
remuneration was fair but thought the framework could be more consistent across the
ices and what the fee covered was a more significant issue for the banks
I There were some counter cash alternatives in place which
were more established for withdrawals.with-ATMs and.cashhack..which was-exneriencine..,
i IRRELEVANT
Phase 2 of the work was the design phase with the objective of developing a more flexible
service.
Martin Kearsley noted that some retailers, such a:
were looking for
available for those in BF2 when moving to BF3. There had been a series of external
engagements to guide us through the development of the model.
A number of points were raised and addressed:
thought the proposed approach made sense in aggregate, including
i IRRELEVANT __ I However, he thought that the changes proposed to the
f because as our! in the future we
Page 7 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21
Action: AC/
M
POL00448669
POL00448669
7 of 56
POL-BSFF-WITN-013-0000055_0006
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
6.2
8 of 56
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
would. IRRELEVANT }
We should also address the AML issue and provide an incentive for the banks to
support full compliance and be able to provide a positive message on supporting a
reduction in financial crime. Martin Kearsley reported that changing from a step
system to a curve was to incentivise volumes by removing cliff edges. Our cost base
proposal was
Tim and above this sum } IRRELEVANT i
the banks. Our as: i
Jiescievanri, We still had the!
was not convinced of}.
IRRELEVANT, ‘om Cooper noted that he
IRRELEVANT
hnd he could not see
rice and in doing so should
Cameron thought that
IRRELEVANT
Tim Parker noted that the view had been that{neievanriwas the bank most likely to
pursue alternatives to Post Office services and asked whether this ill th
Cameron explained that the banks’ position entering BF2 was that! IRRELEVANT
iow satisfied or otherwise the banks were with our proposals
would affect their approach in the discussions on BF3.
eased pricing for BF2 the banks had asked
IRRELEVANT. - “7 she asked whether our views on the
i “because that could {
proposed, in addition, customer service had been raised as one of the “pain points” for
the banks so it would be helpful to understand how these concerns had been
investigated and addressed in the next report to the Board.
PUDO
Owen Woodley noted that the paper set out the position with the Amazon trial, the next
steps in expanding this service and our work to secure DPD as a further partner. It had
been announced that the CEO of DPD was leaving so we would need to see if this had any
implications for our discussions. The team continued to develop the proposition and look
at integration with Horizon.
Mark Siviter noted that PUDO was at the core of the strategy to make up market share as
we entered MDA2. There was a roadmap for digitisation and we were working through
the required mitigations as we entered MDA2 with variable pricing and the removal of the
exclusive relationship with Royal Mail Group (RMG). RMG had reacted as was expected.
There had been promotions for their Click and Drop service which was targeted more at
social senders than small businesses; the latter was where the opportunities lay for Post
Office primarily. The team were starting to see the numbers for more of the market as
they had conversations with other potential partners. Hermes was promoting its service
through free collection from people’s doors and had already increased its market share.
Post Office’s job was to work through our strategy and de-risk any steps RMG might take
that reduced Post Office's fees. The team were focussing in on: 1) what we needed to do
to support the new network model with frictionless customer journeys and switching out
of the Horizon system that made more services available 2) expanding the digital platform,
including Drop and Go but with some additional elements such as E-Bay integration and
taking more control of the digital capacity; 3) giving consideration to building an online
sales channel. The plan was to come back to the Board in July 2021. it was true that we
Page 8 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21
‘Action: MK for
the June
report to the
Board
POL00448669
POL00448669
POL-BSFF-WITN-013-0000055_0007
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
6.3
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
were late in joining the market but the principal reason for this had been our previous
exclusivity deal with RMG. Our Mails work still represented c70% of the market. 87% of
Postmasters were better off under MDA2 agreement on a like- for-like basis.
A number of points were raised and addressed:
¢ Lisa Harrington asked about financial integration, operational robustness and
feedback on the developments from Postmasters. Tom Wasilewski reported that
those branches participating in the Amazon trial were averaging 3-4 items a branch
per day. We were still at an embryonic stage and were seeking to extend this
capacity in two areas: 1) inbound parcels with customer collection and, 2) customer
drop off. Other services were harder to run and less predictable. The team were
running a co-creation group with Postmasters to consider solutions for managing
capacity constraints and how to address problems that arose. Integration with the
backend systems was being worked on over the next month. LH asked how we would
obtain assurance that the system was working, particularly if it involved Postmaster
remuneration. TW noted that the Amazon trial was a separate stream of work
running on separate devices but we wanted to integrate our PUDO services with
Horizon. Al Cameron noted that this would be a major piece of work. Remuneration
integrity was a significant element of the SPM work and the SPM team had been
having conversations with the PUDO team but a lot of new requirements had
emerged from these conversations and we needed to come back to the Board with a
view on this. Carla Stent noted that we would need to weigh up the risks and returns.
AC would bring back a paper to the 3 June 2021 Board meeting covering PUDO
integration with Horizon, cashless branches and SPM integration. Tom Cooper noted
that Payzone outlets already operated without cash and asked whether we could
leverage this opportunity. AC agreed that we needed greater integration with
Payzone but needed to consider legal and competition issues carefully. The options
for greater integration with Payzone were going to be discussed by the GE in April
2021.
* Tim Parker noted that there seemed to be significant activity in the PUDO market,
including Hermes increasing their market share significantly. Mark Siviter thought
that an optimal position for Post Office would be to continue providing RMG
Universal Service Obligation (USO) products, expanding our service with {mreevant!
LE’ { but via ai
The Board NOTED:
i. The launch of the Amazon Click and Collect trial
ii, The roadmap and releases for the PUDO project.
SPM
Zdravko Mladenov provided a progress update. There had been a significant amount of
activity across the business and we were due to launch 400 non-Horizon locations on the
1" of September 2021. The SPM Team was being developed by pairing internal and
external expertise. A governance model had been agreed with UKGI/ BEIS. Approval of the
multi-year business case would be sought from the Board on 3" June 2021 which would
then be sent to BEIS for review over the summer. Programmatic and technical assurance
work would be undertaken on the SPM work, including on remuneration calculations. The
focus over the next three months would be putting in place the 400 non-Horizon locations
and developing the business case.
A number of points were raised and addressed:
Lisa Harrington asked how the SPM work fitted with the Belfast Exit plan. Zdravko
Mladenov reported that we needed to rebuild some of the elements that we had
Page 9 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21
Action: AC
POL00448669
POL00448669
9 of 56
POL-BSFF-WITN-013-0000055_0008
POL00448669
POL00448669
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
originally thought could be “lifted and shifted” from the Belfast data centre as a black
box. Jeff Smyth and Zdravko Mladenov had been in regular discussion and agreed
that the migration of elements could only happen once but did not yet have all the
solutions in place. This issue did not relate to the database which was being taken out
of Horizon.
* — Zarin Patel noted that the Board would want to have a deep dive into the business
case before approving it as this was going to be one of the biggest decisions it would
be making. Lisa Harrington added that we should bring the board together to show
the work taking place with live demos.
* Carla Stent asked about when the Board would have sight of the assurances on the
programmatic and technical aspects of the Programme as this that would help the
Board to sign off the business case. It was confirmed that the assurance work would
be paid for by POL but both POL and UKGI/ BEIS would receive the advice. It was
proposed to “piggyback” this work on existing controls using existing providers. Carla
Stent advised that care needed to be taken to get this right as the approach described
had not always been successful in the past.
* Lisa Harrington asked whether the team had sufficient resources, noting that there
had not been significant simplification of the product sets. Zdravko Mladenov
reported that we were proceeding well with the resource requirements for the
technical team but more resource was still be needed in other areas.
Action: ZM
The Board NOTED the progress update on the Strategic Platform Modernisation (SPM)
programme and APPROVED a drawdown of £4.68M to deliver a range of concrete
outcomes and deliverables until June 2021 including (a) continuing the technical
development to launch the 400 new ‘Horizon-free’ Express propositions; (b) completing
the multi-year business case for UKGI/ BEIS; (c) completing the future Device and
Peripherals Strategy; (d) scoping the legal changes required to commercial agreements
affected by Horizon; and, (e) identifying the options to deliver better Branch MI to
Postmasters in the next 12 months.
7. Independently facilitated Board review
Catherine Stalker introduced the Board review for 2020, noting that the objective was for
the Board to be able to ask questions about the report and discuss what it wanted to do
next in light of the recommendations. The headlines were that the Board had good
foundations on which to build notwithstanding the pressures of recent times, with a focus
on resolving past issues. A clear strategic direction had been set. All directors were
aligned on the goals for Post Office. There was a good range of strengths and expertise on
the Board with a strong Chair, good working relationships and a good company secretariat.
Five areas of focus were recommended:
1) determining where the Board wanted to spend its time with a clear forward
agenda.
2) dealing with succession challenges, including making time to discuss the executive
team who were critical to the future of POL. This should include the Board
spending time with Nick Read so he could use the Board as a sounding board and
so the Board had insight into the pressures on individuals.
3) Putting in place a timely plan to manage the succession of some long-standing
board members and to integrate new members, including the two new postmaster
NEDs.
4) time needed to be spent on culture. One means of acquiring information on this
could be a culture dashboard. The NEDs also needed to get out and about more
once they were able to. This had happened less than on some other boards
Independent Audit had reviewed.
Page 10 of 17
STRICTLY CONFIDENTIAL
10 of 56 POL Board Minutes for signature-17/06/21
POL-BSFF-WITN-013-0000055_0009
POL00448669
POL00448669
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
5) there had been good development of the Risk Management framework but the
Board needed to stand back from the risk processes and structures to look at the
impact and the value. Risk management needed to add value to how things were
running in the business and a learning culture needed to be developed.
A number of points were raised and addressed:
© Carla Stent noted that we had devoted a lot of time to risk so it was sobering to
consider how much more needed to be done; she had had conversations with Al
Cameron and Nick Read about this and the approach that might be taken to drive a
more operational approach to risk management.
* Zarin Patel noted that “grounded trust” was a good phrase and we had been more risk
averse that we might otherwise have been because of the changes taking place and the
Public Inquiry, but we needed to take a shift in the direction as proposed in the Report.
* Lisa Harrington noted that she agreed with the points made in the report, including
needing to get out and about more. The relationship with our key stakeholder had not
been commented upon much and that had surprised her. Catherine Stalker explained
that Independent Audit had reviewed many organisations that were overseen by UKGI.
There was an inherent conflict in being a shareholder director but the POL Board was
managing it in the best way possible. Tom Cooper's participation was valued by the
Board and, like a private equity director, he had greater involvement and access to.
more information than other directors, but there was no suggestion that changes
should be made.
‘Tom Cooper noted that he understood the points raised on culture but there were
some limitations to this. It was hard to “get your arms around” culture. One could
state your ambition and what you wanted to achieve but it was difficult to check and
assess whether the organisation was actually doing this. Tim Parker thought that the
authenticity of management was critical to culture. People had to see that what you
were saying was what you were actually doing. We needed to talk much more about
Postmasters as a Board. We were only beginning this shift in focus but over time we
would capture people’s hearts and minds. Changes in culture were never
instantaneous but all of us wanted the culture to change. Catherine Stalker agreed
that culture was driven by the management team and that it was hard for a board to
stay in touch with this but nevertheless there had not been evidence in the papers and
discussions on culture coming through to the Board as a significant topic. A focus on
culture would be both data driven and through the individuals reporting to the Board
(e.g. the Group People Officer and the Head of Internal Audit) and there was also the
“sniff test” of seeing how things operated on the ground. Richard Sneath added that
useful discussions could be sparked by the Board asking the executive how they drove
the right behaviours which also brought alive what was happening on the ground.
* Al Cameron noted that he had been reflecting on how we had spent our time as a
board, the agenda we were driving, and the time spent responding to requests. Some
of the legal issues were very important but we also needed to recognise that BAU and
strategy were key for the longer-term success of the business. Tom Cooper noted that
the Board would nevertheless need to spend time overseeing the management of the
compensation schemes. Tim Parker noted that while much time had been spent on
reviewing individual cases referred to the Court of Appeal this had helped us set
parameters for the approach to future cases and to reach the conclusion that the
appeals should not be opposed in the overwhelming majority of cases which had been
vital. Boards only had a finite amount of time and the theme of the Report was that our
aspiration must be to focus more on BAU and strategy in future. Colleagues were keen
to revert to a more strategic view. TP also agreed with the points raised around
succession planning and talent in the Report.
Page 11 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21 11 of 56
POL-BSFF-WITN-013-0000055_0010
Tab 1 Board Minutes 30.03.2021 (approved
12 of 56
8.2
8.3
n 03.06.2021)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
* Carla Stent asked what Independent Audit’s advice would be as we brought the new
Postmaster NEDs on board. Richard Sneath noted that Independent Audit had
experience of pension trustee boards. It would be important to make sure that the
Postmaster NEDs were fully involved in the Board’s discussions and decisions and their
contributions were encouraged and heard. Tim Parker agreed that the Postmaster
NEDs must be treated as equal players and would try to get the right balance between
encouraging contributions while recognising that it took some time to get up to speed
if you were new toa board. Catherine Stalker added that it could be beneficial for
existing NEDs to go on some of the induction visits with the Postmaster NEDs to help
forge those relationships.
Tim Parker referred to the “quick wins” included in the Report. Some decisions, such 25. action: VB to
holding the ARC and Board meetings on the same day, had been to try not to impinge too include on July
much on people's diaries. However, all of the points were worthy of consideration and we agenda
would will be following up on the recommendations positively and review these again in
July 2021.
Approvals
Annual Governance Report
The Board NOTED the following to which no changes were proposed:
(a) The Delegated Authorities from the Board, including subsidiary companies and
liabilities and indemnities (full document in Reading Room, summary in Appendix 1)
(b) The delegations in place for the authentication of the Company Seal (Appendix 2)
(c) The Board Committee Terms of Reference (ToR) reviews and the Review of Matters
Reserved to the Board (full reports in Reading Room, summary in paragraph 4)
(d) The Directors’ Register of Interests (Appendix 3).
The Board APPROVED the Authorised Signatories to which changes were proposed
because of changes in roles and responsibilities (Appendix 2).
Network Strategy, including DMB Funding
The Board:
© APPROVED the exit and replacement of 57 DMB branches in 2021/22 ata cost of
{innecevanr} generating! masarannual recurring benefits.
NOTED the progress in developing new light-touch formats and plans for further
piloting and roll-out during 2021/22.
Nick Read reported that next month we would announce the end of the moratorium of
franchising DMBs which was the right thing to do strategically to move to a fully franchised
organisation.
Procurement Risk Exceptions
a. PREN29 — Public Affairs Services
The Board APPROVED an extension to an existing non-compliant direct award by an
additional 3-month term to Lexington Communications Ltd for the provision of specialist
parliamentary and government advice. This was required in order to maintain service
continuity in relation to the public inquiry.
The existing contract for the provision of advisory services in relation to ongoing and
potential inquiries had a value of up to £173,000 (until July 2021 - £101,000 having been
spent to date) but now required a further extension for an additional value of £332,889.
The total value of the spend for the Services would be £505,952.
b. Delegated Authority Request ~ Microsoft Enterprise Agreement
Page 12 of 17
STRICTLY CONFIDENTIAL
POL Board Minut
es for signature-17/06/21
POL00448669
POL00448669
POL-BSFF-WITN-013-0000055_0011
POL00448669
POL00448669
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
The Board:
* APPROVED the award of the contract to Microsoft Limited for the supply of Software
and Services up to a value of £12.5m with a forecast cost of £8.85m over a 3-year
contract.
* DELEGATED AUTHORITY to the Chief Information Officer to finalise and approve the
final agreement as Contract Owner in accordance with the commercial terms set out
in the paper presented to the Board. The contract would be executed by an approved
authorised signatory.
c. Delegated Authority Request — Property, Facilities Management Services and
Security
The Board:
© APPROVED the award of the contracts for: hard Facilities Management Services; soft
Facilities Management Services, security Grapevine Services (Planned & Reactive
Security Services - Alarm Monitoring & Maintenance, Criminal intelligence etc) up to a
value of £150m*, with a forecast base cost of £74.5m (£14.8m p.a. aggregate
excluding project related work) over a 5-year contract (being an initial term of 5 years
for lots 1, 2 & 3 with a further 3-year extension option available for lot 3 (at a cost of
~£18.6m excluding project spend, for years 2026-2029)).
© DELEGATED AUTHORITY to the Group Chief Finance Officer to finalise and approve
the final agreement as Contract Owner, in accordance with the commercial terms set
out in the paper presented to the Board and including the permitted three one-year
extensions in due course. The contract would be executed by an approved authorised
signatory.
*advertised OJEU maximum value.
It was noted that the business case should come back to the Board if the projected spend
was significantly higher than that shown in the paper. Al Cameron noted that we expected
the spend to fall as we reduced our property footprint.
d. Delegated Authority Request - Media Planning & Media Buying
The Board:
* APPROVED the award of the contract to CARAT Limited for the supply of Media
Planning, Buying and Attribution services up to a value of £65m*, with a forecast cost
of £48.2m over a 5-year contract (being an initial term of 2 years, plus three
permitted one-year extensions).
© DELEGATED AUTHORITY to the Chief Commercial Officer to finalise and approve the
final agreement as Contract Owner, in accordance with the commercial terms set out
in the paper presented to the Board and including the permitted three one-year
extensions in due course. The contract would be executed by an approved authorised
signatory.
*advertised OJEU maximum value
The OJEU process to aggregate POL’s Media Planning and Buying services had concluded.
Al Cameron reported that spend in this area included all the aggregator spend. Nick Read ction: VB to
explained where the responsibilities in this area lay in the business and we would come to include on
the Board to look at this work again in due course. forward
e. Delegated Authority Request — Affiliates & Aggregators agenda
The Board:
APPROVED the award of the contract to AWIN Limited for the supply of Affiliates and
Aggregators Network and Management Services up to a value of £50m*, with a
Page 13 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21 13 of 56
POL-BSFF-WITN-013-0000055_0012
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
14 of 56
8.4
85
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
forecast cost of £23.7m over a 5-year contract (being an initial term of 2 years, plus
three permitted one-year extensions).
© DELEGATED AUTHORITY to the Chief Commercial Officer to finalise and approve the
final agreement as Contract Owner, in accordance with the commercial terms set out
in the paper presented to the Board and including the permitted three one-year
extensions in due course. The contract would be executed by an approved authorised
signatory.
“advertised OJEU maximum spend.
This OJEU process - a separate Lot under the Media OJEU — had concluded delivering
POLa compliant and direct contract without agency margin overhead.
f. PREN31 — Digidentity
The Board APPROVED an extension to an existing non-compliant contract by an additional
13-month term to Digidentity Ltd, from 31 March 2021 to 22 April 2022 for the provision
of “Verify Services” (online identity registration service) to Post Office, required in order to
meet Post Office contractual obligations to UK Verify.
It was AGREED that our plans for developing our digital identity service would be included _—_ Action: VB to
on the agenda for the July 2021 strategy sessions. include on July
agenda
PCI Compliance Programme
The Board APPROVED:
© £4.1m additional funding for the PCI Compliance Programme (taking total programme
funding to £19.9m).
© up to an additional £3m to be made available if required. These funds would need to
be requested, with justification, for approval by the Investment Committee.
Carla Stent noted that the costs of the PCI Compliance Programme continued to increase
and asked whether we were seeking to contain the Fujitsu costs. Jeff Smyth reported that
our confidence in the completion of the contract was growing and we were now into the
banking pilot phase. There were not many “unknowns” left but it was always possible that
we would identify further areas that required PCI compliance.
Fujitsu Horizon Negotiation
The Board:
* APPROVED the award of the extension to the term of the Fujitsu Horizon Agreement
for the supply of Application Services from 1 April 2023 (“Extension CCN”).
The duration of the extension would be for a further 1+1 year period (one year was
contracted from execution of the extension and extended the agreement from 1 April
2023 to 31 March 2024, the optional extra year could be committed to no later than 31
March 2023 and extended the agreement from 1st April 2024 to 31 March 2025
(together the “Proposed Extension”)). The forecast spend was estimated at £21.3m p/a
(£42.5m estimated total), some spend was variable and demand based, and there was
no minimum commitment.
© DELEGATED AUTHORITY to the Chief Information Officer to approve the extension as
Contract Owner in accordance with the commercial terms set out in the paper
presented to the Board and including the permitted 1+1-year extensions in due course.
The extension(s) would be executed by an authorised signatory.
Page 14 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21
POL00448669
POL00448669
POL-BSFF-WITN-013-0000055_0013
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
8.6
91
9.2
93
94
95
9.6
97
98
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
It was reported that we would be publishing a Voluntary Ex-Ante Transparency Notice
(VEAT) notice, following which there could be challenge but we would be publishing a s72
notice setting out the legal justification for the approach taken.
Belfast Exit
The Board:
© APPROVED a drawdown of £9.03m to fund project activity until the end of October 2021.
This would deliver migration of the Horizon database to AWS and the Branch cutover,
whereby all branches would be connected to AWS rather than Belfast. The programme
would return to Board in September 2021 to confirm delivery progress and propose next
steps.
© NOTED the revised approach to the migration which split the remaining delivery cost
(c£19m spend to complete) into two priority sets; Priority One being mandatory to avoid
the cost/risk associated with running Horizon on out of date, unsupported software during
the 2021 peak trading period and Priority Two completing Belfast datacentre exit (and for
which options to replace rather than migrate would be investigated as a way to avoid cost
duplication with SPM)
‘© NOTED the engagement of an external consultancy to validate the division of scope into
two priority sets and to support POL efforts to optimise Priority Two scope delivery with an
update/recommendation to the Board in June 2021.
© NOTED the updated project milestone dates.
It was noted the Jeff Smyth and Zdravko Mladenov were discussing the Belfast Exit
Programme and the SPM Programme and the interfaces between the two regularly.
Noting and governance items
Health & Safety Report
The Health & Safety Report was NOTED.
Mails Regulation paper
The Mails Regulation paper was NOTED.
Telco sale and completion update
The Telco sale and completion update was NOTED.
Historical Matters Business Unit Report
The Historical Matters Business Unit Report was NOTED.
Postmaster NED appointments
The Postmaster NED appointments paper was NOTED.
Sealings
The Board APPROVED the affixingof the Common Seal of the Company to the documents
set out against items number 2031 to 2056 inclusive in the seal register.
Future Meeting Dates
The future meeting dates were NOTED.
Forward Agenda
The draft agenda for 3 June 2021 was NOTED.
Page 15 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21
Action: VB to
include on
Board forward
agenda
‘Action: VB to
include on
Board forward
agenda
POL00448669
POL00448669
15 of 56
POL-BSFF-WITN-013-0000055_0014
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
10.
16 of 56
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
Any Other Business
Independent Director with a legal background
Tim Parker referred to Tom Cooper’s note regarding appointing an independent director to
the Board with a legal background to help provide further oversight of the work on
historical matters, including the administration of the compensation schemes; TP asked
for the directors’ perspectives. Tom Cooper explained that the new director might be a
General Counsel of a large company who understood governance and could provide a legal
challenge, including on cost issues to the HMBU team which was not led by a lawyer. This
experience and oversight were needed, not just in relation to the Historical Shortfalls
Scheme but also for the criminal cases which could continue over a number of years while
needing to free up Board time for the BAU and strategic matters. BEIS would not remove
responsibility from POL for oversight of historical matters.
A number of points were raised, including:
© AlCameron agreed that the work and costs of the external legal teams needed to be
managed carefully but did not understand why that should be a Board position. It also
needed to be recognised that there was an independent panel dealing with the HSS
offers. Tom Cooper noted that the HMBU controlled most of the activities and BEIS did
not want to have day-to-day responsibility for these issues.
* Zarin Patel thought it made sense to have a legally qualified director on the Board as
the position for the Board could become more complicated with the civil claims;
however, with the Postmaster NEDs there would be a large Board and we needed to
make sure that we appointed the right person. We did not want to create a shadow
General Counsel and so needed to work through the practicalities of how this role
would work.
* Carla Stent noted that she was reassured that this individual would be an independent
director. Our structure as a Board would need to be considered if we were going to
split ourselves into sub-committees to allow the Board to focus more on strategy. Tom
Cooper noted that the Board should not need to spend nearly as much time on
individual litigation cases in the future. A Board sub-committee on historical matters
could allow Board meetings to focus on BAU and strategy. NR agreed that the day-to-
day management for historical matters was not right yet. It would need to be
determined how we would expect the new NED to operate and what their
accountabilities would be as well as needing to resolve the underlying executive
structure. NR saw the overall benefit of having a lawyer on the Board because of the
contractual issues that needed to be resolved.
© Tim Parker noted that the large amount of public money at stake meant that BEIS
needed to have confidence in the approach we were taking. We wanted someone with
relevant expertise akin to Lisa Harrington’s in IT and transformation which enabled her
to have input into the IT and SPM teams’ work which the other NEDs could not. Tom
Cooper confirmed that this would be a non-executive role and he envisaged the time
commitment being somewhere between that of the Remuneration Committee and
ARC Committee Chairs. Nick Read would need to decide the best construct for the
executive deliverables. Tom Cooper would discuss the proposed approach with Lisa
Harrington in more detail outside the Board meeting. The appointment request to BEIS
would need to be made before the next Board Meeting. A Panel from the Board would
have to interview the shortlisted candidates following the advertising and shifting
processes.
Internal Audit fees
The Board APPROVED an increase of £150k in internal audit fees for the 2019/20 financial
year.
Page 16 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21
POL00448669
POL00448669
POL-BSFF-WITN-013-0000055_0015
POL00448669
POL00448669
Tab 1 Board Minutes 30.03.2021 (approved on 03.06.2021)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
There being no other business the Chairman declared the meeting closed at 16.15 hrs.
11. _Date of next scheduled meeting
3% June 2021.
Chairman
Page 17 of 17
STRICTLY CONFIDENTIAL
POL Board Minutes for signature-17/06/21 17 of 56
POL-BSFF-WITN-013-0000055_0016
POL00448669
POL00448669
Voting Results for Board Minutes 30.03.2021 (approved on 03.06.2021)
The signature vote has been passed, 1 votes are required to pass the vote, of which 0 must be independent.
Vote Response
Count (%)
For 1 (100%)
Against 0 (0%)
Abstained 0 (0%)
Not Cast 0 (0%)
Voter Status
Name Vote Voted On
Parker, Tim For 23/06/2021 22:55
POL-BSFF-WITN-013-0000055_0017