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fe] GrantThornton
Post Office Limited
Governance review — Draft
6 February 2024
e GrantThornton
For the attention of Rachel Scarrabelotti, Company Secretary
Post Office Limited
100 Wood Street
LONDON EC2V 7ER
6 February 2024
Dear Rachel,
In accordance with the Statement of Work dated 12 October 2023, we present our draft report (the Report)
on the effectiveness of the governance practices at Post Office Limited (POL, the Company, or you).
The scope of our assignment includes; a review of governance design, procedures and practices at POL, to
identify any gaps and provide considerations as to how they may be bridged in the context of the wider
change programmes unified internally under Project Ethos. The purpose is also to confirm that practices are
in alignment with the role as set out by the Secretary of State for Business and Trade (the Shareholder or
DBT), and its duties, and general comparable good governance practice in the market.
This overall review does not seek to investigate and comment on any perceived or actual past failings. It is
concerned with establishing whether the current governance approach meets the appropriate standards
and is fit for the future based on the Company's unique position including; its ownership structure, the
requirements to resolve the past, fulfilment of social purpose, and its strategy, to ensure the interests of its
stakeholders are properly served.
Appropriate standards considered for the purposes of this review are, the UK Corporate Governance Code
2018 (the Code) mapped against the Central Government Code 2011 (the Government Code), the
governing Shareholder documents namely; the Articles of Association dated December 2022, the
Shareholder Framework Document dated March 2020, and the Funding Agreement dated April 2022,
(collectively “the foundational governance documents”), in addition to good practice as observed from
other relevant organisations of similar size and complexity.
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Grant Thornton UK LLP
30 Finsbury Square
This Report is confidential and has been prepared exclusively for you. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than POL for our work, our report and other
communications, or for any opinions we have formed. We do not accept any responsibility for any loss or
damages arising out of the use of the report by the addressee for any purpose other than in connection
with the scope set out in the Statement of Work.
We would like to thank you and the various employees and Non-Executive Directors (NEDs) involved in
initial piece of work for their commitment in giving their time to provide honest and insightful feedback,
which has supported the review process.
If there are any matters upon which you require further clarification, please contact
Jonathan Houston ¢
Yours sincerely
Sarah Bell
Part
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Contents
00 Scope and methodology
1
a
© GrantThornton
Context and background
Executive summary
Recommendations
Alternative governance model
Leadership and purpose
Division of responsbilities
Composition, Succession and evaluation
Risk, audit and internal control
Remuneration
Ou
07
27
39
45
Appendix 1
insights
Appendix 2
Appendix 3
Appendix 4
Appendix 5
Appendix 6
Appendix 7
Appendix 8 -
BoardClic Board and Leadership Surveys ~ actionable
BoardClic Board and Leadership Surveys
Supervisory Rights
Subsidiaries
Best Practice Toolkit
List of interviews conducted
List of documents reviewed
Glossary
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63
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81
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108
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0O Scope and methodology
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Company's governance processes and structures acro;
various tiers of management, including the Board to Gr]
Executive (GE), Sub Committee level (Sub Co), the Busi
Unit level, any other individuals or groups who have ha
decision making processes concerning the governance
organisation delegated to them, as identified by POL,
interaction between these entities.
We are also to consider these processes and structure:
the benchmarks of the relevant industry standards thaI
comparable to typical business operations equivalent t
size of POL, and the best practices of organisations wi
comparable structures where we consider there is no i
equivalent, due to POL's constitution.
Throughout the review, we have been asked to maintai
particular focus on how decisions, Management Inform
(MI) and policies flow both up and down the managem
structure, with a view of establishing whether they sup}
effective decision-making in line with the strategy and
governance standards, and how the practical applicat
governance structures affect actions, feedback loops
decision-making outcomes.
In preparing this report we have drawn our conclusion:
= aseries of 10 interviews with Board members (excl
the CFO who is on long-term sick), and a further
interviews with senior executives;
an online survey platform to further assess the pr
application of governance practices within the C
at both Board and Senior Management levels;
0 meeting in November
nt review. A full list of interviews and
fom which our views have been
}d at Appendices 6 and 7.
eporting timeframe, we have had to
face value, albeit where possible we
mentation to frame our views. Our
Juld be viewed in this context.
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Methodology
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We have used the themes of the UK Corporate Governance Code (the UK Code) and Central Government Code as yardsticks in assessing and
reporting on the effectiveness of the governance structures.
+ We have used the themes of the UK Code to frame our assessment on the effectiveness of
the current governance framework within POL.
+ We believe the Code provides a good proxy for measu
environments as it is widely seen as a distillation of bes
largest, most complex companies that are working to r
stakeholders. We have also had regard to the Govern!
+ The UK Code is also clear in outlining that good govern}
Specifically, companies and their boards do not just h
stakeholders, but mutual duties of the shareholders to
objectives but also to oversee boardroom practices.
+ Where we consider there is no industry equivalent, we
the Company's current corporate governance framew
ised to better align with the Company's purpose an
in organisations of a similar size, and who operate in si
+ The Code is made up of several Provisions spanning fiv
governance: Leadership and Company Purpose; Divs
Succession and Evaluation; Audit, Risk and Internal Co
+ In order to test the robustness of our methodology and
weak) governance, we released a White Paper in 2019,
Company Performance I Grant Thornton UK LLP), whi
(2007-2017) to assess whether a link could be demonst!
measured in the Grant Thornton corporate governanct
and subsequent financial performance (taken across a
balance sheet and profit and loss statements). As part
whether the Code is a good proxy of measurement in t
sound governance structure.
‘Output from our research across the FTSE 350 demonstrated that there is a link between _
strong governance and the subsequent creation and retention of value. Our methodology
was validated with several internal and external stakeholders, including a peer review by
Professor Mike Saks, Emeritus Professor at the University of Suffolk. The information
recorded the Grant Thornton governance database has informed our benchmarking
results of POL's governance disclosures the scoring of which has helped inform the best
practice tool kits we have provided in Appendix 5.
Our findings, recommendations, views and conclusions are based upon our professional
experience and judgement. This review does not constitute an audit and we have not
tested or otherwise sought to verify information provided, other than by discussions with
senior management, reference to relevant documentation, and the two online surveys.
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01 Context
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02
Context and background
POL is wholly owned by the
Secretary of State for Business
and Trade (the Shareholder, or
DBT), the ownership rights of
which are preserved in the
Companys Articles of
Association.
The relationship between the
Shareholder, its
representative, UK
Government Investments Ltd
(UKG)), the Company, and the
Shareholder’s expectations of
the Company, are governed
by the Shareholder
Relationship Framework
Document (dated March
2020), and are further
supplemented by an annual
letter from the Minister setting
out the Government's broad
objectives for POL.
The above forms what we refer
to as the foundational
governance documents.
BOCIS a Commercial retail organisation with a social purpose. Througha
variety of partnerships it
and nationwide
including postag
travel and insural
The POL 2025 “s
These pillars are
understand infor
rebuilding trust,
profitability. The
ambition for eith
consolidated lev
Government fun
Funding require!
year cycle and a
within POL, with
current funding
million per annu
One of the longe
financially sustai
various interpret
critical infrastruc
reaching networ!
Against this back}
~ there is a conti
- the Funding Ag
out a requiremeI
of 11,500 Post
rovides to the public, vig its online platform
er of products
ment services,
any, namely;
\g branch
ich define the
lemes at a
viability of POL.
jolder on a three
development
to become
inciled against
se in delivering
hrough its wide-
le who rely on us”.
rnance fallings;
ork Document set
jinimum network
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estate, roughly one third is profitable, one third is profitable or break
even at a Postmaster level, and one third is loss making, both at
Postmaster and POL level;
= there is a government appointed Shareholder Representative on the
POL board, in addition to two Postmasters (who represent some of the
longest serving Board members and are due for rotation later this.
year). All these roles have the same voting rights and director fiduciary
duty obligations as other POL Board members;
- the reference to Shareholder engagement and outcomes practically
represents a collated set of views from several government bodies,
which have influence at POL through the various foundational
documents, namely; UKGI, DBT, Treasury and various Ministers;
there has been a continued need for additional government support
throughout the funding cycle, largely driven by unanticipated costs
associated with the development of the IT platform (NBIT) and the
historical remediation of claims;
- the National Federation of Sub Postmasters (NFSP) released a
statement early in 2024 questioning the effectiveness of having
Postmaster nominees sit on the POL Board due to perceived conflicts of
interest;
- the operating environment is extremely challenging with additional
revelations surfacing as part of the Horizon IT inquiry (the Inquiry),
which are widely reported in the media. Whilst these issues do not form
part of the scope of this review, their impact upon the culture and
running of POL is profound; and
- the Chair of the POL Board has stepped down inthe recent week.
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02 Context
Context and survey
iummary of survey diagnostic
Company in its entire 360+ year existence.
. + In terms of setting context overleaf, we have provided the higlrlevel results from the Board
bd Since 2019, when a settlement agreement was reach
y - and senior leadership survey. This was undertaken in partnership with our third-party
Postmasters against POL, it has been operating year, r . .
4 : : service provider, BoardClic at the start of our work in October/November 2023 as part of
been much internal and external scrutiny leading to ait ; s ar Rh
‘ the initial diagnostic around the practical application of governance within POL. The survey
improvements to transform aspects of its governanc! ‘eatita hanes bean dedisied watch Rois LEG ae Code (the UE
on remediating the position with Postmasters in resp. Code) - sip Ger Seog ‘Sor baa polite passe esta gas es ° “4 °
Court (Fraser J.). ode) and the Companies Act. Some chapters and questions were adapted specific to
POL. We provide further details regarding this methodology on pages 56.
Across these various activities much has been achiev
and policies particularly related to the interface bet + The surveys allow us to ascertain across a large section of the management team where
there is alignment, misalignment and/or, in the case of the leadership survey, where a large
spread of responsesindicates a lack of coherence around the practical application of
governance. The survey also provides a benchmark against other Board and management
teams.
It is within the context of recent challenges and actiot
recommendations.
+ For further details on the survey output, refer to Appendix 1 for actionable insights i.e. those
questions which received the lowest overall scores or alignment, and Appendix 2 for a high:
level summary of the key highlights across the areas of the Chapters of this report / UK
Code.
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Board survey — governance effectiveness
Self-reported overview
Summary of key themes from quotes Post Office Ltd Board, Exec, SLG =-Benchmark
+ There are conflicts between achieving a social and commercial
purpose with current funding arrangements.
Excessive government interference calls into question the Purpose and Strategy
's independence, 100
It is impossible to plan ahead amid uncertainty of funding and
lack of clarity from government on what it wants. ~
SU,
'
Board Agenda and
Lack of visibility and knowledge share across Board pactsion Maning net
Committees precludes synergy and transparency of
information.
Culture, succession planning and ED! targets and narrative
have been de-prioritised amid historical and on-going
challenges.
Risk management is not operating optimally, with several ris
outside of tolerance and lack of adequate funding to address
‘isks within known time horizons. Information, Reporting and
Risk Management
Talent and Culture
Individually the Board is capable and skilled but given POL's
government participation and current market segments, there
are skills gaps in government/public sector experience, IT
transformation, franchise expertise and banking.
Board Composition and
Dynamics
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Leadership survey — governance effectiveness
Self-reported overview
Summary of key themes from quotes Post office Ltd LG. = === Benchmark
: gy and implementation is not clear, and is challenged by lack of
‘older clarity, funding uncertainty and dealing with historical
matters vs BaU create constant trade-offs.
Accountabilities, delegations and decision-making need improvement, "Worbee Prose.
as they are either not clearly set out or understood or implemented. +i
Poor levels of trust in GE, and also across organisational levels. A lack Sub-Committees, Roles and Responsibilities
of accountability, aversion to taking decisions, poor communication,
lack of cross functional working, talent and performance
management all add to thi Information, Reporting and Business Purpose and
Risk Management Organisational Vision
Mland reporting from Sub Co’s is of variable or poor quality and does
not support effective decision-making, with few exceptions. Sub Co!
purpose is unclear, and remits overlap.
= z Governance Structure Strategy Implementation
The GE has too many members and is not a cohesive leadership team, oi
Its meetings are not focused enough with substandard quality of
discussion. Diversity also needs improvement.
Performance Competencies
People churn, varying capacity and capability across leadership with Navigating through Value Creation
many temporary roles, no transparency around recruitment, LED and Business Landscape anette
succession planning calls into question GE members’ competence and Performance Competencies
5 A i Trust and Transparency
leadership. Recent appointments, however, have been additive. Executing for Results
Engaging other stakeholder voices at Board and leadership, and risk
governance all require improvement.
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O02 Executive summary
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03 Executive summary
Overview
In the absence of a unitary There is currently tension within POL, between its social purpose and being
longer-term purpose and @ commercially sustainable organisaiton, being government owned versus
operating in fast paced highly competitive markets, a tension at Board in
strategy for POL, the terms of conflicts of interest and roles and responsibilities with the
governance actions taken to Shareholder and Postmaster NEDs, a tension in resolving the respective
date have largely been tactical. interest of the government and the wider political agenda and a tension
. within the organisation where there is a feeling of power without
That said, recent efforts to start responsibility.
toaddressiaccountabilities, Whilst much of the written policies and procedures are generally in line
from the top down, and to with good practice, their impact is tactical. The inability to strategically
simplify and prioritise strategic prioritise actions in the absence of unitary purpose/strategy and the
capacity, are encouraging. muddling of roles at Board, slows decision-making and fosters a culture
where it is challenging to hold people to account. This is evidenced in the
Notwithstanding this, the survey output (and in interviews and document review) - refer to
governance architecture is not Appendices 1 and 2 for further detail.
fit for purpose. There are five main areas of weakness in terms of the governance which
need resolution;
1. An inability to unlock a unified purpose and shared ambition around a
longer-term vision and strategy between POL and itsShareholder.
Evident from our review are the many interpretations of what
constitutes the strategic ambition and purpose of POL. We were
unable to determine a unifying vision and/or strategic metric ambition
(financial and non-financial) which transcends the funding period. T
is critical to informing the effectiveness of governance design
principles acting as a clear guide in areas such as risk management,
culture, DoA, and performance management.
An unconscious bias around the lack of accountability. During our
review, it was apparent that the basis of the governance issues do not,
first and foremost, lie in the skills and capability of the Board members
and Leadership. Rather, a muddling of responsibilities and conflicts at
Board through the foundational governance documents, which create
. Dec'
. Culture - the mistrust between POL and DBT/UKGIwhic!
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confusion around roles, responsibilities and authorities. This includes the
development of a framing strategy, which permeates down the
organisation and drives authority without accountability.
. Lack of clarity around the practical application of the foundational
governance documentationwith various terms now superseded by
circumstance. There is also uncertainty on both sidesregarding key
aspects of associated guidance such as Public Monies (which if followed
as written could require significant day-to-day approvals largely in
volume by the shareholder) coupled with the short-term nature of the
current funding arrangements. These issues create ambiguity and slow the
pace of decision making. Many individuals also cite mixed messages from
the Shareholder on its longer-term unified objectives for POL, which
contradict the Minister's Letter and foundational governance documents.
n making forums at Enterprise level appear to lack a clear
understanding of objectives, roles, responsibilities and purpose and at
some level there is duplication. This maze of complexity pervades an
inadequate collective capability and experience below board Until
December 2023, there were over 100 personnel in the senior leadership
group (SLG) with a variety of singular and collective accountabilities, a
CEO with 12 direct reports, 12 GE level committees and further
innumerable committees, groups, and forums that reside within the
Enterprise levels. This has inevitably impacted on the quality of cohesive
leadership and management information (Ml) flowing up through the
organisation to the Shareholder.
is culminating in
@ failing working relationship. This manifests itself in additional questions
and requests for information over and above the normal pattern of
quarterly reporting. A short-term funding horizon and lack of clarity
around reward structures is also driving a hand-to-mouth mentality in
decision making, which is tactical and not purposeful. Not only does this
tie up time, but also drives an extremely risk adverse stance. This, in turn,
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2 ae
Addressing the lack of clear vision by the Shareholder on the purpose and objectives of POL, and the relationship and influence it has over the day-
to-day running of the business, are the two most fundamental issues which impact governance effectiveness. The resolution of these is essential in
the longer-term, if the POL is to flourish.
fosters a culture where there is a lack of accountability,
framework to inform efforts. There is also a pervasive f
procrastination in receipt of further information aroun:
described as hiding behind the ‘uniqueness’ of the own
can be categorised as “them” and “us” when difficult t
POL has however, over the last few months, driven through
governance improvements in an attempt to address these ist
and GE are properly briefed on the operational manageme
POL. This is being achieved by focusing on the right matter
and oversight. Noted actions of reference which still need ti
improved leadership capacity at Board and GE level;
Woodley as Deputy CEO; Karen McEwan, Head of Pe
Reward; Chris Brocklesby, CTO (interim) and Kathry
CFO; and at Board level Amanda Burton, Simon Jeffr
whom joined the Board as INEDs in March, April and
further strategic capacity at Board with the creation
namely the Historical Matters Unit and the Investmen:
the recent simplification of the governance structure
and drive accountability, including a New Leaders!
Group (SEG) at its core comprising the CEO, Deputy
CPO, and reducing the number of individuals reporti
primary purpose of on developing the future POL stra]
improved attention and discipline to areas such as PeI
agendas (more forward-looking) and minutes (in term
last 3 months;
Whilst the direction of travel is promising, it does not, in our
governance architecture issues which are ultimately impacting the effectiveness of the
governance design and hierarchy.
It is difficult to pinpoint accurately, the catalyst of where the governance dysfunction
arises; an inability of POL and the Shareholder to articulate a longer-term vision for POL
from which to develop a cohesive strategy, an inability to hold one another to account,
conflicts of interest at Board, capability and the capacity of leadership given the ongoing
is management, inquiry and IT platform, a strategic design which seems to be
interlocked with shorter term funding cycles, and/or a prevalent culture of mistrust. What is
apparent however, is that accountability is difficult to establish, with the blurring of
responsibilities and mistrust between Shareholder and POL permeating from the Board
down.
Addressing the lack of clear vision on the purpose of POL, objectives and relationship with
the Shareholder, and its influence over the day-to-day running of the business, are the
most fundamental issues which influence the effectiveness of governance, clarity on roles
and responsibilities and pace of decision making within POL. Resolution is essential in the
longer term if POL is to flourish. At present this current construct appears to bediminishing
genuine accountability in the Group's governance architecture/hierarchy starting at
Board. The result has been an inability to hold the Executive to account or provide the
guidance and fast-paced decisions that are needed in a fiercely competitive and
transforming market.
We consider that POL, in engaging with the Shareholder, should consider the merits of
exploring an alternative governance model primarily to resolve the ambiguity aroundthe
above.
In considering alternative design principles, we believe POL needs to continue to frame for
the Shareholder what POL is about (purpose), where it wants to get to (strategy and vision)
and how it is going to meet its aims (culture). Equally, the Shareholder must make sure it
states its objectives within the context provided by POL and timescales clearly by defining
what it wants achieved, with greater pace around decisions for which it is responsible.
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03 Recommendations
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Overview
If POL cannot govern its businesses to a level akin to its competitors, it would make more sense to explore alternative ownership. Although, that is likely
to come with further consideration around policy/regulatory change to address any social value aspect.
* In this section we set out our recommendations for action that should be considered/taken
— SEG to agree strategic design principles with the Board and agree a cadence
to: around updates on progress
= 'Improve'effictenoy, traneporency, cocountabiities — SEG to agree SLG training/communication plan to set expectations regarding
- help the organisation to function more effectively; refreshed DoA’s
position POL to move forward when the overarchin, — SEG to agree cultural design principles and consider whether values need to be
the shareholder; and refreshed
start to rebuild collective leadership confidence, per — Board to agree how the Shareholder position is to be reset and ensure, as best as
collaboration, ambition and trust possible, foundational governance documents are amended to drive interim clarity
é Weicckicwadge'thata number ofthese ailortieecia on areas of POL’s authority (or not) and communication channels
being taken to address several areas. — Board and Executive succession planning to be looked at with urgency
+ In Section 4, we have also set out a further considerati — Nom Co to prepare a detailed succession plan at Board with an initial skills matrix
alternative governance model with the Shareholder, fot done against priorities and risks and consider the positionregarding Postmaster
strawman to frame discussion. NEDs, including previous selection process
+ High level we would summarise the key set of prioritise — Rem Co to resolve the historic reward scheme to ensure clarity of objectives for
Senior Executive Group (SEG) to finalise the gover 2024
discipline) of the SLG and associated Committee:
SEG to agree cultural principles that they want t
SEG to develop a high-level communication plan
milestones for POL. This is first and foremost to si;
Consider three themes around the topics of; ReseI
expectations under each
— SEG to map a skills matrix against the SLG gover
capability and capacity, and start to develop job
metrics and identify candidates
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Recommendations — Leadership
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From our activities, we summarise the key next steps to support with improving the effectiveness of the governance at POL
+ There is significant anticipated scrutiny
of POL's strategic delivery capability.
+ Ambition, energies and resources need to
be directed towards speedy delivery and
implementation following concerns
about capacity and focus. The number
of executive level Committees needs to
be streamlined further to clear the way
forward for optimised transformation
and related decision-making.
+ The Board is currently without a Chair
and is relatively new. In the absence of
long-serving corporate memory, care
needs to be taken to debate and discuss
issues thoroughly, with follow-up on
actions and feedback documented.
+ Strategic design principles need
agreement within POL and the newly
formed SEG must come together as a
cohesive leadership team.
Refer Section 5 for further context.
Board
+ Develop a contingency plan on how to reset the Shareholder
relationship considering the foundational governance documentation to
improve clarity over the next 12-18 months. As part of this exercise:
- explore merits of an alternative governance model which can
provide greater clarity on accountability and improve the pace of
decision-making. Refer to Section 4, which suggests a potential
strawman in developing a Supervisory Committee and/or shifting
certain roles to Board observers
- review the foundational governance documents to reflect practical
application, including improving clarity around connected aspects
such as “Managing Public Money". This should be captured in the
Shareholder Framework Document to gain clarity on what is not in
POL's remit in terms of principles that impact day-to-day
operational approvals between POL and the Shareholder. Equally
the purpose of this document to be agreed as there is duplication
between the Articles of Association and Funding Agreement.
+ Agree strategic design principles with the SEG, and explore and agree
steps that POL intend to take to unlock the impasse on developing a
longer-term strategy
* Clarify what the Board can practically achieve under an Interim Chair
+ Provide regular opportunities for informal board meetings to enhance
trust and effective engagement.
+ Continue to improve meeting discipline around agendas, chairing and
Mi.
+ Review the role of the Postmaster NEDs and consider how their corporate
memory can be leveraged i.e., the role they can play in being
ambassadorial champions at Board and within the wider organi
+ SEG to continue to create strategic capacity within leadership at POL
either through ensuring the right elevation of management and/or
identifying skill gaps. As part of this:
- the Senior Leadership group (SLG) to reduce from over 100 to
roughly a quarter in size by March 2024. Job descriptions to be
written for leadership roles with responsibilities clear and tied into
performance metrics, with the new leadership team identified based
on skills/experience rather than seniority
- meeting discipline, transparency and accountability is critical in the
new structure. As part of this refresh, consider rules of engagement
such as taking papers as read and training needs such as cha
preparation of papers etc. Agree at the outset with Committee
Chairs, a summary dashboard which measures impact (financial
and non-financial) relevant for all Committees.
- SEG to agree as a leadership group cultural/leadership principles
they intend to coalesce around, hold each other to account on, and
agree to role model in the organisation.
+ SEG to focus on developing a strategy and need to agree strategic design
principles with the Board (See Appendix 5 Best practice (BP) tool-kit,
pages 87-88).
+ Any strategic design to be supported by a culture framework which has
performance management as one of the key pillars. Dashboard to be
developed to allow Board to understand the current position and monitor
transformation (See Appendix 5 BP tool-kit, pages 85-86).
+ The newly-formed SEG needs to think through a communications plan to
signal their intent of a wider organisational reset for people and
stakeholders.
+ Annual Strategy days to be a focus going forwards, with ideas being fully
rather than partially developed, and submitted to DBT with a timeline.
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Recommendations — Division of responsibilities
From our activities, we summarise the key next steps to support with improving the effectiveness of the governance at POL
+ The accountability chain for POL is complex and
involves customers, external suppliers, joint-
venture partners, employees, postmasters, senior
management, the Board, the Shareholder, the
Shareholder Representative of the government,
UKG's individual NED on the Board, civil servants
at the sponsoring government department,
ministers, and regulators. This web of stakeholders
and their related interests in POL has influenced
an unnecessarily complex governance framework
where resolution to issues has been through
layers, rather than establishing whether the
overall structure is fit for purpose in the operating
context of the Company.
+ There needs to be a simplifying of layers within the
central function with too many matters escalated
to the GE (and Board) for decision.
* Decision-making is labour and time intensive with
criteria and reporting ambiguous and cultural
issues driving the high cost of indecision. This
contributes to creating confusion and risk within
resource utilisation. Furthermore, far too many
OPEX approvals are coming to board due to the
low-level hurdle of £5 million.
Refer Section 6 for further context.
Division of responsibilities and
associated ToRs and DoA at
Board are largely in line with
best practice, apart from
further clarity needed for
‘ownership around wider
aspects of the People agenda.
Review Nom Co and Rem Co
to establish whether they are
delivering against the ToR and
address how any gaps may
be remedied
Continue with redesign and simplification of Committees/working groups reporting into the SEG
by reorientating reporting lines for some current forums and reduce the number of Sub Co's and
direct reports going into CEO, for presentation to the Board (refer to strawman on page 4344).
Design and agree a ToR and DoA for the Committees reporting into SEG, underpinned by a
skills matrix and RACI to identify the capability within the organisation, establish skill gaps
ensuring a single point of accountability.
- Revisit and clarify base information requirements, accountabilities, monitoring , reporting and
communication cadence to provide focus to the forums of most strategic importance. Whilst
undertaking these reviews, it is suggested to also review authorisation limits for OPEX.
- Consider reorientating certain GE level Committees such as the Health and Safety
Committee, the Pensions Plan Governance Group, the Property Committee and the Inquiry
Steering Committee. Most of these people-related matters can be dealt with elsewhere and/or
report into a more strategic forum.
Consider the benefits of establishing an interim Implementation Committee, to spearhead all
transformation operational workstreams (such as IDG and technology), to support with
developing a company-wide narrative on trade-offs and holistic governance design in effective
delivery of BaU, so supporting the development of strategy.
Ideally, an Implementation Committee would only be in existence for a c.1&:month period and
would be headed up by a competent COO role. It would also be envisaged that this committee
would have an Independent Chair from the Board (with transformation expertise) alongside a
strong project management team headed by the Chief of Staff. Remaining members would be
selected from the SLG. This Committee would also provide challenge to the SEG in the practical
considerations of the strategic design
Secretariat to provide independent reviews of the revised structure on an interim basis to ensure
the right conversations and audit trails are working practically, as the new leadership structure
cascades. Consider internal audit undertaking an annual review on the resolution of actions to
identify root causes of delay within the Sub Co structures.
GrontThomton © 2024 I 18
Recommendations— Composition, evaluation and succession
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From our activities, we summarise the key next steps to support with improving the effectiveness of the governance at POL
+ Urgent attention is needed in recruitment and managing of the
Board's composition.
+ Succession planning is not sufficient across the organisation.
Whilst the Chair stepping down was unplanned, the current SID,
and another INED, are due to rotate off (July 2024 and early 2025
respectively) and both ‘Postmaster’ NEDs are also due to leave in
April 2024. This makes for a perceived weak directive and
decision-making body. Consideration of how corporate memory
will be managed carefully, with the longest serving board
members rotating off. These points are not addressed by a
comprehensive succession planning process at present.
+ Equally, there is limited thought given to succession planning
around the CEO (and Deputy CEO) and CFO roles (although
recent hires are starting to address this).
+ Numerous people issues within the organisation which have been
exacerbated by the continued rotation of personnel in the Head of
People/CPO role. Wider issues include, confusion around roles,
accountability and cultural behaviour, as well as legacy
complexity and mistrust around reward schemes and pay
requirements. This area requires laser sharp focus at Board and
within the Executive. The newly appointed CPO appears to be
making positive progress in this area.
+ Equally there are concerns around recruitment processes in terms
of transparency and EDI.
Refer Section 7 for further context
to consider
Succession planning needs to be overhauled and driven
forwards with the design principles of the skills matrices
agreed at Nom Co (see Appendix 5, page 92) .
New and appropriately skilled Board members need to be
recruited urgently with a view to filling skills gaps, addressing
diversity and rotation timings
Consider Committee membership in the context of the Board
rotations. At Nom Co, consideration to be given to Committee
membership, including Chairs of the Board and Committees,
to bring a diverse perspective on management pipeline
Nom Co to take the lead addressing the future viability of the
Postmaster role at the Board. As part of this process,
consideration to be given to formalising how rotation is to be
staggered (if at all), future selection process (and viability of
the role) to be reviewed (particularly given comments in the
NFSP statement).
Board to maintain greater oversight of the work of the Nom
Co and Rem Co over the next 12 months and agendas to
allow time for full updates regarding delivery at the ToRs.
Develop a Board Learning & Development (L8D) programme
to meet the requirements of the incoming Board members,
taking account of strategic priorities, principal risks and skills
matrices (see Appendix 5 BP toolkit), pages 93-94).
Consider how the Board is going to support the SEG going
forwards
A structured approach to recruitment and senior
appointments needs to be implemented.
At SEG, consideration to be given to potential
strategic skill gaps and succession. A COO role
could help address both these points.
Seek clarity with the Shareholder around the CFO
role, which is also impacting resolutions at Board.
Continue with the build out of the skills matrices for
the SLG, with EDI to be integrated into thinking (see
Appendix 5 BP tool-kit, page 92, in terms of
template / themes for consideration).
Review the recruitment process. Concerns that
there is an absence of a framework of skills to
reference for roles, in addition to a lack of
consistency around EDI in terms of targets,
interview panels etc. which need to be addressed to.
support the build out of leadership teams in the
coming months.
Policies and process for people management need
to be enacted and communicated purposefully.
LED across the organisation to be addressed in
time.
GrontThomton © 202 I 19
Recommendations — Risk
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From our activities, we summarise the key next steps to support with improving the effectiveness of the governance at POL
POL has relatively well set up
risk management process and
associated policies and
procedures; however further
uplifting of some of those is
required as the risk
management arrangements
mature.
There is a clear requirement to
review how the control
environment contributes to
creating value, of which
behaviour and culture is a key
element.
Any resistance to this must be
overcome, in order to shift
‘expectations from compliance to
a value-adding management
consulting approach.
Refer Section 8 for further context.
Board steps to consider
+ New NEDs with specific risk skills and experience should be appointed to
enhance the Board's risk expertise.
+ The ARC papers should be overhauled in terms of format and presentation to
ensure more digestible and practical sharing of information.
* The list of regular attendees for ARC and RCC meetings should be
reconsidered, as fundamental changes are introduced to the ARC.
* Packs for ARC and RCC meetings should be tailored to the requirements of
each Committee, with the ARC papers providing a more high-level view.
+ The Central Risk Function should be elevated to a more prominent position
across the business, to emphasise the importance of risk in strategic decision-
making, identifying and seizing of opportunities, and optimising the use of
capital (see Appendix 5 BP toolkit, pages 96-97).
+ ARC to take proactive steps, at an accelerated pace, to better embed the
internal controls framework, including relevant training so that it can attest
positively when the updated UK Code comes into force in 2025 (see Appendix 5
BP tool-kit, page 98).
+ Amore formal approach to aligning the risk and controls environment and
internal audit to be considered across the subsidiaries and franchises to ensure
that risk is managed consistently and effectively across the organisation. This
might involve the establishment of a formal governance structure that oversees
risk management and internal audit arrangements across all subsidiaries and
franchises. Where these are currently lacking, formalised reporting lines and
escalation procedures to the RCC and ARC should be instated.
+ Invest time in LED programmes to ensure employees in the subsidiaries and
franchises are aware of the policies and procedures related to risk management
and internal audit and are equipped with the necessary skills and knowledge to
manage risks effectively.
+ Over the mid-term, explore the merits of establishing separate Audit and Risk
committees to improve focus, understanding of risks and controls,
transparency, and decision-making. The industry trend is separate committees.
Executive
consider
Consider shifting the CRO to reporting directly into the CEO. This to
send a strong signal that the risk function is given the level of
prominence it deserves, given the current environment.
Risk management training should be introduced across all levels of the
organisation, with GE setting ‘tone from the top’ and giving more
prominence to risk management in executing their daily responsibilities.
Individual risk reporting should be used as a driver for decision-making.
The Head of Risk/CRO and Head of Compliance should co- chair the
RCC given these functions are at the heart of managing risks and carry
the responsibility for risk management.
The remit of Postmasters' responsibilities should include managing risks
as with the rest of the first line of defence, and this should be made
clear in relevant risk documentation.
Reporting of risk matters to be re-evaluated, with reporting to the ARC
aligned to its meeting cadence, reporting to executive forums monthly,
and reporting to individual group executives weekly, or as often as
needed.
Once POL's overall strategy is agreed, the firm's risk strategy should be
aligned and reflected in appropriate risk appetite and tolerances. in line
with strategic objectives. This, to foster more mature risk management
processes. Risk thresholds should also be established (see Appendix 5
BP tool-kit, pages 96-97).
As the Central Risk Function matures, refinements to the roles and
responsibilities of the second line of defence versus the business would
be beneficial, and risk management documentation should more
clearly feature the role of the Central Risk Function in providing
independent challenge to the business. The risk management policy
and guidelines should be updated accordingly.
GrontThomton © 202 I 20
Recommendations — Remuneration
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From our activities, we summarise the key next steps to support with improving the effectiveness of the governance at POL
The untimely agreement of reward
structures continues to impact clarity
around prioritisation, performance
management and motivation.
The historical lack of clarit
concerns around responsi
information accuracy has raised the cost
of decision-making at Rem Co, while
diminishing genuine accountability and
effectiveness. The governance hierarchy
between the workforce, Rem Co and the
wider public context, including the
Government needs to addressed.
There is a lack of shared understanding
as to the role and accountabilities of
different stakeholders at Rem Co and
therefore in Rem Co's role itself.
Further issues hinder Rem Co including
inadequate rolling agendas, record-
keeping and poor or inconsistent Ml, as
well as the lack of capability and
capacity within the People function to
support.
Refer Section 9 for further context.
teps to consider
Clarify the role and impact of the Shareholder NED at Rem Com including:
- the application of the UK Code regarding independence. Should the role
remain, consider how to mitigate challenges to independence
= assess whether description of the role, as set out currently requires further
clarity in the foundational governance documents.
Clarify Rem Co's role and authority namely:
= agree with members, considering the foundational governance documents
and the UK Code, item of Rem Co's ToR where it can be proactive with
approvals and where it is seeking assurance or Shareholder approval.
agree how Rem Co approaches broader aspects of its role including
alignment/engagement with the wider workforce and the related public
narrative (see Appendix 5 BP tooFkit, pages 105-107).
= Agreeing clear timelines for resolution of the historic reward schemes.
Engage with the Shareholder to establish the overall remuneration philosophy
including the ability to set LTIPs.
Ensure meeting discipline around rolling agenda, minuting and actions follow-up
and completion. As part of this exercise agree what the Rem Co wants to
achieve over the next 12 months with the Chair, to focus on driving the aspired
direction of travel.
Develop a clear communication plan to signal any material changes to
approach, outcomes, expectations etc across the organisation and with wider
stakeholders.
Consider the benefit in seeking to comply with the spirit of the UK Code
Remuneration principle and reflect whether it needs to drive a shift in terms of
internal practices and/or reporting disclosures and/or that non-compliance is
agreed and understood with outputs included in any future induction pack (see
Appendix 5 BP tool-kit, pages 93-94).
Rem Co to champion a consistent framework to measure and monitor
remediation of Rem Co governance recommendations.
eps to cor
Clarify Rem Co's role and authority namely:
- address cultural issues around accountability through a
RACI matrix aligned to the 12-month agenda/ToR items
‘and update DoA (if appropriate), at Rem Co and within
the People function
Remuneration strategy (development and reporting) to be led
by the CPO. RAC! to reflect this aspect. Establish the set of
principles by which schemes are designed, taking account of
latest best practice, the Ministers annual letter and
appropriate ambition (see Appendix 5, page 103).
The purpose of informal engagement outside of Rem Co to be
agreed, given optics around independence.
Management to be encouraged to deliver more robust
assessments, and design of reward schemes to allow for more
effective discussions at Rem Co
Clarify the role and remit of Internal Audit in support of Rem
Co's work i.e. the Stress testing of new schemes.
Remuneration advisor, WTW to provide information on
historic schemes
Mi needs to evolve to support strategic discussion and
decisions.
Establish the capability and capacity of the People function
to support the changing requirements of Rem Co and the
wider organisation around the People agenda.
GrontThomton © 202 I 21
03 Recommendations
Alternative governance structure
should consider engaging with the Shareholder aroun:
an alternative governance structure which drives grea
decision-making between the Board and the Sharehol
mutual understanding of objectives and clearer accou
Any alternative governance model needs to offer com
values and a general market-wide sentiment in wantin
The alternative structure, through better accountabilit
assessment of capability and capacity issues and driv
continuing to:
- fully respect the distinctive characteristics of POL's:
— balance the need for the Shareholder to have critic
to certain decisions which affect funding requiremeI
= dri igher pace of decision-making and perfor!
intensely competitive markets such as franchising,
— provide accountability (and operational efficiency)
key to the brand and social value aspect
We recommend consideration is given to a two-tier Bor
role of Shareholder representative (and Postmasters) is
This model would seek to create a “Supervisory” or “O
developing a powerful consultative body that can eng
Executive, whilst retaining the power to hire and fire B
be a majority mix of government representations acrosI
Postmasters.
The purpose of the Supervisory Committee would be t
potentially Postmasters NEDs) appropriate powers to hI
for the performance and impact of the business, for th
ensuring adherence to the principles of Public Monies and social values, removing
Postmaster NEDs and the Shareholder from management control.
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fe Supervisory Committee would also oversee
governance documents and would potentially seek to take ownership/identity, for some of
the decisions delegated to the variety of interests that make up the Shareholder view
through the foundational governance documents to support with increasing the pace of
decision making.
The Supervisory Committee would also publish its views on Board performance and on any
Directors up for election for the Shareholder (and/or where relevant) Postmaster
consideration.
It is further suggested the Supervisory Committee will have [two] seats on the Nom Co, to
ensure a fair and transparent nominations process around the selection of Main Board
members and the Executive. We have provided on page [29 a high-level illustration of the
proposal, and we also elaborate on this further within Sections 4.
GrontThomton © 2024 I 22
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model
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04 Alternative governance model
Alternative governance model
The purpose of the two-tier structure is to give the Shareholder appropriate powers to hold the Board properly to account for the performance and
impact of the business, so providing POL with clarity on longer-term objectives and Shareholder accountability on allocated decisions.
Boards are largely in place as a counter-balance against pressures on companies and
executive teams to focus on the near term. They are empowered to share the longerterm
direction of the organisation and should guide management to balance competing interests,
anticipate risks, and competitive threats, and provide insight on opportunities.
The POL Board (both now and over the recent past), whilst generally acknowledging the
historic and current governance issues, and taking steps to create additional strategic
oversight, seem unable to deliver against this remit (although we acknowledge the current
composition is relatively new). This significantly raises the cost of decision-making and is
diminishing genuine accountability in POL’s governance architecture/hierarchy. The result
has been an inability to hold the GE/SLG to account or provide the guidance and fast paced
decisions that are needed in the fiercely competitive and transforming markets that POL
operates withi
POL Leadership (and followership) is undoubtedly complicated by the ownership construct
which leads to an unhealthy tension between governing for Shareholder value and governing
for social purpose (stakeholder value), in the absence of a longer-term vision, and the
requirement for clearance on certain operational matters, such as severance. The current
leadership efforts are focused on preserving value and firefighting, rather than directing the
organisation towards a vision of creating sustainable value.
A dual tier board governance model could provide an alternative and potentially more
appropriate structure to unlock the various decision-making paralysis and support the
organisation through its transformation. This proposed structure looks to split decision-
making to better reflect the two perspectives being asked of the current POL Board by
elevating the Shareholder interests (and that of Postmasters) to a “Supervisory Committee”.
This is a model that has precedence in the UK mutuals sector, where organisations are more
geared towards social purpose. It is also highly prevalent in many European and Chinese
markets, which place a high value on social impact. The most direct benefit of such a model is
the greater focus on transparency and accountability for organisational development. We
have provided some illustrative mechanics as to how the structure may work in the pages
overleaf.
+ The main purpose of the Supervisory Committee as envisaged would be to:
- act as a consultative body that would regularly engage with the POL Board and hold it
to account for its stewardship and strategic leadership of the organisation, and for the
operational performance in accordance with the philosophy outlined in the annual
Minister’s letter (and foundational governance documents). This would include reviewing
the POL Board’s proposal on strategy;
- provide a forum in which the interests of POL’s stakeholders can be represented and
promoted;
~ serve as guardian of POL's commitment to public values (Public Monies), social purpose
and principles, and to ensure these are reflected in its corporate vision, strategy and
operations. This would include advising the POL Board on ethical matters, with
supporting evidence on likely impacts on business performance and values;
- provide an opportunity to shift some of the decision-making requirements included in
the foundational governance documents to an identifiable body in terms of practical
accountability and create clearer timelines around decision-making; and
- appoint up to two representatives to sit on the Nom Co of the POL Board, ensuring
transparency of process and providing the collective views to the Shareholder on future
Board members.
As part of this construct, it would be suggested, similar to the Listed market, that Board
members put themselves forward for (reelection annually. Specifically, the Nom Co would
review the skills balance of the Board and if this balance was felt still to be appropriate, the
current composition would be put forward for (reelection to the Supervisory Committee.
The POL Main Board would retain operational control largely, as envisaged in theToRs and
Dod today, accountable to the Supervisory Committee forshaping the strategy, overseeing
the performance of POL, with a continued requirement to seek consent for certain matters
pursuant to the foundational governance documents (subject to agreement).
GrontThomton © 202 I 24
04 Alternative governance model
Proposed Two-tier Board structure
Supervisory Board
Role: Guardian of Purpose, Values and Principles, Articles,
Framework and Funding Document
Hold the Board to account and influence strategic and
‘operational initiatives
The consultative body, and body for making
representations on behalf of the constituencies represented
Approve matters reserved by the Shareholder Documents
for approval by the Supervisory Board (the funding
request); and
Make decisions on those matters reserved to the
Supervisory Board as set out in the Shareholder documents
(euch as strategy)
Supervisory Board
Independent Chair
3Gov't Reps
2 Postmaster Reps
Managing (POL) Board:
Independent Chair
6-8 INEDS
2 Execs
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Managing Board
Role: Determine Group Strategy consistent with the Purpose and the
Values and meeting the needs of its stakeholders (and Shareholder);
Oversee Group business in accordance with strategy
Motivate and retain an Executive qualified to deliver the strategy
Hold the Executive to account in the performance of its duties, taking
into account the views of the Supervisory Board and
Oversee culture (not overt in the current ToR), and separately, risk and
internal audit framework. Designed to provide adequate assurance as
to the capability and capacity to deliver the strategy and protect the
Group's operating environment and reputation.
Remediation Co: Investment Co:
Independent Chair Independent Chair
© GrantThornton
Audit Co:
Independent Chair
(Risk to become Exec level
committee)
Executive Team:
CEO, CFO,
CTO, CPO, GC, CRO,
Support: CoStaff
Rem Co: Nom Co:
Independent Chair Independent Committee
04 Alternative governance model
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Foundational governance documents
* Any restructure to a two-tiered model would require administrative support and need an
allocated budget. There will also need to be cohesive co-ordination between the POL Board,
the SEG/GE and the Supervisory Committee. Ensuring that the company secretariat is
empowered to act effectively in support of the Chair, POL Board and the Supervisory
Committee will be critical. A table summarising the characteristics of the Supervisory
Committee and Board structures is provided in Appendix 3.
+ Given all the intricacies explored here, we recognise POL is unlikely to be able to rapidly
move to a revised governance structure, particularly in an upcoming election period.
However, we feel it is something worth seeking guidance on now, both for POL and Board
members, particularly with the recent statement from the NFSP which queries the ability of
the Postmaster NEDs to be effective at Board as a Director and representative of
Postmasters.
- On 19 January 2024 NFSP released a statement expressing its reservations about the role
of the Postmaster NEDs on the Board of POL. Specifically, the conflict of-interest position
it places on the individual who is both unable to vote on many decisions taken by the
Board yet is bound by confidentiality and therefore unable to act as an effective feedback
loop with colleagues, brings into question the lack of transparency and overall
effectiveness of the role,
- In its statement, NFSP suggested the benefits of an Oversight/Supervisory Committee
which provides the opportunity to enable full scrutiny.
- Whilst we understand the perspectives brought by the Postmaster NEDs are considered
invaluable at Board, the NFSP statement warrants consideration.
+ Apotential interim measure to consider would be shifting the role of the Shareholder (and
Postmasters) at Board to observers. This model is often favoured by investors or venture
capital funds where observers can influence Board decisions, but do not have any voting
power or fiduciary duties.
This two-tier board construct has both pros and cons:
= In terms of cons, costs in terms of time and resources can be significantly higher if the
roles and number of members are not controlled. Decision-making can be slower if the
ToRs and agendas are not strictly aligned and managed well. However, if the right people
are occupying the right roles (with the right remit), then decision-making should be
effective and efficient with an ability to identify root cause of delay/issue through the
governance hierarchy. In terms of roles, it is imperative to provide the right balance of
business/sector representation to provide the right capabilities in this supervisory forum
for informed challenge and debate.
- The pros (subject to the right balance and role representation) in POL’s case, can enable
better representation of Postmaster and Shareholder voices, as well as facilitating better
decision-making by reducing overwhelm, providing a second review (with arguably more
diverse thinking) of managerial decisions, and all whilst maintaining a clear focus on
strategy and sustainability. It is considered that the two-tiered board would build a more
balanced and positive directive force for the organisation.
GrontThomton © 20a I 26
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05 Leadership and purpose
Strategy and purpose
In this section we explore the Key observations - minimum branch threshold of 11,500 is specified by the Secretary
— 7 . _ of State in the Funding Agreement;
findings and make * POL is effectively stuck between two seemingly conflicting
recommendations on governance objectives, and presently there is no longer term vision or = in so doing, meet the minimum access requirements specified for this
Beeectaralaarl tay purpose to guide strategic principles and/or development. network of post offices as detailed in the Entrustment Letter; and
Albeit the foundational governance documents are clear of — provide this network of post offices to make available the services of general
* Purpose and strategy the need to support a minimum branch network estate of economic interest (SGEl) detailed in the Entrustment Letter (essentially this is
p 11,500 sites although HMG wants POL to become less reliant about maintaining the branch network in accordance with certain access
* Board leadership on the taxpayer. requirements to provide an appropriate level of service to the public).
* Executive leadership + Accordingly, POL is unable to disregard its social imperative + Future government funding is uncertain, so planning in the current environment
whilst at the same time attempting to move forward with its is extremely difficult. Significant efforts go into reprioritisation within POL,
* Measurement of performance — commercial sustainable initiatives. wasting capital in the process (both financial and intellectual). As an example,
there is an agreed programme to shut down c.100 directly owned branches with
an annual cost-saving once complete of c.£25 million per annum. We
understand this programme has been stopped and started c.4 times, where
each time close to execution, funds have been re-orientated to support a
Ml. and meeting discipline * Strategy design seems to be tied to government funding
* Culture cycles. This political backdrop is not conducive to driving
much needed longer-term thinking.
For further points of evidence, refer Generally, Business Unit level strategy is clear. However, 0 different project, with no ability to challenge the rationale in the absence of a
to Appendix 2. lack of visibility of a framework/consistent understanding of strategic framework.
‘trade-offs’ at the centre, and connectivity across business,
jeads to.a high ooet of Indeclston. Ultimately, POL is stuck between maintaining the sub-optimal network/social
purpose and developing its commercial side. Becoming a leaner, more efficient
Overview of findings operation and building the Post Office of the future to meet people's needs
(more digital) in the coming decades, whilst becoming more appealing as a
franchise operator are all part of the vision. There is a need to invest to reduce
costs in any scenario, which HMG is perceived as presently unwilling to consider
on a strategic basis.
+ POL's public ownership is the founding tenet of its social
purpose. To deliver on this, DBT has stipulateda number of
principal objectives of POL which are set out under the
Shareholder Relationship Framework. These objectives of
POL are: + This is a fundamental obstacle to the efficient and effective running of the
business, and one that needs resolving, Although POL can take steps to improve
its governance and become more efficient, real progress towards the business
optimising its commercial platform can also be achieved.
— to maintain a network of post offices beyond its optimal
commercial size as detailed in the Entrustment Letter.
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05 Leadership and purpose
Strategy and purpose (continued)
Any change to the governance architecture at Board needs to be done with reference to the longer-term purpose, vision and ultimately a defined
strategy
Actions
+ Management and the Board need to unlock the current paralysis by agreeing strategic
design principles to put forward to the Shareholder to enable discussion
+ Any plan needs to consider a longer-term vision (and be de-coupled from the funding cycle,
which it should inform) highlighting the opportunities and areas where there may potentially
be market failure to demonstrate the longer-term ambition and purpose of the organisation.
GrontThomton © 202 I 29
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05 Leadership and purpose
Leadership — Board
Board leadership
Key observations
+ The paralysis around being able to progress strategy design principles needs to be unlocked
and the query around how Board Leadership is driving Executive accountability remains,
given the absence of being able to observe a Board meeting.
+ Chairs’ need to be disciplined in meeting time management and follow-up feedback loops
around resolution of actions (as per interviews).
+ The Board is currently without a Chair and is relatively new in its formation. In the absence
of a long serving corporate memory, care needs to be taken in setting the agenda to debate
and discuss issues thoroughly, and deliberately follow up on actions and feedback.
+ Future composition needs to be addressed with urgency, with four members potentially
rotating off this year ~ due consideration to corporate memory needed.
+ The introduction of the two Postmaster NEDs has been beneficial however, feedback is
working in an upward direction only.
+ More informal forms of engagement are seen as beneficial by many Board membersso as to.
improve the effectiveness of formal meetings. That said, recent additions to the Board have
improved the diversity of discussion and outputs.
* Concerns raised about the lack of visibility for non-Committee members of Committee
minutes has now been addressed.
+ The Board value executive pre-briefing sessions as they feel it provides time for more
unstructured dialogue, and thereafter more effective outcomes in meetings (interviews)
Overview of findings
The Board is relatively new. Aside from the Group CFO (who is on longterm sick leave),
who joined in 2015, and the CEO who joined in 2019, the two Postmaster NEDs and the
SID are the longest serving members joining the Board in 2021. Two other members joined
in 2022, with the remaining four members joining in 2023.
The Board is therefore still learning about one another and how to work effectively
together. Nevertheless, whilst acknowledging that there is always scope for improvement,
in their discussions with us, the Directors all considered that the Board is working well
together in an effective manner and overall is ‘fit for purpose’.
Anecdotally, we also note from interviews that the current Board comprises more
seasoned and mature individuals who, despite being relatively new as a group, evidence a
better level of scrutiny, questioning, and challenge. These skills are leading to better
discussions and more effective outcomes. We have not been permitted to observe a
meeting of the Board and so we cannot at present comment further.
We have concerns over the future make-up of the Board in the light of recent and future
changes to its composition and the basic level of succession planning and skills mapping
in place, We comment on this further in Section 7~ Composition, Succession, and
Evaluation.
Attendance is also good; 100% during this year with the sole exception of the CFO.
Although the Board is working together well, discussions and papers are not always
strategic enough and little in the way of follow-up has been seen on strategic plans.
Equally agendas and timings are not always strictly adhered to, and meetings, from
interim feedback received, are not always viewed as productive.
Whilst the Board meets annually offsite for a dedicated strategy session, it is probably
understandable that we have received feedback that these sessions have not been
particularly productive, with general discussions on possible ways forward which are not
worked up sufficiently.
GrontThomton © 202" I 30
05 Leadership and purpose
Leadership — Board (continued)
+ As result, the business tends to revert to more day-to-day activities, and the ideas put
forward are not further developed sufficiently, for the strategy to move forward.
+ We do question the lack of pace around putting forward a longerterm strategy to the
Shareholder given the guidance in the foundational governance documents. This would help.
to crystallise the Shareholder’s thoughts on the longer-term purpose.
+ Whilst this is a difficult position for POL, we recommend that strategy days are used to
develop ideas to be put forward to DBT at an appropriate time as outlined above. These
proposals can then be explored and worked up into more rounded proposals that look 510
years ahead.
+ The introduction of Postmaster NEDs to the Board in 2021 has proved successful and given
the Board valuable insight into the experience of Postmasters across the UK branch network.
This includes a much greater understanding of their issues. Whilst this has provided valuable
upward feedback, it does not appear to us that the benefit has been realised of providing
feedback in the opposite direction. NEDs do not, for example, present back to the
Postmaster community, sharing talking points or insights. This seems to be a missed
opportunity. At Postmaster conferences the Board receives feedback from Postmasters and
the CEO presents his view, but again there are not seen to be forums at these events for the
Postmaster NEDs to communicate with the Postmasters. We recommend that consideration
is given to ways in which the Postmaster NED role could be developed to be more effective in
future.
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Actions
* Discuss at Board what can practically be achieved over the next 612 months
under the stewardship of the Interim Chair. Ensure any priorities are
communicated within POL;
+ Consider a regular cadence of more informal gettogethers to allow for
unstructured discussion and building of trust;
+ Meeting discipline, stick to agenda timings and/or review meeting cadence;
+ Feedback loops on strategic progress between SEG/GE and Board to be improved
(and captured); and
+ Review the role of the Postmaster NEDs and consider how their corporate memory
can be leveraged i.e., the role they can play in being ambassadorial champions at
Board, and within the wider organisation.
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05 Leadership and purpose
Foundational governance documents
The foundational governance documents agreements, and POL should be empowered to get on with running the business,
Ray ebearvetions subject to any specific priorities the DBT wishes the Company to address, and which
are set out in the Minister's annual letter to the POL Chairman.
* The Board needs to establish how the Shareholder position is to be reset and ensure, as best
as possible, foundational governance documents are amended to drive clarity (whether on
an interim or longer-term basis) on areas of POL’s authority (or not) and communication
+ Equally the current funding cycles (between one and three years) are
restrictive for providing clarity regarding long-term business planning. The
last statement of Government policy for the Company is more than ten years
Enanpels: old and this policy urgently needs to be renegotiated and updated (when
Overview of findings appetite prevails)
* Reporting obligations and matters requiring the consent of the Shareholder are set out in Actions
various foundational governance documents which also connect to wider guidance such as
the UK Code and Managing Public Monies, + Board to agree appetite and principles around alternative interim governance
arrangements such as shifting to having observer roles on the Board
+ The principal requirements (in terms of ongoing engagement) contained in the foundational
governance documents are, in summary, an obligation to provide a quarterly performance
update, proactively endeavouring to share information on key strategic or policy issues, to
share details of ‘Relevant issues’, as defined, and to seek Shareholder approval when + Any rework of the foundational documents need to, through the Shareholder
required (for Board appointments, funding, etc). Framework Document, work towards reducing the interaction between the
Board and Shareholder for operational matters (and/or provide clarity as to
what is not within POLs authority), so confirming in practical terms what is
* Review interim measures and therefore impact on the foundational
governance documentation to provide clarity
Currently, however, there is almost continuous dialogue between POL and UKGI/DBT, both
in terms of POL responding to requests from UKGI/DBT for information/clarification on
Vorious matters, and POL asking for advice, guidance and operational approvals. These ——
habits appear to have developed over time and partly arise from POL cultural and capability + Annual and three-yearly budgeting cycles are not supportive of the major, long-
issues. They are also a result of the heightened oversight in response to the pressure to lasting investment schemes needed for the successful delivery of strategic priorities
resolve historic issues. Without the clarity to achieve the practical application of certain and the sustainable transformation of POL. An overarching, rolling five-to-ten-year
guidance set within the foundational governance documents in terms of what is within/or funding facility with the one-to-three-year budgeting cycles feeding into this
not within POL's authority on certain operational transactions this is set to continue. framework, would enable the clarity required for such a long-term plan.
* Inorder to move forward, we consider that both POL and the Shareholder should make
efforts to reduce the day-to-day interaction and become more ‘arm's length’, as currently
this is introducing unnecessary bottlenecks in the system and impairing decision making.
The strategic aims should be clear, subject to POL and DBT coming to the necessary
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05 Leadership and purpose
Executive leadership
Executive Leadership
Key observations
+ SEG needs to pull together as one mutually trusting collective, driving clarity and being
unified by culturally aligned measures of performance. An Implementation Committee
could help by providing focus to the business transformation that needs to take place
(Refer comments in Section 6).
+ The direction of travel in moving towards a more simplistic decision-making structure is
appropriate. Protocols, requirements and accountabilities should be reviewed and
communicated to optimise and support this change.
+ Decision making, decision criteria and reporting are ambiguous, creating significant risks
in resource utilisation. At such a sensitive time, effective internal communications are
paramount; between the SEG and the Board, as well as between SEG and the
organisation.
+ Concerns around the executive leadership remain - capacity, focus, retention, and
meeting discipline all need to be addressed.
Overview of findings
+ Although time is needed for the SEG to build the collective competence, narrative, stability,
corporate memory, and effective, collaborative ways of working, the team also needs to
pull together as one mutually trusting collective, driving clarity and being unified by
culturally aligned measures of performance.
* Streamlining the organisational structure to a simpler hierarchy is a big step in the right
direction. Historically, layers or processes and controls have been built around the
enabling functions, whereas in reality, the organisation needs to address root causes
around capability, organisational structure, and the lack of clarity in roles and
accountability. Base information requirements, accountabilities, monitoring/reporting and
communication protocols should be agreed and communicated, with a focus on those
forums that have the highest strategic importance.
* Given the level of noise surrounding POL, the SEG needs to communicate its collective
purpose and ind
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jual roles in addition to working more effectively as a cohesive
leadership unit. The SEG should be role-modelling the “to be” desired culture and
behaviours.
Points of note from survey and interviews
Historically GE member behaviours’ have been sub-optimal with various
individuals acting in isolation, betraying confidences, and openly criticising each
other, not calling out negative behaviours, all of which has led to a lack of trust.
The inability of the GE to unify around decisions meant that the Board was being
used as a forum to find agreement.
Effective internal communications are particularly important to maintain
employee engagement and trust. Comments made that internal communications
are treated/prepared in a similar manner to external communications~ with a
“political” remit and tone of voice, lead to a lack of authenticity and trust.
Feedback suggested that colleagues need to be trusted with more and richer
information.
The current CEO is a good communicator and is held in high regard.
There remain concerns however about Executive leadership capacity, as well as,
CEO focus and the ability to build out a stable and high-performing management
team. It has been noted that some members of the leadership direct activities to
protect their own interests or drive their own agenda, which is frustrating and
costly to the business.
GE discussions are not useful and suffer from a lack of insights with some bearing
the role of “educator”
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05 Leadership and purpose
Executive leadership (continued)
Action
+ SEG to be intentional about how it is perceived as a cohesive leadership group. Agree high
level cultural principles that they can coalesce around as a team and role model to the
wider organisation (and hold each other to account)
* Consider outlining a high-level communication plan with the business
+ The newly-formed SEG needs to think through a communications plan to signal their intent
of a wider organisational reset for people and stakeholders.
- Start to build up thematic milestones that bring people on the journey. These can consist
of three phases: Reset — re-establish principles, culture and tone from the top, Rebuild —
the internal hierarchy, communications and cross-functional ways of working, then
Reboot - with a longer-term vision with stakeholders. The purpose is for leaders to move
the organisation through stages of decreasing dependence into stages of increasing
collaboration, empowerment and independence, set within clear governance and
cultural norms.
+ Ensure any terminology in updated roles, responsibilities etc does not create confusion
with the foundational governance documents, such as the use of the term “Executive”.
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05 Leadership and purpose
Measurement of performance
MI, minutes, agendas
Key observations:
* Rolling agendas, until recently were not sufficiently structured to include a balance of
forward-looking discussion;
+ Ml, whilst improving, is inconsistent in quality, voluminous and not in a format that is
effective in supporting Board or GE decisions. MI needs to be synthesised to pull out what is
important from the data;
* Throughout a review of minutes at Board level over the last 12 months it was noted that there
was a lack of clarity as to whether actions had been resolved or removed because of
action. We understand from interviews this is prevalent within the central function as well.
Overview of findings
+ We have reviewed most of the papers, Management Information, agendas and minutes of
the Board and Committees for the period betweenSeptember 2022 to December 2023
+ Whilst interviews indicate the quality of Board papers is improving, it remains voluminous
with little in the way of insights. We consider M1 is still not supporting effective decision
making in the way that it should. From commentary in interviews, points were made that in
the absence of strategy, MI is often presented in a way that prioritises each author's
personal agenda.
+ Equally there are still instances of papers being submitted late, being overly long, poorly
prepared, not presented by the person who prepared it, not including specific recommended
conclusions or guidance, and often containing limited metrics by which outcomes can be
judged. There are exceptions, for example some of the retail and/or the monthly financial
reports. We understand that the revised finance report has gone down well with the Board
which was unsatisfied with the previous version, although it is unclear as to why this matter
was not previously raised and dealt with.
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We also observed that a significant proportion of the information presented to the Board is
operational in nature. When we probed the reasons for this in interviews, it appears to be
twofold, eith
+ a tendency for management below Board level to defer making decisions on matters
which are technically within their scope of responsibility. The propensity is to push
decisions up the line, frustrating authors who have spent time preparing insights
+ a duplication of the same information going into multiple sources with authors unclear as
to purpose
Whilst this may be appropriate in limited circumstances, this seems to have become normal
practice. The result is that the Board is not having the proper discussions that it should have
around the themes that drive the commercial success of the business. We comment further
on this practice below under ‘culture’.
We also note comments in interviews regarding a lack of clarity on assigned actions out of
Board/GE meetings, where assignees are not informed in a timely manner.
Minutes of meetings are considered to reflect the substance of discussions and decisions are
taken accurately. They tend to be drafted in a narrative style, recording comments made at
some length, rather than concentrating on decisions taken. Opinions on the style varied
amongst the individuals that we interviewed, but this is more a matter of individual
preference rather than good practice. If the Board is satisfied that the minutes are accurate,
we would not recommend any change.
We understand that committee papers and minutes are now available to all Board members
as several of the NEDs found that the information coming to the Board gave a limited view of
matters across the business.
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05 Leadership and purpose
Measurement of performance (continued)
Actions
+ Simplify, centralise and streamline papers, reporting and dashboards and key metrics ‘less
is more.
Also ensure
+ that actions assigned from the GE/SEG/SLG, are communicated on a timely basis to those
not in the respective meetings
* the Board is provided with higher-quality papers with analysis, conclusions, and
recommendations. Recommend dashboards are considered for all which measure/illustrate
impact across a series of financial and non-financial measures.
papers are presented by the person who prepared them and provide specific recommended
conclusions with accountabilities for action points that are followed up and acted upon
+ guidance is given to those responsible for the preparation of Board papers on ways to make
them more rigorous and more strategic
the Board/Executive/SLG makes it clear when papers are being prepared in a way which
does not meet its needs and where and what changes are required
training of the new SLG is provided on how to write good executive summaries and
emphasise the importance of reliable information.
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05 Leadership and purpose
Culture
Key observations:
+ There is a pervasive culture throughout the organisation whereby individuals are reluctant to
make decisions. This is thought to be due to fear of getting things wrong, the extreme public
scrutiny, lack of clear accountability and management of underperformance. There is also
an acute interest and over-reliance, and even at times, a governance requirement for
Shareholder input both on historical matters, BaU and strategy.
+ Itis unclear at Board level who owns the people agenda.
+ There is no recognised culture dashboard which seeks to either frame or monitor the culture.
+ The untimely agreement of reward structures continues to impact clarity around
prioritisation, performance management and motivation.
Overview
The pervasive culture throughout the organisation whereby individuals are reluctant to take
decisions was clearly stated to us by virtually all interviewees, both at Board level and below.
This has a detrimental effect on the effective working of the business. The reasons for this and
the effects of it are varied but include:
+ the extreme pressure that the Company is under. POL is in firefighting mode dealing with
legacy issues as well as the inquiry developments. This is coupled with hostile media
coverage and Government distrust, leading to micro-management. This micro-management
is counter-productive (although understandable) and is engendering a siege mentality,
which is sucking up resources and inhibiting positive action;
+ there is a culture of fear of getting it wrong, so it is easier to put decisions aside if the
accountability is not absolutely clear and followed through. Driving this is an intense amount
of public, media and Shareholder scrutiny, as well as potential FOI requests. Overall, there is
so much external pressure to not ‘mess up’ again, that it is paralyzing activities in the
organisation;
* in some cases, accountabilities are not as clear as they should be to counteract the above
inherent weaknesses, both at an individual level, and in relation to committees and other
management forums. There is also no universally understood RACI matrix to fall back on to
unlock this;
+ there is also a capability issue. This is material because it leads to making processes overly
complex. Due to the present intrusive nature of the shareholder's oversight, many decisions go
up to government, which is seen as very slow. People become immune to making decisions
because of the number of people overseeing, considering and deciding. A reluctance to take
responsibility means that operational decision making gets pushed up to the CEO or other GE
members, taking valuable time away from their day jobs and, for the CEO, tying him down in
‘operational decision-making when he should be leading:
* issues around the governance and delivery of the NBIT programme. The successful delivery of
this programme is critical to restoring credibility with Postmasters. It also underpins the ability
to undertake future internal investigations. Currently, we understand this is mired in delays
and cost overruns, bringing into question the credibility of Ml;
* the interviews and surveys reveal that individuals are not generally held to account for
underperformance. Feedback indicates this may be due to risk aversion around managing
people out of the organisation and associated implications. Others opined that the
uncertainty around funding resulted in prioritisation/de-prioritisation of projects at short
notice dependant on funding availability, was also to blame. Discussions with interviewees
indicate that the necessary people policies and processes are in place to conduct effective
appraisals — it is largely down to culture. Sanctions for non-adherence to policies (the pol
themselves are good) is difficult because of the cultural ambiguity and the perceived
behaviours being widespread amongst the leadership team.
Exacerbating this is a prevailing risk averse attitude from the Board, and combined with the
above, people at POL are nervous to put forward more risky/commercially courageous options
because they feel the Board will throw them out immediately. This is reflected in low scoring
employee survey results around areas of trust/engagement/being empowered in their roles.
Board risk appetite permeates so much of what happens in the organisation that it becomes a
self-reinforcing cycle.
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05 Leadership and purpose
Culture (continued)
Actions
* Clarify responsibility for the wider people agenda at Board level and amend the Board ToR
to encompass people issues (refer division of responsibilities Section [6] for further details)
+ SEG to agree a set of cultural design principles they want to start to role model and uphold
as a leadership team
* Develop and implement a culture dashboard to frame cultural expectations, and against
which to monitor the culture
+ Consider a refresh of Company values to enable a change of culture and ensure this is
underpinned by performance management
+ Ensure a clear RACI system to clarify individuals’ responsibilities and accompany this by an
increased focus on performance management.
* Consider a communication plan which simply sets out thematic key milestones of the
journey of POL and signals the purpose of the recent change at SEG
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06 Division of responsibilities
Accountability
In this section we explore the findings
and make recommendations on
governance aspects related to:
* Board accountability
* Enterprise accountability
Covering areas such as, the
effectiveness of decision-making
Board accountability
Key observations/actions:
Board division of responsibilities are largely in line with the UK Code and
good practice, other than ownership of the broader People agenda (in
terms of culture, D&I etc) being more explicit in ToR.
— There may be merit at a future date in splitting Risk out from the Audit
and Risk Committee to elevate the second line to better support and
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= large number of individuals reporting directly and indirectly into
the CEO (currently being addressed);
- low-level delegated authorities that limit decision-making; and
— an understandable level of risk aversion, leading to semi-paralysis
and a general avoidance of decision-making, which is also
impacting performance management. Given the public scrutiny
and government ownership dimension, there seems an
organisational reluctance to manage underperformance.
‘oversee cultural transformation. However, there is limited capacity at
Communication and clarity on new roles is key going forward. As an
present. Refer to Section 8 for further details
example, from interviews (including Board members ) many were not clear
as to the role and remit of the Deputy CEO beyond providing the CEO
forums, and impact and clarity of roles
and responsibilities.
For further points of evidence, refer to
Appendix 2.
— Consider whether Rem Co and Nom Co are delivering against their
respective ToRs and agreed how any gaps can be address by review
DoA, capacity, agenda, meeting timings etc. We appreciate the work
of these Committees has been impacted by the absence of a CPO
until summer 2023 (refer to further comments in Section 7).
Attention is needed to ensure that sufficient visibility/cadence of
information is flowing from Subsidiaries up to the POL Board. This.
includes connectivity between the Board and Committee Chairs with
Subsidiary peers (there were varying views on visibility coming from
interviews). We understand this routinely happens at Audit Committee
level. Refer Appendix [4] for further comment.
Executive accountability
Key observation
From our findings we consider the GE does not operate effectively as a
decision-making group and is poorly supported. This is due to several
issues;
- the vast number of matters brought to it for decision
with further capacity.
Overview of findings
The existing POL governance structure is extensive with numerous
levels of committee constructs. The vast number of committees lead to
an “untidy house” where proper recordkeeping, (the corporate
memory) and decision-making mechanisms and opportunities, (the
corporate brain), are not working together to deliver the purpose. This
complex decision-making framework clouds accountability leading to
a lack of effectiveness and transparency in decision making.
A simplified decision-making structure would facilitate effectiveness
and, accountability, as well as speeding up the decision-making
process. This is recognised by the SEG who is currently in the process
of redesigning the decision-making structure. We highlight these
actions on the following page.
The POL leadership team composes of:
- The Group Executive (GE), a group of 12 individuals who report into
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06 Division of responsibilities
Accountability (continued)
- The SLG, also known as the GE-1 who report into the GE; and
- Anumber of senior leaders across the organisation who are not members of the SLG
+ The combination of these three categories is referred to as the Senior Leadership Group
(SLG) which, until recently, met monthly for the communication of board and GE decisions
and wider decision-making.
+ This group had comprised of 100+ individuals, which is now being reduced to roughly a
quarter of the size.
+ The GE's ToR, which again are being reviewed, state that its purpose is to assist the CEO in
strategy development and implementation, operational and financial performance
monitoring, assessment and control of risk, etc, with the GE functioning as a forum for
discussion, decision-making and problem solving. The GE met once a week for this purpose
and SLG met monthly for the full day.
+ The GE is then further supported by 12 sub-committees.
According to most survey respondents and interviewees, some key points of note relating to the
effectiveness of the construct above include:
+ Attendance at SLG meetings is relatively low, and discussions can be unfocused so yielding
few actionable decisions.
+ Across the SLG forums and committees some individuals reported that despite lengthy
deliberations, there is limited challenge or value added to the matters, leading to a belief
that there is limited understanding This is despite papers being provided beforehand, and/or
little need to put effort into papers in the absence of decisions being made.
+ There is duplication of papers across decision-making groups which can sometimes appear
to take decisions on the same matter twice. We found specific mentions of this happening
between RCC and ARC and RCC and Retail Committees.
* The effectiveness of certain working groups is not clear. For example, the Improvement
Delivery Group (IDG) does not have metrics or key performance indicators to measure or
evidence its effectiveness in terms of impact. Furthermore, some committees, such as the
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Historical Matters Committee (HMC) should, given their ToR, report directly into the board. In
practice, however, the HMC reports into the GE, which in turn reports into the board.
+ Authority of committees is not clear. IDG was given as an example where it appears to be a
body that largely hears and collates actions/information rather than take decisions.
+ Committees/forums within the SLG generally act as stage gates with anything of significance
going to GE. This means items are debated and heard twice for approval.
+ Mand sub-committee (Sub Co) reporting is falling short of desired levels leading to generally
unsupported decision making.
+ As highlighted, numerous comments to the effect that a risk-averse environment has emerged
amid fears of making decisions that should ordinarily fall within their roles. The inquiry is
generally causing nervousness and is leading to an avoidance of accountability. This
avoidance of accountability and risk-taking is leading to a higher level of input being required
from legal colleagues, and it is the legal function therefore, that is driving decisions in some
cases.
+ Meeting discipline in terms of capturing actions and providing an audit trail around resolution
(0r not) varies across forums and committees.
+ Incertain cases, individuals are willing and able to take decisions, but are prevented from doing
so by low delegated authority levels. For example, ‘spend’ approvals for transactions on
operating expenses at Executive level is £5 million. An organisation with the size and complexity
of POL’s operations would routinely engage in transactions farin excess of this amount. This is
resulting in a proliferation of comparatively minor decisions being escalated to the board.
+ With Postmasters, we understand there to be over 80 varying franchise agreements. We
understand there is a desire to synthesise these, although it is not thought to present a risk.
However, in terms of developing future strategic models, this may need to be reconsidered.
We are aware that changes in Management reporting lines are underway, however during our
investigations we were informed that in addition to the CEO's direct reports, other executives also
report to him on matters which they should be deciding on at their level. As well as an excessive
number of direct reports, he is also making unnecessary decisions on operational matters.
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06 Division of responsibilities
Accountability (continued)
Work in flight
+ As mentioned, current proposals to reduce the direct reporting individuals into the CEO to
seven are in train and this will form the nucleus of the Executive leadership team to be known
as the Strategic Executive Group (SEG).
+ Further proposed changes include the slimming down of the wider leadership team or SLG
from over 100 individuals to a group of 20-25, and the overhaul of Sub Cos and working
groups.
+ We are informed that the full leadership team and the refreshed GE subcommittees will be
‘announced in late March 2024. We consider that these arrangements are satisfactory and
will improve governance at POL.
+ We are also encouraged by the approach namely, to design the Committee requirements,
purpose and roles ahead of identifying the individuals, which will be done based on skills and
experience for the role and not necessarily on seniority.
+ As part of this process all ToR, DoA’s at the GE and GE+1 level will be reviewed.
Actions
Continue with
+ the streamlining of direct reports and associated DoA/ToR except for risk, which we feel
should be elevated to reporting directly into the CEO (refer Section 8 for further discussion).
Illustrative diagram provided on page 44.
+ the streamlining of GE sub-committees ensuring their responsibilities are mapped out to
identify gaps and overlaps, as well as to ensure synergy. Support for adequate board paper
preparation should be provided where needed. Refer to page [43] for illustrative diagram
* Consider the merits of an (interim) Implementation Committee to spearhead the reform
effort.
- This Implementation Committee should include no more than six individuals from the
reformed SLG group who are fully convinced and committed to the pressing requirement.
for such fundamental reform.
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- They should have a willingness to champion these changes publicly and be clear how
each element complements one another and contributes to the whole.
- The Implementation Committee to be led by an INED from the board with appropriate
transformation expertise, and include a combination of the Deputy CEO, relevant SLG
members and possibly an INED from a subsidiary board.
- The Implementation Committee to be supported by a highly capable and experienced
project team (in our view led by the current Chief of Staff) to manage the various
dimensions of reform implementation. The committee's aim will be to anticipate, manage
and resolve, in a rigorous and dispassionate manner, the intricate technical,
organisational and political issues that will inevitably arise.
- The committee could then act as a challenge to the strategy design being led by the SEG
and in the interim, act as the oversight fora number of the current GE transformation
committees, ensuring a company narrative is created around trade-offs.
Review the DoA spend approvals to drive relevant decisions being taken at the appropriate
levels thereby managing and reducing the frequency of simple matters escalated to board.
Communication will be critical in terms of supporting this transformation to ensure
governance is rebranded and the case for change understood. We comment on this further in
Section 4 related to Executive leadership.
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06 Division of responsibilities
Proposed Two-tier Board structure
Executive Team:
CEO, CFO,
CTO, CPO, GC,
Support: CoStaff
NBIT
4 -
Historical Matters Culture Risk and petal Committee (Strategic Platform mvestnent Transformation
incl. Proper Approvals ani
Funding Meeting Coalition Compliance Unc Broker ty Perot ond
Committee) el poor)
Modernis:
Delivery Group
Committ
Post office Pension
Eocamy Steering) Plan Governance Data Governance reciology Inerovernent
Committee Orsae Committee Delivery Group
Health and Safety
Key: highlight new roles/committees to be considered
Proposed non-GE level committees
© GrantThornton
26 Division of responsibilities
Proposed further simplified executive reporting structure
This side dealing with culture,
firefighting, noise and historic
issues — can be rejigged depending
on remit of CFO/CPO etc.
This side dealing with
sustainability, strategy
implementation and providing
focus on forward looking BaU
Chief of Staff
an CEO
Philippa Hankin Nick Reod Chrysanthy Pispinis
[ T I }
Group General Counsel Interim CFO
cPo
Karen McEwan
Public Inquiry Director
Diane Wills
Remediation Unit
Director =
Simon Recaldin
Group Corporate
Affairs, Communication
& Brand Director
Richard Taylor
© GrantThornton
Ben Foat
Kathryn Sherratt
Strategy and
Transformation
Director
Tim McInnes
(Deputy CEO
Owen Woodley)
Group Chief Retail
Officer aE
Martin Roberts
[
FRESH JV
POMS (PO!) al
FRESH Subsidiary
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Chris Brocklesby
Payzone
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and evaluation
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07 Composition succession and evaluation
Composition — Board
In this section we explore the findings
and make recommendations on
governance aspects related to:
Composition of the Board
Composition of the Executive and
SLG
Succession planning
Performance management
For further points of evidence, refer to
Appendix 2.
Composition of the Board
Key observations:
+ Over the last 15 months, the Board has experienced eight role
changes including two new Chairmen. That said some obvious
skills gaps remain ~ as well as a lack of diversity.
The very recent departure of the Chairman, the imminent
rotations of INEDs (and Postmaster NEDs) and the long-term
absence of the CFO, make for a perceived weak directive and
decision-making / oversight body. Corporate memory needs to
be carefully managed.
+ The Board along with the Shareholder need to consider a
response to the NFSP statement, released 19 January 2024,
which queries the viability of the Postmaster NED role, in addition
to raising concerns around the original selection process.
Overview of findings
+ The Secretary for Business and Trade asked the POL Chairman to
step down from his role with immediate effect. The intention is to
appoint an interim Chair to take on the role pending the search
for a permanent successor. We understand, however, that Ben
Tidswell, the present SID, will take up the post until a replacement
is found, or until he leaves in July 2024.
Further board rotation is imminent alongside this process with
expected departures of two INEDs and the two Postmaster NEDs
within the next 15 months.
Individually, all board members have significant experience and
expertise both at executive and Board level. Interviews cite that
there is improving diversity of discussion and debate at Board.
However, the Board is still learning how to best work together and
be most effective as the uppermost decision-making and
oversight body of POL. It is usual to “sacrifice” the first 1218 months
to becoming fully effective.
* There is, however, a lack of gender diversity within the board when
compared to best practice. Currently only two members of the ten
permanent board positions are held by women.
+ Itis of paramount importance to urgently recruit newboard
members with appropriate skills, experience, and who will ‘fit in’ to
the current Board, a task that will be made significantly more
difficult by the current negative public perceptions surrounding the
Company's probity. Clearly the identification of a Chair is key to
informing further recruitments.
It appears ill-thought through that both Postmaster NEDs are due to
leave at the same time, having only served one term of three years.
That POL did not anticipate this issue in terms of corporate memory
until recently points to the poor succession planning. No thought
appears to have been given to transfer of knowledge/roll over with
both rotating off at the same time. There is no transparency as to
formally how this is going to be dealt with beyond, we are aware, of
a recent decision that "one" will be extended.
Points of note from surveys and interviews
The board has gaps in experience and skills in technology and digital
transformation at a critical time in its development with the
replacement of the Horizon IT system and concerns around the
delivery and cost. There is also a perceived lack of experience in
dealing with government/Whitehall and the civil service generally as
well as franchise expertise;
* All cite how much they underestimated the complexity with the
Shareholder in terms of governing the organisation;
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07 Composition succession and evaluation
Composition — Executive
+ Many raised the desire for more informal get togethers to build trust and have
unstructured dialogue given the breadth of the agenda at POL equally all highlighted an
absence of a formal learning and development programme
+ The Board does not regularly review its diversity with regards to background, ethnicity,
gender and other minorities; and
+ There is acknowledgement that the Board is ultimately approved by theShareholder which
influences its composition.
Actions
* Succession planning needs to be overhauled and driven forwards with the design principles
of the skills matrices agreed at Nom Co. New and appropriately skilled Board members
need to be recruited urgently with a view to filling skills gaps, addressing diversity and
rotation timings.
* Given the immaturity of succession planning, Nom Co membership to potentially be
reviewed to include having the Chairs of all the Committees as members to provide a
diverse perspective on management pipeline.
* Nom Co to take the lead on addressing the future viability of the Postmaster role at Board..
With the NFSP also raising issues around the validity of the original selection process the
Nom Co should seek to establish what corporate memory exists around this to be able to
address any future concerns or processes.
+ Nom Co to agree design principles for the skills matrices. These to be mapped urgently to
support informing the future “to be” composition plan
* Consider how the Board is going to support the SEG.
* Nom Co/Board to consider extending terms of Board members due for rotation this year.
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Composition of the Executive
Key observations:
+ Atan individual level, the Executive team is an experienced group however, history suggests
the group is not optimised yet and working together as it should. Innovation is being stifled
and objectives are misaligned, but we are encouraged that there are fundamental steps
being taken to drive different outcomes to build leadership capacity and accountability.
+ The absence of a (permanent) CFO is causing issues both at board and in operations and
this needs attention. The potential departure of the Deputy CEO needs to be addressed.
+ Numerous "People issues" within the organization, including confusion around roles,
accountability, and cultural behaviour, as well as complexity of legacy reward schemes,
mistrust around pay, high staff churn, and confusion due to lack of corporate memory.
+ The entire “People” agenda (at Board and operationally) and its numerous related issues~
most importantly performance management and accountability - requires a laser sharp
focus on rapid implementation.
+ Itis acknowledged that the current level of “noise” surrounding POL is a huge distraction as
well as being an impairment to successful recruitment. Urgent steps need be taken to avoid
gaps in the Executive team developing and a COO should be the next recruitment focus.
Overview of findings
+ The current Executive team is largely untested and although the accumulated competence
and experience should be in place, history would suggest that as a group they have
struggled to form a cohesive team to develop an innovative and sustainable strategy. They
are without doubt an experienced team of individuals, however, without aligned and
unifying objectives, the collective is in danger of demonstrating little cohesion, which in turn
reflects poorly on the CEO.
+ The current CEO (and CFO) has been in role somewhat longer than the external board
members however the absence of the CFO from the business for an extended period at such
a critical time poses issues. The capable deputy CFO has stepped in on an interim basis
however, this key position needs to be filled permanently with the right calibre of
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07 Composition succession and evaluation
Composition — Executive
+ individual to oversee and support the anticipated transformation. In addition, the absence — ‘Capability overall is lacking when it comes to breadth and depth, and increased expertise and
of a permanent CFO is causing issues with board resolutions and this issue needs to be experience in certain areas is needed, such as transformation management, effective leadership,
resolved as soon as possible. although recruitment limitations (je remuneration and government thresholds/appetite) and
+ There are a number of other (relatively) senior roles which are currently filled on a contract TepUtation Fecoghiséd.6s limitations: inithisiregord ;
basis, This is exacerbating the lack of corporate memory across the organisation, reducing ~ There is limited cross functional working across POL leadership and more needs to be done to
‘accountability, and ultimately leading to an increase in staff churn. facilitate the building of leadership teams
Actions
* Furthermore, the Deputy CEO has indloted hls desire to step down in 1218 months. hich «more structured approach to recruitment and senior appointments needs tobe Implemented without
ig pability gap Pp alg:
in the current role. As part of the wider recruitment plans a COO should be recruited ; ;
without delay to enable a sensible handover period and ensure an avoidance of further Push for clarity on CFO role in the SEG
capability gaps occurring in key positions at both Board and Senior Management level. * Consider merits of a COO role
+ Fasdbcsliaggadte Gkiiiere oie alarge novnbisnct?peanlathiousstwhish have Beati * Continue with the build out of the skills matrices for leadership, EDI to be integrated into thinking
exacerbated by the historic lack of an incumbent in the Head of People role. These issues
include lack of cohesion in leadership, confusion (and duplication) of roles and * Learning and development plans to follow
responsibilities, lack of skills matrix and lack of performance-based conversations, + Communicate changes and ensure where possible transparency around process
accountability ambiguity, lack of diversity and inclusion awareness, and general poor Succession planning
cultural behaviour. Other issues include the complexity of legacy reward schemes, mistrust
in the organization about how pay is determined, high staff churn, and confusion/slow Key observations
decision-making resulting from a lack of corporate memory.
Review recruitment process
* To date succession planning has been poor at POL and there is a heightened need to drive this forward
+ Anewly appointed Head of People, (October 2023), has all these issues as immediate at pace. The lack of a proper succession plan for key senior roles (CEO, CFO, etc.) is a growing risk that
priorities and a three-year people delivery plan is imminent. We are encouraged that her is causing wide felt repercussions at Board and at Executive level.
outline proposals for tackling these issues are focused in the right direction in addressing
the gaps. A lesser priority is the lack of any formal learning and development plans for
directors.
+ There is too much board role rotation, and this is impacting the corporate memory, decisionmaking and
oversight effectiveness.
+ The current lack of transparency around senior appointments is hampering board discussions and
leading to an erosion of trust. In addition, a structured approach to internal appointments is completely
— While new additions have been additive in bringing new, valuable experience, there has __lacking and should be implemented without delay.
not been enough time to re-build collective competence and ways of working
— Itis felt that sometimes recruitment is perceived not to routinely be conducted on a
transparent basis with reference to the absence of a framework of skills, competencies
etc and no ED! thought put into interview panels and targets.
+ Further points of note from interviews and survey
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07 Composition succession and evaluation
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Succession and performance management
+ In the survey scoring this is one of the areas identified as highest priority yet receives the
lowest scoring in terms of effectiveness/impact (red score below against the general Board
benchmark in the third column)
The company’s leadership and talent management evaluation and planning are in
good order. 1 50 7%
We have a satisfactory succession plan for key roles in the management team. 4s 49 bh
‘The board's contribution to matters concerning management appointments and
development of a diverse pipeline has led to the desired outcomes. oe nf as
+ As highlighted feedback acknowledges concerns around the lack of proper succession
planning ~ at Board and for key senior leadership roles as it appears that POL did not
anticipate that the two Postmaster NEDs would be stepping down at the same time. The lack
of awareness of the wider impacts on corporate memory until most recently, coupled with the
lack of formal discussions as to how this should be addressed, (other than one role is to be
extended), points to a weak capability in this regard.
+ The lack of succession planning around the key senior leadership roles of CEO, CFO ete. is
causing concern. Succession planning is a key process in ensuring the organisation can deliver
on its objectives, focusing on the right number of people, with the right skills being employed
in the right roles and at the right time.
Action
+ Per comments on page 46 Nom Co to oversee immediate action to start to address issues
around skills matrices, recruitment processes etc that underpin succession plans.
+ In the absence of a strategy Nom Co to agree with the SEG succession planning design
principles
+ Head of People to continue to drive the process with reporting lines between Board, Nom Co
and Rem Co clear in terms of remit of oversight and support in this area
Performance Management
Key observations
+ Poor organisational culture ~ very little in the way of performance management in the business
and very little done to tackle poor performance largely due to culture and clarity on strategic
priorities, roles and responsibilities etc
+ Related to this, a lack of transparency at Board around senior level recruitment and
appointments.
+ Key development areas highlighted in Board Effectiveness reviews over the last few years remain
@ gap today. The Board need to clearly establish why it has not resolveda number of the issues
outlined both through internal and external reviews.
Overview of findings
+ Internally, there is no structured approach to promotions, no skills or competency frameworks
used as a basis with levels set for each cadre, no set requirements for interview panels and no
requirement for EDI training. Externally, even though senior appointments could be kept quiet due
to valid reasons, such as fears of leaks to the press, this is still hampering discussions and eroding
trust in this important area.
+ A number of relatively senior roles which have been filled on a contract basis rather than by new
permanent employees which has exacerbated the lack of corporate memory across the
organisation, reduced accountability, and increased staff turnover although we understand this
is complicated by the ownership structure and foundational governance documents.
The CPO has all these aspects as immediate priorities. By the end of February 2024, she aims to
articulate a 3-year people delivery plan which will begin to tackle these issues. We are encouraged
by what we have heard from our discussions with her and consider that her outline proposals are
very much focused in the right direction at this early stage.
Action
+ We recommend therefore that people skills be reviewed, and that individuals be placed in their
most suitable roles.
+ Policies and processes for people management need to be enacted purposefully.
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control environment
© GrantThornton
08 Risk and control
Risk and control environment
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The control environment needs to structurally evolve to enable those that are charged with governance to have the confidencethat the key financial and
non-financial risks are understood, transparent and are being appropriately managed to drive value
Key observations:
In this section we explore the findings.
and make recommendations on
governance aspects related to:
POL has relatively well set up risk management process and
associated policies and procedures; however further uplifting of some
of those is required as the risk management arrangements mature.
+ The Central Risk Function needs to be elevated across the business to
gain the necessary prominence so that POL can more effectively use
risk management as part of improved strategic decisions. :
* Risk Management
* Risk policies and procedures
+ ARC papers could be significantly improved by introducing a more
* Risk appetite, policies and \ ; i
concise and data-driven approach of reporting.
procedures
* POL should undertake more pro-active steps in satisfying itself that it
° Risk culture has an effective internal controls framework in operation.
* Control environment Risk Management
Overall, we consider the decision to move the central Risk Function out of
the remit of the Director of Internal Audit to be appropriate. However, given
recent developments, the exposure the legal function has with the Inquiry,
and a number of ongoing investigations, POL may want to take the action
to re-consider whether a reporting line into the General Counsel could also
potentially result in a perception of conflicts of interest.
This is because the central Risk Function should remain independent and
be able to freely challenge the rest of the business, including the legal
department. In our opinion, it will be more appropriate if the Head of Risk
has a direct reporting line to the CEO. This will also send a very strong
signal to the business and any other interested parties that POL has given
the risk function the level of prominence it should carry given current
environment.
Action
For further points of evidence, refer .
to Appendix 2.
In our understanding, the central Risk Function of POL has been on a
journey, The Risk Function resourced with appropriate skills and
experience.
+ Inline with our expectation, the central Risk Function has the overall
responsibility to oversee the corporate approach to risk management
as well as defining and implementing risk standards, policies,
procedures and guidance, identifying emerging risks and trends and
producing regular reports to the ARC.
+ Until recently, the Head of Risk has been reporting to the Director of
Internal Audit and Risk Management. In the course of our review, POL
has undergone executive changes, which have resulted in the Head of,
Risk now reporting to the General Counsel. This is because the firm
has rightly identified potential conflicts of interest with the second line
of defence reporting to the third line of defence. This change also
brings the risk function in line the compliance functions, which
already reports to the General Counsel.
Re-visit the newly introduced changes in reporting lines as far as the risk
function is concerned and consider whether more appropriate line of
reporting should be introduced both from an independence and elevation
level
Risk policies and procedures
We are satisfied that POL has established an appropriate set of risk
management documentation, including Risk Management Policy, Risk
Management guidelines, Risk Register, Risk appetite statements for its
enterprise risks and associated tolerances.
Moreover, we understand that in the last two years, POL has also
introduced a new Governance, Risk and Controls tool, ServiceNow, to help
automate risk reporting. The team has also been restructured, streamlined
to a relatively lean structure of three with the Head of Internal Audit taking
overall responsibility for it. Further enhancements were also introduced to
the existing documentation. GrontThomton © 20% I 51
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08 Risk and internal control environment
Risk and control environment (continued)
+ Inour view, as the central Risk Function matures, some further enhancements to the risk acsion
documentation should be introduced. For example, some refinement of the roles and + Amend the Risk Management policy and the Risk Management guidelines to consider
responsibilities of the second line of defence versus the business would be beneficial. the observations above.
Currently, the Risk Management policy states that the CFO has the overall responsibility “to
ensure that the Post Office actively monitors and strengthens its approach to risk
management and promotes a consistent risk-intelligent culture”. Further consideration
should be given to the identity of the executive sponsor of risk management in line with Risk Appetite, thresholds and tolerances
updated reporting lines.
Whilst, given other priorities, we do not consider this action critical from a timeline
perspective, we are of the view that further uplifting of key risk documentation is required.
* Positively, POL has set up risk appetite statements for each enterprise risk as identified.
These are supplemented by formal tolerances, which are established using the same
definitions as for the risk appetite. However, it is unclear from the documentation we
have reviewed what process was followed to land with these tolerances. Furthermore,
we understand than no quantitative or qualitative thresholds were adopted when
+ Similarly, we consider that the risk management documentation should more clearly feature
the role of the central Risk Function as providing independent challenge to the business.
Both the risk management policy and risk management guidelines should be updated to this
effect in our view.
+ The Risk Management guidelines mentions that Postmasters should be “risk aware” in setting the risk tolerances. Typically, when risk tolerances are set, we would expect that
defining their roles and responsibilities with regards to risk management. In our opinion, risk thresholds, which refer to the specific levels of risk that will trigger a response or
Postmasters have a critical role to play in ensuring that risks are managed, similar to the action will also be established.
rest of the first line of defence, and this should be made clear within the remit of their
responsibilities and all relevant risk documentation.
Action
+ Once POL has settled on its overall and risk strategies, a more holistic review should be
undertaken to introduce more formal approach as to setting risk appetite, risk
tolerances and risk thresholds. This will bring the organisation in line with industry
+ Inaddition, the Risk management policy sets out a regular bemonthly reporting to the
Group Executives, ARC and the Risk and Compliance committee (RCC). We would typically
expect that the frequency pf reporting varies according to the needs of the stakeholders. psiotiee cand ill ahaeltndape incidence ieiietnan}tsiceedel Th bnetioure ecu
For example, we would normally see that reporting to the ARC is aligned to its meetings’ reflected in ciniupidated Hakireigleter, which Gledry sticuletes whei:cre the sek
cadence, reporting to executive forums is monthly and reporting to individual group thresholds that have been breached so for a risk to be outside risk tolerances.
executives is on a weekly basis or as often as they need.
+ The Risk Management guidelines also refers to the Risk glossary as Risk taxonomy. We
consider this incorrect. Usually, risk taxonomy refers to a system of categorising and
organising risks and it includes the different types of risks that an organisation faces as
opposed to the definitions of the risk terms used within documentation.
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08 Risk and internal control environment
Board ARC Committee
Audit, Risk and Compliance Committee (ARC)
We have reviewed the papers, managementinformation and minutes of the ARC for the
period between May 2023 and November 2023.
The agendas we have seen are broadly in line with what we would expect to be covered in
ARC given its remit. We note that they appear quitefull and cover a wide range of issues
important to the business areas and it is unclear to us whether risk matters receive sufficient
airtime and debate outside the formal reporting.
In line with our commentary above regarding Board papers, we are of the view that the ARC
papers could be significantly improved. Whilst reports cover largely the right content and
appropriate level of detail, papers are currently relatively lengthy, contain mainly narrative
text and are supported by little Management Information.
We recommend that papers are significantly overhauled in terms of format and
presentation so to ensure that the information is shared with the committee in a much more
digestible and practical fashion. For example, we would expect that all committee reports
follow a very clear structure, that is the same for all papers to the extent possible, and they
make use a more concise format that is easy to understand. Additionally, we would expect
that much more data-driven management information, such as key performance indicators
and metrics, is included as part of the main body of the report, to support the narrative and
provide a more comprehensive view of the risks and controls. Visual aids such as graphs,
charts, and diagrams are usually used to provide a clear and concise overview of the risks
and controls. This will help the committee to quickly understand the key points and focus on
the most important areas. In practice, this may be best achieved in PowerPoint format
report as opposed to traditional word format report.
Based on our documentation review, minutes appear to capture the key points raised in the
meetings, reflecting the discussion as occurring and there is clear attribution of comments.
Actions and owners are also recorded.
We haven't been able to observe an ARC meeting; however, from what we can see in the
minutes there appears to be a good level of discussion with the Chair ably facilitating the
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debate. We noticed that both the Chair and one of the NEDs, Elliot Jacobs, appear to be
providing a significant amount of challenge and ask pertinent questions.
Action
+ Board papers into ARC need to be significantly overhauled in terms of format and
presentation so to ensure that the information is shared with the committee in much more
digestible and practical fashion.
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08 Risk and internal control environment
Board ARC and Risk and Compliance Committee
+ We noticed that there is a relatively high number of regular attendees of the meetings. We Risk and Compliance Committee (RCC)
acknowledge that this may be result of the wide remit of this committee and therefore key executives
across all these areas should be present. When we raised this matter with key stakeholders, we did not
get the impression that this is in any way obstructing the meeting, albeit some comments about
occasional distraction of the conversation were made. Nevertheless, we are of the view that as and
when more fundamentals changes are introduced to the ARC, the list of regular attendees should also
be re-considered.
We have seen a sample of minutes of the RCC that were shared with the ARC, but
we have not had sight of the packs for these meetings. Our understanding is that
the papers for the RCC broadly duplicate those of the ARC, with the exception of
cases when the RCC has decided that certain papers are to be worked before they
get submitted to the ARC, or when ARC has requested a special report.
From a good governance perspective, we would typically expect that the papers for
ARC are appropriately tailored and while we would usually see a lot of granular MI
and risk reporting in the RCC, this information should be elevated for the needs of
the ARC. We acknowledge that papers take significant executive time and therefore
producing regularly two sets of those requires a high effort, but it is important that
+ We have raised the matter of potentially splitting the Audit, Risk and Compliance committee with the data as a minimum is bespoke to each committee. This would normally also
Directors and other key stakeholders so to free time for more focused discussions covering either audit drive a different type of conversation.
or risk. Our understanding is that currently non-executive directors are relatively stretched so to be
able to populate one more Board committee will be difficult. Based on our experience, the industry has
largely moved away from joint Audit and Risk committees and the current trend is for those to be run
separately. Whilst this may not be the most pressing matter for POL at present, we consider that this
should be addressed as part of a next wave of governance changes, and as the makeup of the Board
is further reviewed. * Similar to our observations on the ARC, there appear to be a high number of
members and attendees at the RCC, approximately 15, with additional attendees
invite for certain items. In our experience, this large number of attendees does not
* POL should give a due consideration to splitting the ARC and look to appoint the new non-executive necessarily facilitate a focused conversation and efficient decision-making process.
directors with specific risk skills and experience. Whilst some of the current Board Directors come with a
strong operational risk profile, we consider that further risk expertise will significantly benefit the Board
and respective committees. Separating the Audit and Risk Committee will also allow for more focused * We would expect that the Head of Risk / CRO and Head of Compliance co chair
discussion and should lead to a deeper understanding of the risks and controls within that area. the committee given these functions are at the heart of managing risks and carry
the responsibility for risk management.
+ However, we were told in interviews that executives will benefit from more technical risk questions and
input from the non-executives. As we have not observed an ARC meeting, it is unclear to us whether this
is because there is not sufficient time for discussion that executives may need, with regards to risk
issues, or this is reflective of the capability and skillset of the committee at present.
* Based on the minutes, we can see that, in line with our expectations, the
conversation is focused on risks at operational level although we were not able to
establish whether a more detailed debated around specific KRIs, related root causes
and risk appetite occurs at this meeting.
Action
Action
+ Furthermore, each committee can be held accountable for its specific area of responsibility so that
there is greater transparency and better decision-making.
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08 Risk and internal control environment
Risk Culture
Actions
+ Everyone we spoke to shares a view that more needs to be done in POL with regards to risk
culture. This tallies with the results from the survey, where the firm has scored lower than the + Undertake substantial risk management training across all levels of the organisation;
industry benchmark on matters related to risk. most importantly, GE should set the tone from the top and give much more
prominence to risk management while executing their daily responsibilities. We
understand that they all receive individual risk reporting concerning their areas and
this should be used as key driver for decision-making.
* Both survey responses and interviews crystallised two main issues with risk culture- on one
hand the organisation is very risk-averse, which is seen across all layers of risk governance,
and on the other hand, the level of importance attributed to risk management is insufficient,
which also appears to be common for all grades, including the top executive layer. * The role of the central Risk Function should be elevated to gage much more
prominence across the business, and this move should be led by the CEO to highlight
the importance of risk when making improved strategic decisions as well as in
identifying and seizing opportunities and optimising the use of capital.
+ This is also reflected in the relatively conservative risk appetite and tolerances that have
been set up for all risks; this ultimately has resulted in risks being reported outside of
appetite on a continuous basis. A lot of those risks have also remained as reported “red” due
to the lack of funding to address the underlying issues, resulting in an unsatisfactory overall * More fundamentally, we would expect that once the POL's overall strategy is agreed,
risk reporting picture and raising concerns about the effectiveness of the POL’s risk as per our observations earlier in this report, the risk strategy should also be aligned
management practices. and reflected in more appropriate risk appetite statements and risk tolerances in line
; 7 ; ea , : with strategic objectives. More holistic risk assessment should also be undertaken to
soln ourview, all of the evidence we have seen is a strong indicator of an immature risk culture. ensure that all risks pertinent to POL are captured in the risk universe. The risk
Positively, the firm recognises that, and key stakeholders have expressed a willingness to strategy should also play a central role in performance management, the appraisal
work on that, part of which should be addressed by the wider culture programme under
lini he i havi
“project Ethos”. process and outlining the required behaviours.
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08 Risk and internal control environment
Internal Audit and Controls Framework
Internal Audit arrangements
POL appears to have established appropriate Internal Audit framework and supporting
documentation. The Internal Audit Charter has been set out to describe the main purpose of
Internal Audit, how the function approaches its work and the rights and arrangements in place
to provide quality assurance to the Board and the ARC.
The Charter also defines the role of the Internal Audit function, the standards and policies that
apply, reporting lines, access and principles for setting up the Audit Plan. In accordance with
good practice, the Director of Internal Audit and Risk has a direct reporting line to the Chair of
the ARC, and we understand that they benefit from a very good working relationship.
We understand that the Audit Plan is developed on a risk-basis in line with a conventional
industry approach. The Director of Internal Audit and Risk submits a rolling risk-based plan for
approval by the ARC, reviews progress against the plan with the ARC quarterly and where
necessary amends the plan to reflect changing risk priorities. We have seen evidence that this,
is indeed how the plan works in practice, as several updates have been shared with the ARC in
2023, and from our conversation with stakeholders, we are aware that the Plan for 2024 was
just submitted for approval to ARC, although we have not seen a copy of it.
We have also observed that the Interna Audit updates to the ARC are amongst the better
papers, in that they are concise, highlight clearly the key themes and findings for each audit,
and utilise visuals and tables to show progress and illustrate other trends.
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Controls Framework
+ We have seen a copy of draft Internal Controls framework that POL has developed. As
expected, the purpose of the framework is to articulate the minimum standards and
associated guidance for POL to ensure an appropriate control environment exists and
is maintained, and covers key elements such as control environment, three lines of
defence model and controls universe.
+ The framework appears to be set at the right level, however, without us doing a deep
dive review of the specific controls in place, it is difficult to comment on the
framework’s effectiveness. Anecdotally, we understand from interviews, that there is a
significant amount of work still to be undertaken to ensure that all activities have the
right controls in place. Positively, a new Head of Assurance was recently recruited who
has been tasked with ensuring that the appropriate control environment is embedded
across all business areas. This appears to be work in progress.
+ We have seen evidence that the ARC receives a regular update by the Head of
Assurance on reviews undertaken on historical matters and other reviews.
* Given that the Board is responsible for ensuring that an effective system of internal
control is maintained across the organisation, we suggest that the ARC should satisfy
itself that the Internal Controls framework that is in place is effective, and it is adhered
to in practice, Based on our documentation review, the conclusions of the assurance
reviews demonstrate that the practical adherence to otherwise welkdesigned
documentation is an area of concern, and the ARC appears to be aware of that.
Action
+ ARC to take more pro-active steps, at an accelerated pace, to better embed the
framework, including relevant training so that they can attest positively to the
effectiveness of the internal controls, particularly in light of the new corporate
governance code coming in force in 2025.
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08 Risk and internal control environment
Franchises and subsidiaries
+ We have seen little evidence, based on the documentation we have seen, of alignment
between POL and its subsidiaries and franchises, as far as risk and internal audit
‘arrangements are concerned.
+ Inour understanding, risk is managed separately at a franchise level, but we consider that
some appropriate aggregate reporting should be brought to the attention of RCC and ARC,
‘as required. We can see that there is some reporting from the subsidiaries into the RCC.
+ We are also unsure as to how the subsidiaries and franchises are captured by the Internal
Audit plan, although we understand that the Group Internal Audit arrangements apply to all
fully owned subsid
Action
+ Amore formal approach to aligning the risk and controls environment and internal audit to be
considered across the subsidiaries and franchises to ensure that risk is managed consistently
and effectively across the organisation.
This might involve the establishment of a formal governance structure that oversees risk
management and internal audit arrangements across all subsidiaries and franchises, in the
cases these are currently lacking, with clear reporting lines and escalation procedures to the
RCC and ARC.
+ Invest time in training and development programs to ensure that all employees in the
subsidiaries and franchises are aware of the policies and procedures related to risk
management and internal audit, and are equipped with the necessary skills and knowledge to
manage risks effectively.
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09 Remuneration
© GrantThornton
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10 Appendices
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Appendix 1
BoardClic Board and Leadership Surveys —
actionable insights
© GrantThornton
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Appendix 1 - Board and Leadership Surveys actionable insights
Board survey
Actionable insights
‘The company's leadership and talent management evaluation and planning are in
00d order. 50 74 I aa
wv tow scone
We have a satisfactory succession plan for key roles in the management team. 49 64 EOD
ww tow scone
Information, Reporting and Risk Management
Investments are given appropriate and robust review. 56 79 II es I
The board is quick to respond to changing business conditions 58 82 QUEUE
‘The board has a specific framework or approach in place to monitor culture in 39 66
the organisation.
Me tow scone
Purpose and Strategy
‘The company is well prepared for business or technology disruptions. 41) 73
Mv tow scone
‘The board periodically reviews and challenges mission-critical dependencies 66 78 3k
‘The board's contribution to matters concerning management appointments and
47073
development of a diverse pipeline has led to the dk
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Appendix 1 - Board and Leadership Surveys actionable insights
Leadership survey
Actionable insights
The members of the Group Executive trust each other. 41 81
\v tow scone
Trust and Transparency
I consider communications from the Group Executive to be transparent 52 78 I COREE
Group Executive members generally appear to find it easy to make decisions. 46 59
Mv tow scone
Diversity within the Group Executive positively affects our decision-making process. 59 81
Performance Competencies ~ Navigating through Business Landscape
The Group Executive is strong at developing strategies to address future business 57 80
scenarios and work to implement those.
‘The CEO holds people accountable for agreed upon results. 60 81
I believe that the Group Executive takes appropriate business risks 54 79 I (a
Strategy implementation
believe we are sufficiently focused on meeting the challenges of the rapid digital
transformation of business and society. 4 76 I ea
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BoardClic Board and
Leadership Surveys
© GrantThornton
Appendix 1 - Board and Leadership Surveys
Leadership and purpose - strategy
Board survey
‘QUESTION
The board has ensured, to the extent permissible within the policy framework set
by the shareholder, that the company has the right strategy to fulfl its purpose.
The board is not af
address issues as n¢
id to scrutinise what is making the company money and
ded
The company is well prepared for business or technology disruptions
The board has a consensus on which stakeholder groups are the most critical to the
‘company’s long-term success.
The board is quick to respond to changing business conditions.
The board regularly assesses the strategy implementation process.
PRIO Y SCORE BENCHMARK. O csecutive © 516 © Board
59 65 :
360 6685
360 OM
27 70 83
23 5882
mm 8979
(Our agreed strategy includes vital ESG topics.
os 47) 80
‘Summary of comments
+ Asa relatively new Board, some members are still getting acquainted
with how the Post Office functions, however despite being capable,
‘experienced, and skiled, the Board lacks clear direction from the
government regarding their vision for the Post Office.
+ There is a growing perception that the board is not sufficiently
independent from is government Shareholder and this is being used os
a shield,
+ Majority are of the view that the conflict between running a profitable
post office and providing service to the communities has resulted in a
‘muddled strategy. The management team is not addressing the core
problem due to a perceived lack of government support.
+ Thisis exacerbated by uncertointies around the upcoming general
lection, and the impending renewal of the Shareholder Framework
Agreement, which is affecting activities across the business.
+ The Board hos @ consensus on which stakeholder groups are the most
critical to the company’s long-term succes:
+ Vital topics such as ESG are not properly discussed or prioritised.
+ On strategy no KPIs at top level therefore this creates strategic gaps
with the Board
Key
Summary of comments
Need to divorce the inquiry from the day to doy it still does overshadow.
There are conflicts between achieving a social purpose and a commercial purpose. The Shareholder policy
framework drives certain decisions which may not be sustainable
1 step forwords 3 steps bock
Not sure that the public v commercial focus issue can be resolved. Ifthe focus is commercial then you cannot have
1,500 branches
priorities to focus on:
Building consensus among all stakeholders on POL’s medium to long term strategy and developing a roadmap for
‘execution which covers funding and clearly balances the social and commercial purpose of POL.
Ensuring that the annual strategy doy is focused, robust and feeds into the key areas of the business in the coming
year.
Building greater alignment and dialogue between the Post office, DBT, UKG! and other stakeholders to gain a better
understanding of relevant priorities.
Focusing on relevant areas within POL by appointing board champions for specific areas such as diversity and
inclusion.
Deploying more automation and digitalisation which will lead to greater efficiency and cost-savings
Prioritise purpose and strategy more in structuring conversations at committees
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Highest total
The Board has a consensus on which
stakeholder groups are the most critical to
the company's long term success
(Benchmark 83%)
Lowest total
The companys welll prepared for business or
technology disruptions
(Benchmark 73%)
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Appendix 2 ~ Board and Leadership Surveys
Leadership and purpose - agenda and minutes
Board survey
Highest total
We sufficiently explore all given opinions and
TON POY ORE Rene Okeecutive © sis O Board suggestions prior to making a decision
(Benchmark -83%)
We give priority to the most important strategic topics during our board meetings. 3.6 64 78
The board has a well-thought-out annual plan which covers relevant topics. 27 63 84
We sufficiently explore all given opinions and suggestions prior to making
a decision. 27 67 83 67%
The board materials are of high-quality and conveniently summarised. 22 57 78
Lowest total
Board materials are of high quality and
Summary of comments ‘Summary of comments (continued) Conveniently summarised.
‘+ Respondents shared the view that Board papers are lengthy and not well summarised. Key priorities to focus on: (Benchmark -78%)
+ There are mixed views on the time-efficiency of the Boord's work. * Shorter more focused board popers with a one-page summary of key data.
+ Respondents remarked on the need for more visibility of Board members across the work and *_‘Kentify and synthesise what matters from the data to provide more valuable insights
‘octvities of the Board committees to facitate transparency and open knowledge. + Cross-reference information and reporting with rtk reporting in order to better inform and
+ Board papers are considered too late and overall lacking in quality. They are voluminous. It shape decision-making
tives the Impression of laziness although some are good such os Retail + Reduce duplication of papers and across decision-making forums
+ Mixed views on the Chair. Some felt the commercial challenges were moving in the right + Ensure that when actions are assigned from the GE/SEG/SLG, those who the actions are
direction although slowed with having to navigate the Shareholder dynamic. That said it ‘signed to are informed of this a8 soon as possible after being assigned
‘seemed discussions never seemed to culminate in a clear vote, + Simplify, centralise and streamiine popers, reporting and dashboords and key metrics ~ ‘less
+ Information get togethers have fallen away ond are vital for cohesion at Board js more."
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Appendix 2 - Board and Leadership Surveys
Leadership and purpose
Selected SLG feedback
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Survey chapters: Business Purpose and Organisational Vision, Strategy Implementation, Performance Competencies — Executing for Results, and
Information, Reporting and Risk Management
Survey comments
+ Most respondents are agreed that business purpose,
organisational vision strategy and strategy implementation
require work and focus:
- general sense that there is a lack of clarity on strategic
direction and that individuals across the organisation all
‘pull in different directions’ around strategy and vision
which impedes a mutual view and delivery - “we often flag
we want to do something as a priority and then a new
priority comes up the following week”
= Creating and agreeing a coherent strategy and objectives
with the SLG, GE, the Board and the Shareholder all aligned
in the short, mid and long-term vision and objectives
- There are conflicting priorities not directly related to the
strategy which are all perceived as high priority at the same
time, and therefore drawing focus away from the
organisation's strategy, purpose and vision delivery
- Strategic objectives and their delivery could be measured
more effectively and in a structured manner from the start
of the FY by establishing clear Key Performance Indicators
(KPls) which coalesce around the agreed strategy, are
filtered throughout the business and which are referred to
periodically
- Articulating a clear operational plan for how strategy will be
implemented and providing the right information
consistently to measure and check delivery
- POL needs to be clear on its strategy as a franchisee
including leaner central operations but don’t have
permission or funding to move this forward meaningfully
Internally, the main perceived barriers to moving forward in this area +
are largely focused on three areas: the first being funding, itis
viewed as a constant challenge that continues to limited and hold
back the innovation POL need to continue to evolve and stay relevant
to customers, the second being the lack of accountability and ability
to hold individuals to account when it comes to agreeing and
implementing strategy with ‘tone from the top’ noted, as well as
internal processes, ie taking issues unnecessarily to GE/Committees,
which stem the flow of work, accountabilities and execution. The
third area is the continuing practice of individuals and teams working
in silos including the GE, failing to communicate openly, and pushing
their own agendas
Externally, the strategy is seen as being intrinsically tied to and
restrained by the Shareholder’s view of the organisation now and in
the future ~ “Shareholder support and clarity of what they would like
the Post Office to look and feel like in the short and long term and
how to fund it”...."force the Shareholder to be clear on what it wants,
and navigate us to a place whereby we have funding to achieve that
objective/have a strategy to deliver it”
Collaboration and mutual alignment between the Board, GE and the
Shareholders to this following the Inquiry, will be needed to move
forward. Stemming from this is the funding provided based on this,
which also results in delivery difficulties due to tension, ie reduce cost
base vs implement new technology
Several views expressed that a review and fresh view by the
Shareholder of what it really wants the organisation to be and deliver
in the current and future landscapes would help. As would the
organisation being clear about what is achievable to the Shareholder
and the impact of financing constraints
Respondents identified, in their view, the single biggest
challenge the organisation will face in the next two years in
implementing strategy:
= Funding in relation to, delivering transformation and
investment, reducing costs, maintaining the current
business model at its current scale, executing efficiently,
recruiting talent to increase capacity. This is caveated with
the recognition that where funding is given, the
organisation needs to improve where it focuses this
funding to be impactful
- Pace of execution, agenda, culture and accountability
with a focus on the current agenda being so packed and
‘accountabilities not always operating effectively, that
attention is drawn away from executing on strategy at
pace
— Policy direction and Shareholder clarity and
organisational alignment as to what they would like the
‘organisation to look and feel like in the short, medium and
long-term, especially with high levels of uncertainty,
changing customer needs and a lack of target operating
model currently
= Historical issues such as the Inquiry and Horizon,
detracting resource, capacity and focus from formulating,
agreeing and coalescing around strategy and strategic
execution
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Appendix 2 - Board and Leadership Surveys
Leadership and purpose
Selected SLG feedback
+ Individuals have raised a variety of views as to how they can
improve the GE's work with leadership, strategy implementation
and realisatio
— Improving DoA where they do not exist and utilising those
that do exist more effectively to ensure the GE has
capacity to focus on crucial areas
— Ensure that decision-making and communication occurs
transparently and through cross-functional groups rather
than in silos, and which also have DoAs that empower
them to make decisions. This is with the recognition that
due process around documenting these decisions for the
GE and Board would need to be in place
— There is a need for a clarification of accountabilities and
holding individuals to account where they are meant to
execute and deliver, and especially when they do not
deliver as expected, including a stronger performance
management approach
= Collating the right information when monitoring progress
towards delivery of the strategic objectives to support the
GE in assessing how well the organisation is performing
against the strategy
- Separating the business as usual activities from the
challenges of the Inquiry, and within this creating capacity
and alleviating pressure on individuals in the team to
deliver their roles
— Tocontinue to push for clarity on strategy, clear
implementation and monitoring plans, in order to align
funding and objectives with this and agree a plan of
deliverables/activities that flow from this and can be
followed through with individual accountability
- Narrowing focus and related investment to realistic,
achievable outcomes ~ balancing quality and cost delivery
= Supporting the GE in developing medium and long-term
strategy, and in aligning this into a more manageable
programme built around the organisation's key outcomes
and priorities and that can flow down through the
operational teams effectively too. In this case, the SEG
could involve the SLG more
- Creating a proactive culture within the organisation to
drive progress and support continued execution despite
challenges such as disruption by the Shareholder, lack of
capacity, accountability and funding
— Communicate better and more transparently including
actively highlighting risks which may materialize and
impede the GE from delivering strategic objectives, and
where prioritisation could be improved
— Reducing the complexity of the decision-making
infrastructure, ie less Steering Committee's and informal
Forums, which slow down decision-making while ensuring
transparency and cross-organisation communication
- Addressing both the capability and cultural behaviours of
the leadership team to rebuild trust, accountability, focus,
collaboration as a group and drive, to deliver results
MI does not include a single agreed set of metrics/KPIs and
accessible at a central level, linked to strategy by which all
papers, options and risks should be assessed by and which acts
as a central source of data for GE/SLG
Papers are seen as inconsistent and although sometimes good,
respondents would like meeting papers which are more concise
and focused, with data well synthesised and relevant (by
reference to the above/strategy/risks) and which provide the
bigger picture alongside some (but less than current) detail
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Appendix 2 - Board and Leadership Surveys
Division of responsibilities
Board Survey
Summary of comments
Low delegated authorities and spend approvals mean that too many
issues come up to board for decisions, thereby causing delays anda
bureaucratic environment.
Respondents remarked on the need for more visibility of Board .
‘members across the work and activities of the Board committees to
facilitate transparency and open knowledge.
‘Some respondents acknowledged that the Board has positively
evolved from being more executive in nature historically to @ much
‘more oversight focused mode of functioning.
‘Summary of comments (continued)
Key priorities to focus on:
Review the delegated authorities and spend approvals to streamline the matters coming up to the Board for
decisions and create space for more strategic discussions.
Focusing on relevant areas within POL by appointing board champions for specific areas such as whistle blowing,
‘and diversity and inclusion,
Provide access to all Board members of Board committee papers to create improved synergy, collaboration and
‘alignment across key decision-making priorities.
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Highest total
There are clear escalation and reporting lines
between the board, board committees and
senior management
(Benchmark -%)
68%
Lowest total
Feedback loops between the board and
organisation are effective
(Benchmark -%)
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Appendix 2 - Board and Leadership Surveys
Division of responsibilities
Selected SLG feedback
Survey chapters: Decision-making and Working Processes, Roles and Responsibilities, Trust and Transparency, Information, Reporting and Risk
Management and Subcommittees
Survey comments
+ Interms of division of responsibilities regarding decision-making
and effective working processes, key themes emerge around the
delegation of authorities and thresholds, amount and quality of
papers and dynamics/discussion at meetings, accountabilities
as well as pre and during meeting culture, specifically:
= Delegation of authorities thresholds up to the SLEG/GE
need to be increased to enable more decision making at
GE-1 and GE-2 to and for the SLEG/GE to focus on critical
and strategic matters
= Build, reinforce and normalise a culture of devolved
authority and trust in skilled senior professionals amongst
the SLEG/GE, the Board and the Shareholder
* At the same time, ensuring accountabilities are clear,
widely understood and able to be brought to bear when
necessary for delivery and execution, while recognizing
and acknowledging that the SLEG/GE are also
accountable for their SME’s decision-making at GE-1 and
GE-2, Additionally, this outcome should be respected
irrespective
- Where decision-making accountability and the.
responsibility does sit with the SLEG/GE, ensure that there
clarity as to who owns the decision-making despite the
collective challenge, discussion, alignment/lack thereof
and support which may shape the decision and outcome.
At a GE level, there is perceived room for slimming down
the agenda, the amount of decisions they need to make
and therefore the DoA as well, to reduce what needs to go
to the GE and Board for approval
Papers, information and data and improvements across all
three to be clearer, more strategically aligned and focused
in their ‘ask’ and expected input/decision-making
‘outcome, is seen as crucial to improving both meeting
discussions and driving outcomes, including ensuring that
«a decision is made before everyone leaves the room
Alack of trust and collaboration across the business day-
to-day, and when putting papers with risks, options,
benefits together along with this carried through into
meetings at the GE, was noted, with no one speaking up or
supporting each other, and acting in silos, ie not reaching
out to HR, LCG, Finance, Risk slowing down decisions
Other good practices that respondents consider would
support and drive better meeting dynamics, decision-
making and discussions range from more pre-
engagements with stakeholders to aid understanding,
closing out decision-making loops/discussions clearly,
bringing the right data to the table, to challenging and
questioning each other and presenters/SME more in
meetings and where necessary, bringing the meeting back
to the topic at hand (either by the presenter or the Chair)
For some, the low risk appetite of both the Board and the
GE/SLEG, the issues around funding from the Shareholder and
the historical issues (Horizon, the Inquiry), all underly the current
Dod and division of responsibilities and the lack of trust to
devolve decision-making
Comments around roles and responsibilities circles back to two
key core areas: accountabilities/ownership and cultural ways of
working:
= Particularly in terms of ensuring clear delegated authority
‘and ownership, and balancing between skills and expertise
to enable ‘collective capability’ combined with an
corganisation-wide education piece about this once
clarified. This also includes ensuring that the right matters
are going to GE and everything else is delegated.
= Regarding cultural ways of working: removing silos,
building trust, proactively collaborating and opening two-
way communication lines between GE and below.
Focusing on adaptability and executing at pace also
considered key, but comments reflect that individuals
below GE are keen to engage the GE, share knowledge,
insight and generally engage more.
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Appendix 2 - Board and Leadership Surveys
Division of responsibilities
Selected SLG feedback
+ Trust, transparency and governance that supports this, are
widely regarded as low and impacting decision-making,
perceived as arising from:
= The overall approach to communication internally and
externally, such as where decisions are made, failing to
communicate and cascade these down transparently and
clearly, and external communications being delivered with
sense of vagueness/evasiveness (‘politician answers’)
- _ SEG/GE members demonstrating behaviours which
suggest a lack of trust in each other or erode trust, ie
openly criticising each other, not keeping confidence, not
showing courage in calling out negative behaviours, acting
in isolation and undermining each other
= Aculture/approach/environment where being transparent
about mistakes, lessons learned, rationales, outcomes and
successes is not encouraged or supported.
= “POLis generally poor at making decisions. It is currently
the worst it has been in the time that I've been here. There
is lots of duplication with papers and across decision
making groups who take decisions on the same matters
causing an eternal loop of decision making which means
that no decisions are taken...”
= Compounding this is a lack of consistency as well across
the GE and their reporting lines
= Means of communication including that decisions of the
GE are not often recorded formally and shared widely
= Asense that decisions are driven by personal agendas in
the absence of strategy or what is occurring in
government and this not being communicated, and
therefore not necessarily taken independently and in the
best interests of the organisation and to an extent, its
other stakeholders
Commentary reflects a mixed, but largely aligned view that the
decision-making environment could be made more optimal
through:
= Improving the DoA, accountabilities and the
understanding of these so they are consistently applied;
some support a RACI combined with clear communication
and consequences/performance management
= Focusing on better prioritisation of forums, work and
projects by the SEG based on strategic importance and
risk, instead of relying on various individuals to assign
importance and trying to meet all competing demands.
Therefore, the top priority programmes are delegated up
to the SEG/GE and receive funding to be progressed, and
the rest to a lesser extent — this could reduce the
stop/start/continue of less strategically important
programmes and aid execution
— Where there are decision-making groups, these should be
formalised and owned by a GE sponsor/sponsors, and
decisions arising out of these should be respected and
taken as sufficiently challenged within this forum; where
there is a lack of consensus, the GE should align amongst
themselves, underlined by recorded and transparent
decision-making
= Improving agility and pace of decision-making through
higher-quality MI: data, metrics, pre-meeting preparation
and completeness ~ matters should be complete when
they reach decision-making forums, supported by the
right data/analytics with all relevant papers/information
put forward so decisions can be made efficiently
- While decision-making forums are being simplified (in-
flight), they still require further simp to improve
DoAs (Incl. Budget), speed up decision-making, reduce
siloed working and free up capability that is currently
taken up by producing multiple papers, and sometimes
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= even duplicating these for forums that appear to serve
same/similar purposes
- Amore supportive, less risk-averse risk appetite and
tolerance combined with more risk ownership. The Board
to consider creating greater scope for judgement within
the risk appetite
‘A small proportion view some GE Subcommittees as effective
with consistently applied, clear, and understood authority and
appropriate DoAs. However, for most, GE Sub Co's decision-
making authorities and DoAs seen as needing improvement,
clarifying/refining and extending. This would address overlap,
lack of communication/sharing, lack of consistency in operating
and repeatedly circular processes/duplication, such as:
- Amatter being debated/heard twice and bouncing
between GE and Sub Co's repeatedly, ie going. from GE
Sub Co to GE first, then back to Sub Co and then referred
again back to GE, decreasing efficiency
- GE members utilising GE Sub Co’s as ‘holding patterns’ for
putting off decision-making
In terms of the Board and GE's oversight of relevant operational
information and matters being appropriate, comments indicate
that this is variable, as well as views varying as to the extent
these are appropriate;
= Inconsistent escalation and reporting lines and sometimes,
too much when flowing up impacts the ability to prioritise
and focus on the ‘so what’ by the GE and Board
— _NEDs exercising detailed oversight in some areas, not
enough in others with the role of the Shareholder
NED/Shareholder Representative not helping this,
= GE sponsorship/attendance tends to improve this flow
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Appendix 2 - Board and Leadership Surveys
Composition, succession and evaluation - board composition
and dynamics
Board survey Highest total
There is mutual trust and respect between
members of the board
(Benchmark 91%)
PROV SCORE. BENCHMARK secutive O16 Qs
The board has the knowledge and experience required to suppor the company gy
strategy and monitor crucial operations :
My knowledge and experience are well utilised. 23 70 = «85 77 6
There is mutual trust and respect between members of the board. 2677
Lowest total
My knowledge and experience are well
Summary of comments ‘Summary of comments (continued) Sadana
(Benchmark 85%)
+ Concems around the lack of proper succession planning. Many point to the fact that the + Respondents held the view that being a relatively new Boord, more emphasis should be laid
renewal term for the postmaster NEDs, who are some of the longest serving members of the ‘on social time spent together to build relationships
Board, are up for renewal at the same time (summer 2024) with limited visibility expressed + The voice of the postmaster NEDs is valued.
‘outside the Nom Co on how this is formally going to be dealt with beyond being stoggered Kay priorities to focus on
+ Most respondents do not agree that the board regularly reviews its diversity with regards to ‘+ Skills matrices across the entire board mapped against the skills required for effective
beatin stay goeron thar na ES aes 70%
+ There is acknowledgement that the Board is ultimately approved by the Shareholder which + To review the current Board structure with a short, medium to long term lens to determine (J
influences its composition Board evolution in current and post-public enquiry realities.
+ Respondents remarked on the Board being largely composed of individuals from financial aN Eycihiee leering cri Gevelorers ll evelophig o Tobie pk Phat bowed! on Sema
services backgrounds and less from areas of current POL market segments such os retall (sbdtbeedt et) Semone etc Bose
rates act Oe i cen ee Ram eee + Focus on re-introducing Board dinners and opportunities for social interaction to foster good
pe seetraice oresente a cet el fe ence iid ot aco oa ool a working relationships and postive boord dynamics
‘commercial and government experience.
‘+ There is also the need to balance the current Board with a ‘younger voice’ by appointing
younger individuals as non-executive directors
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Appendix 2- Board and Leadership Surveys
Composition, succession and eval - talent and culture
Board survey
Highest total
question Prov
Se es aes oe We have a satisfactory succession plan for
key roles in the management team
(Benchmark 85%)
The company’s leadership and talent management evaluation and planning are in
"pany ip wt manag planning so o71
00d order. bail bd
We have a satisfactory succession plan for key roles in the management team, 49 bh
The board has a specific framework or approach in place to monitor culture in
the organisation 32 3966
There is very good alignment between the board and the management team
regarding core strategic priorities.
Engagement mechanisms between staff, and between staff and the board
The board's contribution to matters concerning management appointments and
development of a diverse pipeline has led to the desired outcomes.
18 SSH
Lowest total
The Board has a specific framework or
‘Summary of comments
+ Most respondents do not agree that the board regularly reviews its diversity
with regards to background, ethnicity, gender and other minorities.
+ There is acknowledgement that the Board is ultimately approved by the
Shareholder which influences its composition
‘+ Respondents remarked on the Board being largely composed of individuals
from financial services backgrounds and less from areas of current POL
‘market segments such as retail. Comments on current skills gaps include
‘banking and digital, public sector/Whitehall experience, managing a
government Shareholder and an individual who has combined commercial
‘and government experience.
+ There is also the need to bolance the current Board with a ‘younger voice’
‘by appointing younger individuals as non-executive directors
+ There seems to be very littl in the way of performance management in the
‘business and very litle done to tackle poor performance.
‘approach in place to monitor culture in the
organisation
(Benchmark 66%)
‘Summary of comments (continued)
Respondents held the view that being a relatively new Board, more emphasis should be laid on informal time
spent together to build relationshi
The input of the postmaster NEDs is valued.
Key priorities to focus on:
Determine the main demographic groups that make up POL's target market and ensure Board skils support
full understanding of POL's morket and stakeholders
‘Skills motrices across the entire board mapped against the skills required for effective strategy implementation
‘of POL's vison and identify gaps and overlaps.
To review the current Board structure with a short, medium to long term lens to determine Board evolution in
‘current and post-public enquiry reaites.
Prioritse learning and development by developing o robust plan that is based on skill ossessment.
Focus on re-introducing Boord dinners and opportunites for socal interaction to foster good working
relationships and positive board dynamics
39%
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Appendix 2 - Board and Leadership Surveys
Composition, succession and evaluation
Selected SLG feedback
Survey chapters: Roles and Responsibi
Navigating through Business Landscape and Subcommittees
Survey comments
+ Fewrespondents wholly agree, with mojority either partly
agreeing or disagreeing that the composition and accumulated
competence and experience of the GE is sufficient to master the
organisation's current challenges and opportunities. While this is
caveated with the acknowledgement that what the organisation
is facing is unprecedented and the GE's intentions are in the
right place, there are various reasons behind this:
— Experienced individuals who seem to struggle to operate
successfully as a collective and ‘one team’ including being
misaligned on objectives/priorities
= Substantial amount of change and less stability among GE
leadership leading to a lack of ‘corporate memory’,
— While new additions have been additive in bringing new,
valuable experience, there has not been enough time to re-
build collective competence and ways of working as a
group and for them to be embraced by the established GE
= Lack of diversity/balanced composition incorporate
ED//diversity targets and therefore diversity of thought
= Capability overall is lacking when it comes to breadth and
depth of it, and increased expertise and experience in
certain areas is needed, such as transformation
management, effective leadership. Recruitment limitations
(ie remuneration) recognised as impacting this
= “Recruitment is still not routinely conducted on an open
and transparent basis.... here is no structure approach to
internal promotions, no framework as to skills,
competencies etc for each level, no set requirement for the
composition of interview panels, no requirement for ED!
training etc”
— Capacity is a perceived issue and therefore work on
incorporating GE-1 and SME's more to become an
effective functioning team and engaging their
opinions/expertise where necessary
- There is room for slimming down the size of the GE (in-
flight) to a few core roles to support effective collective
working and solidify collective capability and competence
= The uncertainty generated by leadership changes, several
temporary roles and the ongoing absence of the CFO
= Minimal accountability and ownership, combined wit
poor management of consequences/outcomes and
performance management approach
Itis evident from comments that there is intention, drive and a
desire to move the organisation forward, align business unit
goals with strategy (once defined) and generate value.
In terms of driving value creation with the current GE, SLG/GE-1
composition:
- Work as ‘one’ collegiate team within the GE and beyond
pulling in the same direction towards common aims. These
common aims should be strategically aligned and
prioritised on this basis
= GE conversations to turn to value creation (as opposed to
value for money) as a priority with a wider stakeholder, (ie
customer-centric, postmasters), innovative mindset and
‘approach
There is a wi
well-rounded stakeholder-cent
ies, Value Creation, Performance Competencies — Executing for Results, Performance Competencies —
In terms of behaviours, becoming curious and relying on
data and SMEs to help inform decision-making rather than
just relying on own knowledge and assumptions of
Culturally, trusting generally and trusting SMEs including
placing them on decision-making forums (where
necessary) and considering their ideas, to reduce silos,
create cross-organisation working and build confidence in
teams and their ability to deliver
Continue opening up communication lines, increasing
Visibility of the whole GE and evolving to collaborative
ways of working across business units. Crucial for the
SLG/GE- to utilise within their own teams and for them to
understand where they can support and add value to the
GE in terms of value creation
More regular meetings of the entire SLP suggested with the
intention of aligning on strategic priorities and matters of
importance and to understand where cross-functional
support would be valued
jely held view that the GE should develop a more
ric approach and skillset:
Listening, beyond the shareholder, by engaging directly
on the front-line (ie in branch etc) with customers, post
masters, and the wider market and competitors through
this
Learnings from this could be applied to strategy and
where successful/unsuccessful, highlighted as successes
or lessons learned
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Appendix 2 - Board and Leadership Surveys
Composition, succession and evaluation
Selected SLG feedback
+ Individuals have raised generally aligned views, with only minor divergences as to the
membership composition and collective competencies of the Subcommittees.
+ Overall, itis felt that composition of these Subcommittees is broadly on par, with a few
Ns are to improving composition and collective competencies:
= Cross-business/function membership and occasionally less senior members of the
organisation where they can offer greater depth of insight
- Some Subcommittees, for example, Retail, may benefit from a review of members,
as currently all various GE members rather than any LCG representation and
others to be reviewed/considered for slimming down or re-instatement
\ging in additional SMEs where greater knowledge/understanding/insight and
challenge is needed prior to making decisions
= Ensuring all members understand the importance of good governance and the
difference between enterprise/corporate governance and operational governance
and the impact of this on the Sub Co's operation
+ Allcomments to some extent were comforted by the composition and competencies of
the Sub Co's but did qualify that where the composition and competencies of these
become infective is when the governance slows down/impedes decision-making, i.e
ToRs requiring tightening, attendees review and DoAs not sufficient/effective enough
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Appendix 2 - Board and Leadership Surveys
Audit, risk and internal control
Board survey
‘The company's controls and reporting are in full alignment with the company's
‘The board handles business risks (including emerging risks) well aa
‘The board periodically reviews and challenges mission-critical dependencies. a7
compliance issues (anti-corruption, sanctions, anti-trust, workplace and product oe
safety, ete).
‘The board has ensured that the company has appropriate business continuity plans gg
Scone wencrmank ° + O10 ©
62 a2
so 79
“7 a
so 79
66
78 8s
7 8s
oo
os 78
‘Summary of comments
Respondents opined that the current process of top-down risk should be changed to allow individual
‘business units to own their own rik and present these to the Audit and Risk Committee,
Concems that POL is operating outside of risk appetite in c.8 areas for the next 24 months which is
unsustainable. There is a question as to whether rsk appetite is not set properly or POL really are and in
that ease are the Boord and Executive clear and aligned on the consequences
Though the Audit and Risk Committee reporting has evolved and improved with new leadership, there is.
still a need for more frequent reporting on data and insights about branch profitability, network
sustoinabilty, and potential risks.
Respondents highlighted that the Board is risk averse amid the public enquiry and lack of adequate
funding to address risks outside of appetite, resulting in the crystalisation of certain risks and the
continued non-mitigation of others.
‘On that point itis view the restrictive risk profile whilst comprehensive is @ borrier to delivery rather than
key management tool
There is a lack of visibility of the Audit and Risk Committee for Board members who do not sit on the
committee.
‘Summary of comments (continued)
‘+ There should be a mechanism for reporting/escalating risks during gaps in
Board meetings
+ Isthere a 1", 2"! and 3 line of defence ~ not in the way most commercial
‘organisations understand it
Key priorities to focus on:
+ Focused collaboration with the Shareholder to communicate the impact of
identified risks on the business towards ensuring that funding is channelled
‘eppropriately.
+ Develop a system for risk reporting outside of scheduled Boord meetings.
+ The employment of a Chief Risk Officer.
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Highest total
The board has sufficient information about
the company’s most important compliance
issues (anti-corruption, sanctions, anti-trust,
workplace and product safety, eto)
(Benchmark 83%)
78%
Lowest total
Investments are given appropriate and
robust review
(Benchmark 79%)
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Appendix 2 - Board and Leadership Surveys
Audit, risk and internal control
Selected SLG feedback
Survey chapters: Information, Reporting and Risk Management and Decision-making and Working Processes
Survey comments
+ Respondent's comments centre around more supportive, less
risk-averse risk appetite and tolerance combined with more risk
ownership across the business, particularly regarding:
- Uncertainty around what the risk tolerance is and what
this may mean in different situations, ie how this may be
differ in some circumstances vs others instead of applying
a blanket approach
- The Board and GE (through being delegated down to the
GE via the Board)’s risk appetite can result in the GE's risk
adverse decision-making by deferring sensible commercial
decisions, or placing them ‘on hold’
- Greater trust from the Board and the Shareholder across
the GE/SLG for taking calculated risks which may stretch
current risk appetite and tolerances but move execution
forward
= Culture and capability concerns around risk ownership,
where it is evident that business owners do not
independently take ownership of the risks despite each
individual's remit for managing risks within their roles
- Are-education/re-set programme of risk across the
organisation (in-flight)
- Arestrictive risk management, appetite and tolerance
which is perceived as negatively driving, rather than
forming decisions
Limited capacity of risk owners to monitor risks outside of
appetite generally, relying on the central team, and
therefore this being done infrequently (only every 6
months vs risk owners viewing data live often and
periodically), which leads to decisions that are reliant on
less recent, up to date data
Too much reliance by the Board and the GE on the second
and third lines of defence as des high levels of
operational detail, neither are viewed as being close
enough to the first line with these
Risk assessment, mitigation and assurance activities, due
toa fear of being called out, are cumbersome, and often
impact speed of decision marking, execution and
innovation. This is with the recognition that this activity is
crucially important, but that an overly cautious approach
can also result in inefficiencies and ineffective governance.
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Appendix 3
Supervisory Rights
© GrantThornton
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Appendix 3 - Supervisory rights
Two tier illustrative structure
Main Boarc
Supervisory Committee
Members 6-8 INEDs, 2 Exec and an Independent Chair
Role Largely consistent with the Do and ToR as it is today however in summary;
* determining a strategy for the Group, consistent with the Purpose and
the Values and meeting the needs of its stakeholders (and shareholder);
‘* motivating and retaining an Executive qualified to deliver the strategy;
‘* overseeing the business of the Group in accordance with the strategy;
‘© holding the Executive to account in the performance of its duties,
considering the views of the Supervisory Board; and.
* overseeing culture (not overt in the current ToR) and separately risk and
internal audit framework designed to provide adequate assurance as to the
capability and capacity to deliver the strategy and protect the Group's
operating environment and reputation.
DoA Largely in line with the documentation in place today, subject to further
comments made in the report in Section 6
Independent Chair, c.60% Government representation and 40% Postmaster representation
Act as the guardian of the Purpose, the Values and Principles and the Arti
Document;
les, Framework and Funding
Hold the Board to account and influence strategic and operational initiatives
The consultative body and a body for making representations on behalf of the constituencies represented
Approve matters reserved by the Shareholder Documents for approval by the Supervisory Board (the
funding request); and
Make decisions on those matters reserved to the Supervisory Board as set out in the Shareholder documents
(such as strategy)
The Supervisory Board may have the ability to take on certain Shareholder authorities as set out
in the Framework document, funding agreement and Articles with a view to increasing the pace
of decision making ~ to be agreed
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Appendix 3 - Supervisory rights
Two tier illustrative structure (continued)
Responsibilities In line with current documentation
Approve the Purpose, strategy and any associated funding requirement
Deciding the agenda for each meeting
Following up with the Group Board and/or Group Exec on any outstanding matters
Commission research on topics with the remit and allocated budget
Deliver an annual statement of the Steering Committee including on the performance of the Group Board
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Appendix 3- Supervisory Rights
Supervisory Committee illustrative rights
The Supervisory Committee would potentially have the right to
+ require any members of the Board to attend Supervisory Board meetings;
+ sufficient information to allow it to hold the Board and Executive to account for the
performance of the business, any reporting including but not limited to annual and
sustainability reporting and adherence to the values and public money principles.
This would include but is not limited to information on key strategic and operational
initiatives and any critical elements of the management of the business (subject to
any legal or regulatory requirements);
+ to be consulted and influence the Board in its management of the Group's brand
across all businesses and any strategy and operational initiatives and any aspects
of the management business;
+ require the Board to explain in the Annual Statement any recommendations of the
Supervisory Board which has not followed and setting out the reasons for it failing
to do so;
+ require the Board and/or Executives to attend Supervisory meetings at agreed
times/specified circumstances;
+ provide recommendations to the Shareholder in respect of Director elections;
* hold the Board to account for the way in which the annual level of investment is
deployed;
+ hold the Board to account for its annual planning and performance and in relation
to sufficient resources being available for the Group;
* hold the Board to account for the POLs policy framework;
* hold the Board to account on Executive remuneration and performance criteria;
and
+ to have up to three members on the POL Nom Co providing an opportunity to have
oversight of process and agreement with any substantive changes to the Board
Composition
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Appendix 4
Division of responsibilities —
Subsidiaries
© GrantThornton
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Appendix 4 - Division of responsibilities - Subsidiaries
Subsidiary — Division of responsibilities
Subsidiary Boards
+ POL has three subsidiaries namely Post Office Management Services trading as Post Office
Insurance (PO), Payzone Bill Payments Limited, and First Rate Exchange Services Holdings
Limited (FRESH) and First Rate Exchange Services Limited (FRES) which is a JV with the Bank
of Ireland.
+ POlis fully-owned by POL which also acts as its Appointed Representative (AR). Historically
the Chair of POl’s Audit and Risk Committee reports into POL's Audit and Risk Committee.
Given the AR relationship between both entities, POI requests for the papers and minutes of
POL in order to fulfil their oversight responsibilities. We understand that POI’s Chair and the
recent POL Chair were scheduled to meet later this month- this should remain on the radar
for any incoming chair. There are also periodic meetings between the Head of Internal Audit
of POL and the Head of Compliance of PO! to review POL's risk profile.
FRESH/FRES is a joint venture between POL and the Bank of Ireland, there are three POL
representatives on the board and the group general counsel acts as the board chair. In terms
of reporting, the joint venture agreement was revised and presented to the POL board for
‘approval and financial information for the joint venture is also reported at the POL board.
+ Payzone Bill Payments Limited is a stand-alone subsidiary of POL and as such POL’s level of
oversight has been sporadic and limited. However, this is set to change as subject to
Shareholder approval, Payzone will be subsumed into POL.
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Appendix 5
Best practice tool kit
© GrantThornton
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Board leadership and purpose — tool kit
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Culture monitoring and measurement methods
How the Board monitors culture
‘The Board plays a significant role in monitoring and assessing both the
culture of the Group and its alignment with the Company's purpose, values and
strategy. Itis by the People & Gi Committee, which
‘opportunities to strengthen culture, and the capabilities that underpin it, in a way
that serves the future strategic goals of the Company.
ie Leading indicators of change
>mpletion, and en
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Culture monitoring and measurement methods
2 2, Culture
ing and
easurement met Who
VC: I -
‘We are passionate about our ero ou vas
‘purpose and Doing Business the rg “pores avery
Right Way: We strive tomake the + he aways te rat
world a better, safer and more ting wn precion
sustainable place for all now Y Dace andpasion
‘and for future generations. : + We rst ae ter an
fave fan wang tog
Ser peeet cater ond vets, ical People and
Sana Culture
our rapone
Bringing quality safety and Onna nie
sustainability tite.
ow vile
Tobe the worlds most trusted
partner for Quality Assurance.
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Key Performance Indicators, relevance, progress and
strategy
Our key performance indicators (KPIs)
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Key Performance Indicators, relevance, progressand
strategy
Measuring our progress
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Composition, evaluation and succession — tool kit
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Composition, succession and evaluation
ripti
r, skills ar
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Composition, succession and evaluation
ample
and
hould include information on
jalifications and tr
industry and technical
o
+ Pre
appointments
1g on f
cially valuc
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Composition, succession and evaluation
eeoecce I
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Composition, succession and evaluation
Board induction ——
tor induction and training are key
to ensuring that Directors can and can
ntinue to valuable
ntribution: or
possible after joining the Board an
throughout their tenure
in the Directors induction pr meetings with provided ‘On appointment, directors undertake Neon ctr Non Enmcabve Decor
form this takes (training ‘a. comprehensive induction programme
Beletinge alta Ceartatmneet designed to give them a thorough overview Maggie Chen Jones and Ruth Caria, whojoined the
ule bce Ne d Baile and understanding of the business. Boardion 1 March 2023 and 6 April 2023 respectively,
stakeholders). This can al: emer ‘are currently going through their induction and their
strategy and/or the busines ‘Thisistaloredto take into account the rectors previous ‘rogrammes wil be reportedin the 2024 Annual Report.
J ‘experience, thei respansibiities and foreach Non
. Executive Director, the specticresponsbiltiesrelevant to
xample provides a both a broac crore ten Sea oar The Tnchedes
Jescription that describes these = ‘meetings mththe Charman, the Che! Executive, other
oe tor ofthe Board andthe Company Secretary as
elements, while providing a more a wei at members of the Execute Committee and weniot
Jetailed insight based on a Director jocitgeerrcntonn se
that joi ecently and F soul
a cet are es Storer sere Satermaoes tk ponapunertensoaeeciconeslsraens
induction has been tailored base Feeest See {cite poles supporting our business practices.
their existing skills and experience
Directors are encouragedto visit our different offices,
contact centres and BT/EE retail shops, as wells spending
‘Openreach engineer. et out opposite
‘Guggenheimer, who joined the Boardin October 2022
GrontThomton © 2024 I 93
Composition, succession and evaluation
Example 9, Director indu
and training arrangement
On-going training arrangement
should also be described, including
sntifying how on-going training
needs are identified and what training
has been provided during the year/wil
be provided next year
This example notes that the Chair i
onsible for ensuring that the
rs receive on-going
development and training (most
should these be in place) anc
describes what training has been
provided this year. Thi
going development and training in
Directors being prepared and able
contribute to and strategy
delivery.
Directors’ induction,
development and training
Together with the support of the Group
General Counsel and Company Secretary and
her team, the Chair has overall responsibilty
for ensuring that our Non-executive Directors
receive a comprehensive induction and
‘ongoing development and training. The
nduction programme and induction pack
are tailored to their experience, background,
Committee membership and requirements
of their role. They are encouraged to engage
with the business by visiting sites in the UK
and US. As our internal and external business
environment continues to change, it is
important to ensure that Directors’ skis
and knowledge are retreshed and
updated regularly
AAs part of continuing to enhance their
knowledge of the business, during the year,
the Board attended a series of enrichment
sessions on a number of topics including
ESG, the British Energy Securty Strategy,
energy futures and US utility regulation
supply chain & inflation and winter outlook ands
preparedness. They aiso received corporate
governance updates, investor guidelines and
Potential changes to legislation and regulation
through updates to the Board or the
relevant Committees.
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Audit, risk and internal control —
tool kit
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Internal controls, risk and audit (continued)
Example 10, Business mo
Jescription of the
n help stakeholder
mpany’s business model
which the company generates anc
value over the long-te
considering the su:
tainability of the
company’s business model.
Best practice description of a business model
clearly details the fol
* What the company
they delive
* How they do it (val
* Where it does it (r
* Howit
takeholder
Jifferentiates itself
* Why this - purpose
j does (products or
r to the market)
lues, strategic framework)
arkets(s) it operates in}
hareholder value over the
company
from competitors
beyond money
WHAT WE 00
Hanutacturing
We make great tasting, es preparedood that
‘antomerscan ust nur own manufacturing centres
on
Logistics
\Wernore prods fromaurmandtactring testo our
stopsourseves hepnatoeep prices asow 5 posibe
ur people
Werave more than 28000omanng coteaques proving
courcintomerswhthepest experience erry
customer channels
hover 2:30 shops across the UK devery and
‘wholesale parinerehip, andck Collect. we cn serve
‘ur customers wherever. whenever andtowever they
choose throughout the ay.
Customer
ur coleaques provide fantastic erie that makes cur
customers sop aithus tine and tne gan The Greggs
‘Appand Rt systems alow vs tobuld longterm
‘connection lthour customers andreward th yay
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Internal controls, risk and audit
ufficient
any around
ole 11, but alsi
lim «Deliver
of
—
@@0 8
{inspire
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Internal controls, risk and audit
aI contr
‘Ongoing monitoring of the Group's systems of risk
‘and
c i A with ii Internal control
ider including within your disc The ARCom i satisfied that - tough regular review of report
around risk management and dashboards, n-dopth assessment of kay busin x
fond hunctons, conse
‘of changes to the Rex Governanc
and Appetite Framework and ongoing review of progress against
proce review for internal cont uch the Intornal Aut Plan (more dotad bolow t's approp
‘ongaing etlectveness of Man Group
and internal controls some detail on the
as areas of the system that have beer
applied and the rationale for both, as well as yoar, a number of operational matters were reported t. fe
the methods used for this analysis (report 1m These wore Sacussed as Y tought te SScremagoar nme Sty oe
interr [ARCom at ts February 2023 and December 2022 mastngs. Wrist Tracom nan ng mo en ra
‘Man Group sought to improve its processes in response tothe
tis im thar alimatarial umber oF nature ether to requre separate disclosure Sepa core eeeewenaec reer
perational,
financial, compliance), especially with the
upcoming changes to the UK Code (effe
rion whch may pa recon h
era
findings or areas identified for improvement Someones
n if they are not considered a significant
eakness/considered insignificant or the
ystem is still considered effective. Insight on
also strengthen this disclosure
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Internal controls, risk and audit
Example 13
independer
Independence of external aust
The Group has an Aud Independence Potcy (AP that defines
Independence ond objectivity of external audit
‘The Audit & Risk Committee monitors the independence and
objectivity ofthe external aucitot and lead partner on an ongoing basis,
roceuresond gure ude which he Conpenysreatorsne Aud fees
Metres sternal uitregoverned TeA onofocuatestne Settee SERS UHH I I wane formelcwviow annual. Ths wa cuchl ares ofthe Commined’s
Where the auditor of the organi Conmitee beng ale oatay tae hatter are rata, Y
jit t! } eine Se pp “0D 400 work, as it serves to ensure an appropriate professional scepticism
provides non-audit services in additior subsiares inthe work of he external auctor The independence and obyectvty
Beet . Im ofthe external autor are assessed trough arange of measures
to audit services, there should be an ‘part oftns onal review the Conte conser arae ee Leo aioe
explanation of how the auditors dereoomert bes practice end gadence Themen fetes term review 71501100] I Audi parr rotation
ee {tne caren AP onic eetobie st weno) ore Oxner assurance services 462423] I The Groupispolcyistorotate the audit pariner atleast every ve
objectivity and independence is = Ase Gdn ote na lea eal pinonneae Assurance services proved 180 16.4] I years The lead aut partner i Victoria Vening, who has held the
Indepencence an ojecivty ote enteral udtor tononmateral affiates Tole since Apri 2021, replacing Peter Mcverin ine wth the Group's
« Rrequremert torte wa ust Peevey eee, Corporat refinancing fed 650 =] I potcy requirements
auditors for w ide ernal + Rooter goraring tn wraemert newt ocandt, Teal non-oys fes 2442 6377I I ‘The Group has a defined policy imiing the provision and value of
ers acces. wich gevoncegcecicinvey ented Total actor's emunersu0n 716592 19277] I non-audit services performed by the extemal auctor. The policy
audit, this sh addre:
and in detail
A good and detailed dis
ample,
is evidenced in thi:
right, t
outlining the safeguards in
policies, private meetings, and othe
check
considerations), a:
and balances (approval:
well as why it i
provided, and the fees proportionally
audit vs non-audit
‘cumstances and is kep under review teach meet°g
‘ofthe Commatee
The externa ator a reports tothe Committe ons oe
rocestes and procedures to ensure ndepencence,obectty
‘nd comotance wa the relevant standards
The amounts paid othe external audeor during each of the
financia years ended 31 December 2021 and 2022 for aug
‘nd non aud services are set out below and innate 2 tthe
Cansohoated nancial statements (age 193).
‘As noted opposite. the external auditor should not provide
‘on-audt services where k might impairs independence
‘or objectivity. Therefore, any engagement forthe provision
‘of non-audt services requires prior approval from the Committee
‘or Committee Chaie Agreement to allow the external auc frm
topertorm additional non-audt services i taken only after
Considering two key factors. Namely, thatthe non-aude services
policy has been ful applied and that any engagements ae in theI
Dest interests ofthe Group and ts key stakeholders
During 2022 there was a decrease in the level of non-auat
services provided by Deloitte, withthe most significant tem
being the Group's interim review. in 2021, Delotte provided
Support ina imited reporting accountant role in respect of the
shareholder circular for the acquisition of Pinnacle, wth fees
totaling £468,000,
Inallcases the Committee was satisfied thatthe work was best
handled by the external auditor because of its knowledge of the
Group, and that the services provided oid not give rise to threats
toindependence. The Committee was ais satisfied that the
‘overall ievels of audit and non-auct fees were nt of a material
level relative to the income of Deloitte as awhole, and that the
level of non- uct fees was below the 70% cap, based on the
average audit fee forthe orecedina three vears.
represents a key control to ensure thatthe nature of any non-aucit.
services performed, and the fee eared for such work relative to the
fees earned for the audit, does not compromise in fact or appearance
the auditors independence, objectivity or integrity. Under the terms
Cf the policy, the auditor is excluded from undertaking a range of work
‘on behalf of the Group. The auditor may be commissioned to provide
audit related services and permitted non-audit-elated services with
the specific approval of the Audit & Risk Committee. The Committee
hhas confirmed that this poicy was adhered to within the year.
The external auctor provides @ detalied Independence confirmation,
FSA(UK) 260 (Communscaton of aust matters with those charged
Stojecto the review and approval of the Commitee
wth EY without manag
land managements mligabon of those rks, and the transparency
‘end openness of the auctor’ interactions with management. and
Sretner hindrance placed upon them,
effectively in the year As such, the Commitee continues to
thot EY, and Vietorla Venning as lead auc partner,
feman independent and objective,
Gront Thorton
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Internal controls, risk and audit
oval
Effectiveness of external audit process
‘At the May 2022 meeting, the ARCom considered feedback
from ARCom members and various members of the management
team in order to facitate the ARCom's formal assessment of the
annually as to the external auc effectiveness of the extemal audit process. Respondents were asked
1 of he atlociwoness revew also prasad the attoency
ucts having boon brought forward to ear
2s wal as the qualty ofthe wider auc loam.
Anurmber of areas. nex the development of aud qualty exscators
poed coordaten wth internal Aud, were ertfed as
requeing kuther consideration and Debofte
Zest practice provides detailed insight
‘ackiross eso
EEC RCUCROCERCCUMERCICIER I ‘ho vows on soveral components of the externa! aucit process pide tha 2022 A ‘Altor iscussson
how this ha: Jecision to re- including the quality of the audit partner and team, planning and at the external audit process in respect of
‘execution of the audit, qualty of audit reporting and the external 1s hac baen etlecve
The responses indicated that, overal, Deloitte was performing in line
heWdescrlnticneahoullearticuictemenorthe with expectations, with the audit team demonstrating appropriate
The descrip 4 Li Ow challenge and understanding of Man Group's business. Delott
‘management of the transition of the lead engagement partner during
recently (ie when last tendered, appointed) 2021 was cited as a particuarly positive area, with the continued
4 t toorn ny ten volvement of key members of the wider Deloitte team and the
resulted in a successful and smooth transition. Deloitte os extemel eudtor
‘and the appropriate
auditor currently is, whether it has changed
process w resulted a change ir
xppointment was
aoponted as the Group's external auctor in 2
tender process led by the ARICom n 2013. In accordance
the u m inst, what the Following initial planning initiated in 2021, a decision was taken to
Jal year ending 31 December 2024
ere epee icra
to alow fora smooth rareton it requred
any future actions identified to ensure a
sod qual rvice in future year
tender process cond.ced dung 2022 are 3
This ex idences all of these element
with
owang the ARCom’s review ofthe alectveness ofthe extemal
ss undertaken dure the year, has
Delite as Man Group's
tcstor Wo the Board. The Board has subsequent
recommended the reappointment of Delotta for approval by
‘shareholders atthe 2023 Annual General Meating.
The ARCom wil continue
to ensure tat remans elective andthe aust fo
represents good vale 1 sharencders, whe mandatory rotabon
GrontThomton © 2024 [100
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Internal controls, risk and audit
Example 15, Emerging risk and
mitigation
carrying ssment of em
Emerging risks
SSP defines emergingrisks as those whose
timing and impact arenot entirely certain but
may, over time, pose arisk tothe delivery ofthe
Group's strategy. Wehave well-established
processes for identifying and monitoringemerging
Atthe Group level, we adopt a top-down approach through our annualrisk assessment exercise, during,
which emerging risks are discussed with senior regional management (CEOs and CFOs) and Group
management, includingheads of Finance, HR, Procurement, and Legal departments. identifiedrisks
arereviewed and approved by the Group Executive Committee before being submitted to the Board,
Short
Mobilisation ‘Due tothe Group's strategic priority of Pivotingto
mala inadeikiontolprincisal eu rabetwehrs Fisks throughhorizonscanningandourembedded term of pipeline high-growth markets; the Grouphas placed additional
Bey riskmanagement framework, both at Group and ‘emphasis on identifying, assessing, completing, and
noted in recent reporting cycles, th regionallevels. integratingnew transaction targets to significantly boost
emergence of emerging risk disclosures similar growthinkey markets. For more information, please refer
Spe Attheregionallevel, weemploy abottom-up topages 19-20.
approach, where incidents and trends are Medium Gimate ‘Similarly to the prior year, climate change is one of our
monitored and discussed atregional risk term change ‘most significant medium-term emerging risks. Primarily
committees and Group Executive Committee this relates to the failure to adequately consider and respond
he best practice disclosures focus on pana miriam etna toe tothe physical and transition risks associated with climate
Reap erecta erceivedimpact and probability of these risks, change. including the impact on our units suchas damage
‘ 1 v they are escalated to the Group CEO and Deputy or closure, disruption to our supply chain, increased food
Ye 4 of principal risk well a: Group CEO and CFO through weekly trading ‘security challenges and increased pressure of compliance
SHARIN RELSTIGHelamertatetc nes updates and subsequently to the Group Executive with regustory requrements
and Risk Committees, as appropriate. Regional
timelines, approach, risk appetite, mitigations management closely monitors these risks and ‘See pages 50-56 for more information on our consideration of
(in this case, cross-referenced/signposted) to periodically updates Group management. iesakeriai ite iotantial easactonthatiieh aa ord ereatiea
support their disclosures around risk Long Structural Consistent with the prior year, from along-term perspective,
term changestothe _theremaybe structural changes to the travel sector driven
losures of emerging risks as
roaching di
yanisation would, principal risks, can
takeholders that seni
ard are undertaking
onfidence t
t and the
horizon scanning and reflecting periodically
on shifting risk profiles, impa
provide
, timelines and
everity
travelsector _by customer behaviour, suchas an aversion to air travel due to
its impact on the environment, increased remote working and
greater road travel as adoptonof electric vehicles increases,
hese also present opportunities, but otherwise couldhave
asevere adverse impact on the business. Holiday destinations
could vary dependent on the impact of climate change.
‘See pages 52-54 for more information onhow we are
addressing these structural changes and mitigating action
Asabove all these risks are monitored and discussed at senior management level to consider
appropriate mitigations.
Gront Thorton
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Remuneration — tool kit
POL00448770
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‘Commercial in Confidence
Remuneration
xample 16, Strategically linke
utive pay commentary National Dashboard for 2021/22
‘Tne nous ant fr tetag tenes Thee ene nema cet wees er ne oat?
sores wh gong on opepte weg yan one tame sane an ae a
‘noord uy Tran Acar a Bion Penge an Fie ana We ete Wontoe Say
xecutive pay should be aligne
company purpose and values ar paca i -
f the company’s strategy, it is crucic “ “_—
Jemonstrate this link through sina pte 7 Rae commits
detailed explanatior = . @ momen
@ mance” © Sinem Ou peor
The t practice examples f 3 Corconmatnn
distinct ‘integrated reporting © SEE aca, © Seca, @ Meron
proaches. Hc y share a © orgrnece
commonality through explaining the
link between their , the
trategy and e itive remuneration.
trategic themes/business strategy
linked to their KPls in their
remuneration reports. Both present wis
fective strategically linked
trategy to pa anne
‘Setarey mecnres beng evenee ana redscng penance acre musing poe ofr
‘one gure 25 pe ca) of PP wt be ermine yon nats aug. Tis provider a drect tne of
Son beeen ra inacon cect 0D er ec coear one enpenyen sapad etna
‘stat eaonaa te tse been scmoraes now radu PP conan
GrontThomnton © 2024 [103
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‘Commercial in Confidence
Remuneration
Example
linked «
This bu to consumer
ractice mple also dem¢
thorough discussion in the
remuneration report by the
imittee chair
is a particularly good approa
upport vis nly cro
ferencing and signposting
aining the link in this way
till be a valuable additic
appro. outlined in the
1s example, as part of
‘integrated reporting.
When considering t
the mor ific, ie referencir
t performance metrics/KPls to
he strategy and how it support
he better
Alignment of incentives with strategy / global market
c
‘Our ambition is to be one of the best performing, most trusted and
respected consumer companies in the world. Our strategic priorities to
drive the company forward are unchanged: sustain quality growth,
‘embed everyday efficiency, invest smartly, promote positive drinking,
champion inclusion and diversity and pioneer grain-to-glass
sustainability,
The performance measures in the incentive plans align with the
strategy and the key performance indicators on pages 32-34. The
financial measures for the annual incentive focus on net sales growth,
‘operating profit [both of which represent critical measures of growth for
Diageo) and operating cash conversion {which recognises the criticality
of strong cash performance and cash containment, particularly in the
current challenging market conditions). The IBO component adds focus
on key individual strategic and financial objectives.
The measures under the long-term incentive plans continue to reflect
the company's strategic priorities and key drivers of long-term growth
by incorporating organic net sales, organic profit before exceptional
items and tax, free cash flow, TSR and key Environmental, Social and
Governance (ESG) measures (greenhouse gas reduction, water
efficiency, positive drinking and gender and ethnic diversity)
Global pay competitiveness is another key remuneration principle for
the company. Attracting and retaining key talent is critical for our
business and remuneration is an important aspect of being able to
meet our talent objectives. As we operate in a global talent market,
the Committee takes into account global pay practices, including the
US market, when reviewing executive pay. Global pay competitiveness
has been considered by the Committee in the context of a number of
changes in the Executive Committee during the year
Gront Thorton
e208 M104
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‘Commercial in Confidence
Remuneration
Example 18,
h and alignme
ve pay and wider
workforce conditions and
pay
E has expanded the rem
Remuneration Committee to include
pay monitoring acr wider
workforce, not just executive pay, ' a ‘Arange of voluntary Allemployees are Annwal incentive The Performance
benefits inline with amember ofthe Plantinked directly Shore Plan is a
with the aim of understanding and on oi the wider worklorce SHEPS or SEPS _tobusiness
aligning pay practices across the Plus contractual car defined benet performance
tnd private medical 50% financial.
organisation msn “ ton Considerations benefits 50% non-financial
‘Annual increases are
typreally inline with
This example ¢ w the
elements of executive pay align with Ortess than te wider
the wider workforce as well as how ‘employee popuaton Annual incentive The Lesdership
J a cae Plan considering ‘Share Pian is also.
they consider the wider workforce — yer cost performance of the _ linked to strategic
4 : ; {ypicaty ranges rom Group tawecty inked performance
ie through meeting annually with tothe above). the mestures over the
SSE’s recognised Trade Unions tc business area and longer-term and
theindivcal 25% trove wah orect
help inform collective bargaining tthe total werd is impact on sreegic
agreements in setting the maximum freveeyearns I “nMermeuaele
percentage pay increases that are . ‘range of voluntary Depenaing on All employees may
available to top staff, ensuring thi Denents are vate Festal ag fbrmercpag hs
allemployees, such Ofemployees wil Share incentive
et with reference to pay c de seacycie towork artclpate tne Plan (Sse matches
Scheme, aholiday Innwal incent
purchase scheme. Plan (as abovel” every three bought)
health benefits and 100% of the award and the Sharesave
This has now ensured consistenc enhanced maternty, 's paidin cash (SAVE) pian
F paternity and
from the top to the bottom of the ‘adoption teave,
workforce
organisation.
GrontThomton © 2024 [105
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‘Commercial in Confidence
Remuneration
ample 19, Engagement with
ynment of e:
clearly he
e pay to be aligr
he workforce n
snus opportunities being
aligned and rewarded in the same
way as the CEO's. This also helps the
rce understand he
is being paid.
Jitionally
while not add
hair engage e
through both an ‘employee forum
and ‘trade union forums’ as well as
the engaging their long-standing
partnership with their unions ir
etting and alignir
COMPANY REMUNERATION
AT SEVERN TRENT
GrontThomton © 2024 [106
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‘Commercial in Confidence
Remuneration
Example 20, Engagement with and
alignment
ay and
and pay
imilarly to the previous twe
4 explains how pay is aligned but
> provides additional details on how input
tring that pay
It notes that
CEO pay rat
engagement
‘ople Office
and Reward
meetings. Thi
aking this assessment and
aligned
rious data source
io, gender pay gap and
its, sll as the Chief
& Employee Benefits Forur
is two-way engagement enable
the Committee and the CPO to explain
alignment «
kfc
ta
nape a fulle
y purpose of ensuring the
ree is treated transparently, whi
points that
slemente
Benet employee
‘arrangements, the rie ofthe Committe and the Pocy. and how they ink with wider worklorce pay and Denels witin Kiet are discussed ~ ee page 128 Tot further information
The Committe takes ito account the pay and employment conditions of employees within the Group when making decisions on the Executive Directors’ remuneration for example,
jad information relating othe worktorce's
Employee benefits
fronang evoyee mh aoe of eng ert an ipa 8 cao he Group atvcig an tng rr ar mchaad nrc note. F72 are na it
en grovang new beats eloees we fring wh cou of eng oretures The new beste an pois ivosuced dng he Mare eo"
‘Atenpioyees ber cere oan aha enc
2500 coven ecees on rreae ck py errant na dy wc ey epaced A it pay fu 0 20 yaa al yx wher 2 a
= Ort o60 eyes acre eure fossa ert nce ed ts we fae eee mar aon
‘Gro a mcreated asa Real Lng Wage employe’ anc rece apy zeae Sanat 253 we aR mene 10
Lng Wage ws uo soped i corangent wares win etc om 7 Jay S027 and waoconreto om I Apt 202
New beets wore made aalaie erpioyes 10 ass wih weibeng anda cost of ng pessites
“ese lore trom spor roe wm aha accparc ‘som ry Pn Pat veto ene
“foreach cot of pucnanng ech and white goods and a Teparsané matonarceSWough epithe Mom Salry
Reward & Employee Benetts Forum (the Forum)
"he Reward & employe Banas Forum has representatives Yom acoss he Groups UK buses areas ang he Group cust netacris. proven a plato to acu
emoloyee reward a beefs os ne carer of atractng. eveopng a retain ow people. The For has onsdeed some ofthe hey beets avalate to empoyees
‘nSuang tose that povde vlate sung on every fanty Spend Mera ana phyal Neath cae support ane Res Faron sere
‘ne Conte Chae ane te Chet Peope Ocean he meetings and he Frum recent scunsed Now the Exact Deectrs ternetabonarangemerts ate deterrnes
tre conor or signet wa te py and beets ole water went, the tl fhe Now Execave Overs and he Remuneration Conte, and fe 223 Poy,
"he Char updated he Ceriee on he otare fe meting ae he eedback cee
GrontThomnton © 2024 [107
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Appendix 6
List of interviews conducted
© GrantThornton e 108
Appendix 6 - List of interviews conducted
Interviewees
Henry Staunton
Ben Tidswell
Simon Jeffreys
Amanda Burton
Andrew Darfoor
Brian Gaunt
Saf Ismail
Elliot Jabos
Lorna Gratton
Nick Read
Board Chair and Chair of the Nominations
Committee
Senior Independent Director and Chair of
Historical Remediation Committee
Chair of Audit and Risk Committee
Chair of Remuneration Committee
Chair of the Investment Committee
Non-Executive Director
Postmaster Non-Executive Director
Postmaster Non-Executive Director
Shareholder representative (UKGI), Non-
Executive Director
Group Chief Executive Officer
Owen Woodley
Karen McEwan
‘Anshu Mathur
Richard Taylor
Tim McInnes
Simon Recaldin
Martin Edwards
Barbara
Brannon
Deputy Chief Executive Officer
Group Chief People Officer
Group Assurance Director
Group Corporate Affairs, Communications and
Brand Director
Strategy & Transformation Director
Remediation Unit Director
Managing Director, Identity Services
Product Portfolio Director for Lottery, Retail &
Government Services
Rebecca Barker
Rachel
Scarrabelotti
Ben Foat
Johann Appel
Chris Brocklesby
Martin Roberts
Kathryn Sherratt
Chrysanthy
Pispinis
Jan Rudkin
Tracy Marshall
Simon Oldnall
POL00448770
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Head of Risk
Company Secretary
Group General Counsel
Head of Internal Audit
Chief Transformation Officer
Group Chief Retail Officer
Interim Group Chief Finance Officer
Chief of Staff
Interim Group Rewards Director
Retail Engagement Director
IT Director GLO/Horizon
‘Commercial in Confidence
POL00448770
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Appendix 7
List of documents reviewed
© GrantThornton
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‘Commercial in Confidence
Appendix 7
List of documents reviewed
Governance Framework and Foundation documents
+ Legally privileged - draft - POL Corporate Governance Framework PART 1- 181022 RS.docx
+ post-office-limited-shareholder-relationship-framework-part-1.pdf
* POL Framework Document (NRF draft 13 April).docx
+ Redline ~ POL Framework Document (NRF and POL Comments)34 and POL Framework
Document (NRF draft 13 April)22.pdf
+ Funding Agreement - Signed.pdf
+ 20221216 POL Articles Of Association Clean FINAL.pdf
+ POL ~ Articles of Association - NRF comments 30 March 2023.docx
+ Redline - 20221216 POL Articles Of Association and POL - Articles of Association - NRF
comments 30 March 2023.pdt
* Investigations Governance Framework First Draft.docx
* Whistleblowing Governance Framework — Final Draft post CIU comments (002).docx
* 20210928 POL Board Current & Proposed Market Standard Unlimited Liabilities & Indemnities
Position APPROVED FINAL (1).pdf
+ Civil Recoveries Schedule of Documents and Timeline.docx
+ 20230301 GE GE-1 Accountabilities Updated September 2023.pptx
+ 20230301 GE GE-1 Accountabilities Updated September 2023 pdf — No redactions
required. pdf
Governance committees’ structures
* GF Graphic 202305.pptx
* PO Group Governance Structure Diagram WORKINGDOCUMENT 202309. pptx
* POL GE Subcommittees 20230907 FINAL.pptx
+ Structurechart202305 updated. pdf
Board and board committees ToRs
* 20230329POL Remuneration Committee GOV Terms Of Reference APPROVED FINAL.docx
* POL Remuneration Committee ToR
* 20230907 POL Group Executive Terms of Reference Approved.docx
* POL Group Executive Terms of Reference
* 20230523 POL ARC GOV Terms Of Reference Updated Footnotes APPROVED FINAL.docx
* POL Audit, Risk and Compliance Committee ToR
* 20230523 POL Nominations Committee GOV Terms Of Reference Updated Footnotes
APPROVED FINAL.docx
* POL Nominations Committee ToR
* POL Board Historical Remediation Committee Terms Of Reference v1 (1).docx
* POL Remediation Committee ToR
* POL Investment Committee ToR
GrontThomton © 2024 I
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Appendix 7
List of documents reviewed (continued)
Terms of reference for sub-committees and working groups
* 20230301 Data Governance Committee ToR FINAL.docx
* 20230907 POL Group Executive Terms of Reference Approved.docx
* 20230401 Health and Safety Sub Committee ToR FINAL.doc
* 20230401 Health and Safety Sub Committee ToR FINAL. pdf
* 20230302 Improvement Delivery Group 2 ToR FINAL.docx
* 202308 Investment Approvals and Delivery Group ToR FINAL.pdf
* 20230926 POL Investment Committee ToR FINAL.docx
* 20230906 POL Opex Committee ToR FINAL.docx
* 202306 Post Office Pension Plan Governance Group ToR FINAL.pdf
* POL RCC ToR Approved 20230906 by GE.docx
+ 20221214 Property Committee ToR v6 FINAL.docx
* 20230802 Retail Committee Terms of Reference FINAL.docx
* 20220428 SPMP Steer Co ToR at Pages 21622 FINAL.pptx
* 20221214 Technology Committee Schedule 1 to Terms of Reference FINAL.pptx
* 20221214 Technology Committee Terms of Reference FINAL.docx
Delegation of responsibilities
* 20230523 POL Board GOV Delegated Authorities Without References APPROVED
FINAL.docx
* 20230523 POL Board GOV Matters Reserved — Updated Footnotes APPROVED
FINAL.docx
* POISPZBPL Spend Approvals Flow Chart 202305.pptx
* POL Spend Approvals Flow Chart 202305.pptx
Remuneration Committee papers and minutes
* POL Rem Co Agenda & Papers 20220927 FINAL.pdf
* POL Rem Co Agenda & Papers 20221206 FINAL. pdf
* POL Rem Co Agenda & Papers 20230301 FINAL.pdf
* POL Rem Co Agenda & Papers 20230502 FINAL.pdf
* POL Rem Co Agenda & Papers 20230511 FINAL Redacted. pdf
* POL Rem Co Agenda & Papers 20230703 FINAL Redacted.pdf
+ POL Rem Co Agenda & Papers 20230926 FINAL Redacted. pdf
* 20231106 POL Rem Co Additional MIN Signed
* 20231128 POL Rem Co MIN v5 DRAFT
* 20231218 Rem Co Mins DRAFT to Rem Co
* 20220927 POL Rem Co MIN Signed.pdf
* 20221110 POL Rem Co Additional MIN Signed.pdf
GrontThomton © 202%
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Appendix 7
List of documents reviewed (continued)
+ 20221206 POL Rem Co MIN Signed. pdf
+ 20230124 POL Rem Co Additional MIN Signed.pdf
* 20230301 POL Rem Co MIN Signed.pdf
* 20230502 POL Rem Co Additional MIN Signed.pdf
* 20230511 POL Rem Co Additional MIN Signed.pdf
* 20230522 POL Rem Co TIS-Written Resolution SIGNED.pdf
* 20230703 POL Rem Co Additional MIN Signed Redacted.pdf
* 20230926 POL Rem Co MIN v5 Clean.docx
* Decisions via email
Nominations Committee papers and minutes
* POL Nom Co Agenda & Papers 20220927 FINAL.pdf
* POL Nom Co Agenda & Papers 20221206 FINAL.pdf
* POL Nom Co Agenda & Papers 20230309 FINAL.pdf
* POL Nom Co Agenda & Papers 20230606 FINAL.pdf
* POL Nom Co Agenda & Papers 20230926 FINAL.pdf
+ 20230606 POL Nom Co MIN Signed.pdf
* 20230309 POL Nom Co MIN SIGNED
* 20221206 POL Nom Co MIN SIGNED
* 20220927 POL Nom Co MIN SIGNED
* 20230926 POL Nom Co MIN Signed
* 20231128 POL Nom Co MIN v5
* Decisions via email
Audit and Risk Committee papers and minutes
+ POL ARC 20230724. pdf
+ POL ARC 20231127.pdf
+ POL ARC 20230516 Agenda & Papers- REDACTED 19.01.24.pdf
+ POL ARC Agenda & Papers 20221205 FINAL - REDACTED 19.01.24.pdf
+ POL ARC Agenda & Papers 20230123 FINAL - REDACTED 19.01.24.pdf
+ POL ARC Agenda & Papers 20230328 FINAL - REDACTED 19.01.24.pdf
+ POL ARC Agenda & Papers 20230925 FINAL - REDACTED 19.01.24.pdf
+ POL ARC Agenda & Papers 20220926 FINAL - REDACTED 19.01.24.pdf
+ POL ARC Agenda & Papers 20230621 FINAL (1).pdf
+ POL ARC Agenda & Papers 20230710 FINAL - REDACTED 19.01.24.pdf
+ 20221205 POL ARC MIN Signed.pdf
+ 20230123 POL ARC MIN Signed.pdt
+ 20230328 POL ARC MIN Signed Redacted. pdf
+ 20230516 POL ARC MIN SIGNED. paf
+ 20230621 POL ARC MIN SIGNED.pdf
+ 20230710 POL ARC MIN SIGNED (1).pdf
+ 20230710 POL ARC MIN SIGNED. pdf
+ 20230724 POL ARC MIN SIGNED (1).pdf
GrontThomton © 202%
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Appendix 7
List of documents reviewed (continued)
* 20230724 POL ARC MIN SIGNED. pdf
* 20230925 POL ARC MIN SIGNED.pdf
* 20231107 POL ARC MIN SIGNED.pdf
+ Written Resolutions
Board Papers and minutes
* POL Board Agenda & Papers 20220927 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20221101 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20221206 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20230124 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20230309 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20230328 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20230524 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20230606 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20230711612 FINAL!.pdf
* POL Board Agenda & Papers 20230711 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20230817 FINAL! Redacted.pdf
* POL Board Agenda & Papers 20230926 FINAL! Redacted.pdf
+ POL Board Agenda & Papers 20230926 FINAL! Redacted.pdf
Group Executive meetings papers and minutes
* POL GE Agenda & Papers 20220914 FINAL Redacted! Redacted.pdf
* POL GE Agenda & Papers 20221012 FINAL Redacted! (1)Redacted v1.pdf
POL GE Agenda & Papers 20221123 FINAL Redacted! Redacted.pdf
POL GE Agenda & Papers 20221214 FINAL Redacted! Redacted.pdf
POL GE Agenda & Papers 20230111 FINAL Redacted v1.pdf
POL GE Agenda & Papers 20230222 FINAL Redacted. pdf
POL GE Agenda & Papers 20230315 FINAL Redacted.pdf
POL GE Agenda & Papers 20230419 FINAL Redacted. pdf
POL GE Agenda & Papers 20230419 FINAL Redacted. pdf
POL GE Agenda & Papers 20230628 FINAL Redacted.pdf
POL GE Agenda & Papers 20230628 FINAL Redacted.pdf
POL GE Agenda & Papers 20230913 FINAL Redacted. pdf
POL GE Agenda & Papers 20231011 FINAL Redacted.pdf
20220914 POL GE MIN FINAL Redacted!.pdt
20221012 POL GE MIN FINAL Redacted!.pdf
20221123 POL GE MIN FINAL - No redactions required.pdf
20221214 POL GE MIN FINAL - No redactions required.pdf
20230111 POL GE MIN FINAL Redacted.pdf
20230222 POL GE MIN FINAL ~ No redactions required.pdf
20230315 POL GE MIN FINAL - No redactions required.pdf
20230419 POL GE MIN FINAL Redacted pdf
20230517 POL GE MIN FINAL - No redactions required.pdf
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GrontThomton © 202 I 114
Appendix 7
List of documents reviewed (continued)
Board papers and minutes (continued)
01.02 20231128 POL Board MIN v1 REDACTED FOR UKGI
02.01 20231031POL Board MIN v3 REDACTED FOR UKGI
20220927 POL Board MIN Signed Redacted
20221101 POL Board MIN Signed Redacted
20221206 POL Board MIN Signed Redacted
20230124 POL Board MIN Signed Redacted
20230309 POL Board AdditionalMINSigned.pdf
20230524POLBoard Additional MIN Signed. pdf
20230606POLBoardMINSigned.pdf
20230711POL Board MINSigned.pdf
20230711POLBoardStrategyMINSigned.pdf
20230712POL Board Strategy MIN Signed.pdf
20230817POLBoard Additional MIN SignedRedacted.pdf
20230926 POL Board MIN Signed.pdf
01.0220231128 POL Board MIN vi REDACTED FOR UKGI
Written Resolutions
Strategy and supporting business plans
Minister Hollinrake letter to POL Chair 29.06.2023. pdf
OS COMMERCIAL Sarah Munby to Henry Staunton Strategic Priorities 2022. pdf
part-and-parcel-the-econmic-and-social-value-of-post-office ~ London Economic Report.pdf
Purpose and vision for GT ~ Strategy.pptx
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‘Commercial in Confidence
Skills Assessment
+ NED Committee Membership Skills Matrix 20230821 v2.docx
Past/Ongoing Reviews
* 07.00 POL Board Ethos Programme 20230926 FINAL.docx
+ App 9 Post Office Limited Internal Audit EQA- Final Report 06.05.22.pdf
* 11.01.00 POL Board Annual Governance Report 20230328 FINAL (2).docx
+ amanda-burton-report-review-of-the-transformation-incentive-scheme.pdf
+ 11.01.00 POL Board Annual Governance Report 20230328 FINAL (2).docx
+ 2022 EDI Survey Results and Insights v0.04 for publishing ~ PDF.pdf
+ ARC Committee Evaluation Report 2022-23.docx
+ POL Board Evaluation Report 2022-23.docx
+ Nom Co Evaluation Report 2022-23.docx
+ Rem Co Committee Evaluation Report 2022-23.docx
+ Legally privileged confidential - Phase 7 narratives - 081222 - draft.docx
+ App 9 Post Office Limited Internal Audit EQA- Final Report 06.05.22.pdf
+ Remediation Committee (FKA Historical Remediation Committee)
* 07.00 POL Board Ethos Programme 20230926 FINAL.doc
+ review-of-the-governance-relevant-to-post-office-limiteds-senior-executive-remuneration.pdf
* 280923 - SS and A Burton Report Recommendations Plan September 2023pdf
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documents reviewed (continued)
Terms of reference for sub-committees and working groups
20230301 Data Governance Committee ToR FINAL.docx
20230907 POL Group Executive Terms of Reference Approved.docx
20230401 Health and Safety Sub Committee ToR FINAL.doc
20230401 Health and Safety Sub Committee ToR FINAL. pdf
20230302 Improvement Delivery Group 2 ToR FINAL.docx
202308 Investment Approvals and Delivery Group ToR FINAL. pdf
20230926 POL Investment Committee ToR FINAL.docx
20230906 POL Opex Committee ToR FINAL.docx
202306 Post Office Pension Plan Governance Group ToR FINAL.pdf
POL RCC ToR Approved 20230906 by GE.docx
20221214 Property Committee ToR v6 FINAL.docx
20230802 Retail Committee Terms of Reference FINAL.docx
20220428 SPMP SteerCo ToR at Pages 21622 FINAL.pptx
20221214 Technology Committee Schedule 1 to Terms of Reference FINAL.pptx
20221214 Technology Committee Terms of Reference FINAL.docx
Risk management
20221031 Group Risk Management Policy v1.4.pdf
20221031-Risk-Management-Policy-Guidelines-v1.0.pdf
2022-Technology-Risk-Appetite-Statements-and-Tolerance-levels. pdf
20230216-SNOW-Risk-Management---Quick-Reference-Guide v1.0.pdf
20230216-SNOW-Risk-Management-User-Guide v1.0.pdf
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Previous Board effectiveness reviews
+ 15 BoardandCommitteeEvaluationReport201920 POL Board 20200408 final (1)
+ 11.01 POL Board Board and Committee Evaluation - Progress 2021-22 20230124 FINAL.docx
+ 13,02 POL Board Board and Committee Evaluation Report 2021-22 20220329 FINAL.docx
+ 13.01 POL Board Board Evaluation Report 2022-23 20230606 FINAL.docx
+ 08.01 POL Board Independent Audit Board Review 20210330.pdt
+ POL Board Evaluation Report 2022-23.docx
+ CONFIDENTIAL AND PRIVILEGED - 20230727 -POH — DRAFT BSFf Ongoing POL Governance
Review — AB Reviewed for confidential informatio.docx
Role profiles
* 05_ POL Board Members & Executives.docx
Registers of attendance at board and committee meetings
+ POL Register of Attendance 2022-23.xlsx
+ POL Register of Attendance 2023-24 .xIsx
Board induction
+ Board induction materials and succession plans
Conflict of interest
* Conflicts of Interest Policy March 23.pdf
+ PO Group Register Ofinterest Current (POL Only).xIsx
Assurance framework
* POL ARC POL Control Framework 20220926 FINAL AM DO NOT EDIT.docx
* Integrated Assurance GE Submission 5 July 2023.docx
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Appendix 7
List of documents reviewed (continued)
Corporate governance policies and procedures
+ 2022- 2023 Modern Slavery Statement - Approved.pdf
+ 20221031 Group Risk Management Policyv1.4.pdf
+ 2023 Contract Execution PolicyCLEAN.docx
+ ABC Policy v8.0 July 2023.pdf
+ AML CTF Policy v10.0 July 2023.pdf
+ 20230322Policy-Exception-Note--PEN--FormFinalv1.0.docx
+ 20231010Policy-Exception-ProcessHow-To-Guidev1.0.pdf
* 2023-Commercial-Ri:
-Appetite-Statements-and-Tolerance-Levels.pdf
+ 2023-Governance-Risk-Appetite-Statements-and-Tolerance-Levels.pdf
+ 2023-People-Risk-Appetite-Statements-and-Tolerancev1.pdf
+ PO Harm Table Ver Mar 22 FINAL.pdf
+ Business Change Management Policy v2.4 2023.pdf
+ central risk team slide pack
+ Business Continuity Management Policy (002).pdf
+ 20231206 PO Enterprise and Intermediate Risks and Mitigations.xlsx
4 + Conflicts of Interest Policy March 23.pdf
Internal Audit Charter and Plans
+ Cyber and Information Security Policy 3.1 2023.pdt
+ Document Retention and Disposal Policy v2.0 Clean.pdf
inancial Crime Policy v8.0 July 2023.pdf
+ FOIEIR Policy v3.1 2023.pdf
+ Group Legal Policy .pdf
+ Health and Safety Policy V8. 2023.pdt
+ HMRC Fit and Proper Policy Standard v5.0.pdf
+ Law enforcement policy v1.0 Sept 21.pdf
+ Our Code of Business Conduct. pdf
+ 07.05.00POLARCInternal Audit Update Appendix 120220926FINAL. pdf
+ Appendix 1 FY23 IA Plan Refresh Sept 22.pdf
+ Appendix 1 FY24 IA Plan.pdf
+ IA Report ARC Dec22.pdf
+ IA Report ARC Jan23.pdf
+ IA Report ARC Mar23 - Final.pdf
+ Internal Audit Charter VO.2 May 23.pdf
+ July ARC IA Update vi.pdf
* POLARCInternalAuditUpdate20220329 (002).pdf
* POLARCInternalAuditUpdate2022
+ Internal Audit and Risk Divisional Structure.pptx
External Audit management letter
+ POL Management Representation Letter FY2021-22SIGNED.pdf
+ Physical Security Policy v3.0.pdf
+ Remuneration Policy for the Executive Directors.msg
+ POL Pay Directive 07 2023 Senior Managers.pdf
+ POL Pay Directive 06 2023 Middle ManagersFinal.pdf
+ POL Pay Directive 04 2023 CWU Grades Final v2.pdf setanee wae)
Appendix 7
List of documents reviewed (continued)
PO Group Contract Execution Policy Quick Reference Guide August 2023 CLEAN.docx
PP1 Procurement Policy V24.6.pdf
Protecting Personal Data Policy v4.1 2023.pdf
Speak Up Policy v.8 May 2023.pdf
Treasury Policy V0.2 2023.pdf
Treasury Policy DA Matrix August 2023.pdf
Vulnerable Customer Policy V3.3 Sept 22.pdf
First Draft HM Governance Paper Incomplete work product (as sent to POL on 3 April
2023(79793441.1).docx
Postmaster Policies
Guide to the postmaster support policies v3.0.pdt
Network Cash and Stock Management Policy V3.1.pdf
Network Monitoring and Branch Assurance Support Policy V3.2.pdf
Network Transaction Corrections Policy V3.2.pdf
Postmaster Account Support Policy V3.2.pdf
Postmaster Accounting Dispute Resolution Policy V3.2.pdf
Postmaster Complaint Handling Policy V3.2.pdf
Postmaster Contract Performance Policy V5.0.pdt
Postmaster Contract Suspension Policy V5.0. pdf
Postmaster Contract Termination Decision Review Policy V3.0.pdf
Postmaster Contract Termination Policy V5.0.pdf
Postmaster Decision Review Policy V2.2.pdt
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+ Postmaster Onboarding Policy V3.1.pdf
+ Postmaster Training Policy V3.1.pdf
Culture documentation
* Culture strategy.pptx
+ PO-Ways Of Working new text_ red.png
+ PO-WaysofWorking-CommitmentCardsA5.pdf
+ Ways of working image.jpg
Stakeholder list
+ Communications Master Stakeholder List.xsx
Board rolling agenda and governance map
* 00 POL Board Agenda 20240130 v7 FINAL
+ POL Board Governance Map DRAFT.xixs
Improvement delivery
+ FINAL DRAFT - Guide to IDG improvement tracking- 190722.docx
+ IDG Dashboard - Progress Report October 2023 v1.1.pptx
* ClJ4 Shortfalls - Storyboard v1.0 (002).pptx
* Draft - Governance framework — Horizon and IT business area v2 120822.docx
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Appendix 8
Glossary
© GrantThornton
Appendix 4 ~ Glossary
Glossary
POL, the Company
Pol
FRESH
FRES:
DBT, the Shareholder
The Code
The Government Code
Foundational governance
documents
HMG
UKGI, the
ShareholderRepresentative
The Inquiry
The Review Reports
AR
RACI
ToR
DoA
FOI
ML
Led
up
Post Office Limited
Post Office Insurance
First Rate Exchange Services Holdings Limited
First Rate Exchange Services Limited
Secretary of State for Business and Trade
UK Corporate Governance Code 2018
Central Government Code 2011
The Articles of Association, the ShareholderFramework Document and the Funding
Agreement
His Majesty's Government
UK Government Investments Ltd
Post Office Horizon IT Inquiry
Amanda Burton and Simmons & Simmons reports and recommendations
Appointed Representative
Responsible, Accountable, Consulted and Informed model/matrix
Terms of Reference
Delegation of Authority
Freedom of Information
Management Information
Learning & Development
Long-Term Incentive Plan
NED/INED
SID
CEO
CFO
CPO
clo
coo
CRO
cto
GE
SEG
SLG
ARC
Rem Co
Nom Co
Sub Co
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Non-Executive Director/independent Non-Executive Director
Senior Independent Director
Chief Executive Officer
Chief Financial Officer
Chief People Officer
Chief Information Officer
Chief Operations Officer
Chief Risk Officer
Chief Technology Officer
Group Executive
Senior Executive Group
Senior Leadership Group
Audit and Risk and Compliance Committee
Remuneration Committee
Nomination Committee
GE Subcommittees including Risk & Compliance Committee (RCC),
Investment Approvals & Delivery Group (IADG), Retail Committee,
Improvement Delivery Group ((DG), and Health & Safety Board (HSB)
Financial Year
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