TASK 1 Briefing Paper To:Rail Co Trust Board From: Chairman of NCG Committe Subject:Agency relationship & Role and Values of NEDs Dat \-12-22 This Briefing paper analyses the agency relationship ofthe parties involved and assesses the role and values of NEDs on the board as a public sector company. ‘Agency Relationship Principal Rail Co isa public sector ril company responsible for delivering passenger mil services within Heeland The principals are the tax payers of Heelan, They expect the funds are used economically, effeiently & effectively as well s there is Value for Money. Agent Rail Co is governed by a supreme governing committee known asthe Rail Co Trust Boat ‘This boued is responsible for ensuring thatthe Rail Co board of directors make the bes use of public money and maintain effective and efficient services tothe publicSub Agent ‘The Rail Co board is responsible forthe stratepic direction of Rail Co, Is responsible for supervising the operational activities ofthe business and providing leadership and strategie diction, The board is also accountable to the Ril Co Trust Board for our heath and safety performance Rote as ues of NEDs Currently the board of Rail Co consists of 10 directors out of which 7 ate Non-Executive, ‘Thete ate Four board committes( SHE Committe, Audit & Risk Committee, Remuneration & Nomination Committe and Corporate Governance Committe Roles of NEDs: Strategies- NEDs Bring External experience and leadership to ensue that Rail Co acheives is mission to provide high quality. cient and cost-effective rail service to all passengers Performance: NEDs will review the performance of Executive Directors of Rail Coto ensure they are making the best we of public money and maintain cffective and efficient services to the public. ‘isk NEDs will sure effective Risk amangement and intemal controls of Rel Co and fnanc repom is accurate and retile to stakeholders People Values Independence Challenges Fxecutive Ditectors However, NEDs may lack independence if they ae long time associated with Rail Co, Currenly 2. NEDS of Rail CO has been in the board for over $ Year NEDs may not have suieient time to attend meetings. Currently NED Hervey Flood have been absent in the board meeting,Sincerely Chairman of NCG Committe tasked Alex Reed has sk yout propa eport forthe Ril Co Tt Bod wis Report Tora Co Trust Board Fro sistant Auditor ‘Subjectcimplications of Passenger Survey results & Relative performance of Rall Co Date:06-12-22 This report analyses the the implications of the findings ofthe passenger survey results and reviews the actual. three yeas relative performance of Rail Co over the last Passenger Survey Results ‘Overall satisfaction with your journey- This has declined by 3 Percentage points over the previous year and shor by 6 Percentage points over its 2016 target growth, ‘The reason is there is no online ticket booking facility andthe ony way to avail icket is to go the station, A. frustated customer stated "Why sit that when teavel on business to Ayeland, I ean book my tein kets online, ye, herein Beeld Vea oly buy a ticket atthe station? This i very Fustrating and ‘occasionally, Tuse my car to gel to work asi is more convenient than queuing for upto half an hou to buy a train ticket". Furthermore commute rains are still ‘overcrowded, Overall leading to dissatisfaction from customers, Rail Co sat risk of losing passengers in future f this rend continues Satisfaction with ticket buying facilitis- This has declined by 4 Percentage points over the previous year and short by 6 Percentage points 0 growth, 2016 target.‘The reason fr this is the lac of online ticket purchasing facility. There are long ques in ticket counter A Customer even stated that "Why is it that when I rvel ‘on business to Ayeland, lean book my trai kets online, ys, herein Beslan | can oniy buy a ticket a the station? This is very fastraing and occasionally, | tase my car to get to work sit is more convenient than qucuing for upto half an hour to buy a tran icket "This provides evidence that it customers may opt for alternate transportation rather than waitin Tong ques. Availabilty of staf- This has declined by 3 Percentage points over the previous year and short by 7 Percentage points over its 2016 target growth. Tis is further evidenced by loyal customers stating thal ticket inspectors are no where tobe seen a all and some pastengers ae travelling without purchasing a ticket, This may encourage passengers to not buy tickets aa and travel for free. Overall decreasing revenue for Ral Co ‘Value for money for price ofthe ticket: The VFM has decline by 6 Percentage poins over the last year and short by 7 Percentage poins over is 2016 Target ‘The Reason is price of ticket increased by 10% to cover revenue losses. This isa significant negative change in customer perception. A Customer customer stated "The price ofthe regular ticket I buy to commute to work has increased by nearly 10% since lst year. [eally eannot understand shy as | donot seer to be getting more for my money”, This is important to the government because if customer do nol believe to get value for money then Rail sin ik of losing customers Relative Performance Competitors Revenues (BS) Revenue growth of Rail Co is much lower than competitors despite grow in passenger numbers of 10% (ANR 5% , Ceeland 8%, Rail Co 25%) Reason for this is signtieant numberof passengers is wavelling without eke ‘operating eosts- The operation costs are much higher than competitors. (ANR 68% , Celand 65%, Rail Co-7%) Reason for this is ineicences in ost contol and revene loss om passengers travelling without ticket Average price per ticket (BS)The average pice of tickets much higher haa competivos ANR 43 , Ceeland 40, Rail Co-65 Reason for this is Rail Co increasing its ticket price wo cover for inefficiencies and recover losses from passengers travelling without ticket Los ime injuries to sta. the ost ime is higher than compettros (days 355 days ANR., 21days Ceeland, Rail Co-481 Reason for this is lack of taining and low staf morale.Sincerely Assistant Auditor, NAA Letter Assistant Auditor National Audit Authority Becland Date Chairman Rail Co Trust Board Beeland Subjectzinternal controls & CEO's fiduciary duties Respected Chairman, | have reviewed the effectiveness ofthe internal controls and examined the role ofthe CEO in relation to his fiduciary duties. etow are my findings. Weakness of Internal Controls No ticket barter at 40% of Staion Ticket inspectors not inspecting tickets Lack of waning to Sta leading to health and safety risk(CEO failing in his Fiduciary Duties = believed thatthe target growth for punctuality set by the Trust Board for 20XG was unachievable and therefore shouldbe ignored. It is the role of CEO to ensure thatthe targets set by board are acheived. This cannot be ignored ‘The CFO stated that he strongly believed thatthe majority of customers didnot understand the concept of value for money and therefore this measurewss ‘awed, This shows that he has lack of understanding his customers. Rather than putting blame on customers, he should find out the reasons why the customers believe they are losing value for money. The Chief Executive stated that tining levels were slisfactoryand that there was no evidence to suggest that turnover indicating low staff morale. Such claim by CEO is incorrect. ‘morale was low. There is increasing staff The Chief Executive disagreed that this was a significant rsk to Ral Co and thatthe cost of installation of ticket barriers would far outwsigh the benefits. Is estimated that 524M dollars i lost due to no tiket bares, he should frst review a formal cost benefit analysis before making suc claims His comment relating to the media as an unimportant stakeholder is incorrect as adverse media reports about Rail Co are a potential reputational risk create mare customer dissatisfaction, Assistant Auditor (a) Evaluates the implications ofthe findings of the passenger survey results and reviews the actual and relative performance of Rail Co over the last three years, ‘Alex as asked you o draft leter to be sent tothe chairman ofthe Rail Co Trust Board which () Reviews the effectiveness of the internal controls at Rail Co using evidence from the minutes ofthe latest Rall Co board meeting and any other sultable source and justifies thatthe chief executive of Ral Co i failing in bis fiduciary duties tothe rustes of Rail Co,(marks) Professional skills marks are available for demonstating scepticism ski board meeting in questioning the opinions and assertions made by the chef executive a the recent (@) Write a report tothe cairo the NOG whic evaluates the sultability ofthe shortlisted candidates for the position of chief exccutve of Rail Co and recommend with justification, which candidate you consider to be the most suitable forthe position Report ‘To:Ralil Co Trust Board From: Chairperson of Adhoc Subcommitte Subject: shortlisted candidates for the position of chief executive Date:06-12-22 This report analyses evaluates the suitability ofthe shortlisted candidates for the positon of chef executive of Rail Co and provides recommendation, sate- A Candidate A isthe Chet executive of 3PS Express, the largest passenger trai sevice operating company in Jeyland. He has 7 years of Experience i the eal industry.which is mach desirable for Ral Co eis responsible forte privatisation of V Trains in 20X3 meaning he worked in the public sector. This is desirable for Ral Coa its also «public company.he hasbeen the Chef executive of Beeland Oia multinational ol and gas company for 9 yeas. ‘He has close liaison with national government regulators and rail interest groups which is key skill ia managing relationship with trast board and minister of teanspor, He has regular liaison the media and the publi. This is highly desirable considering the current operating climate of Rail Co Candidate B Chief exceutive of BV Ple the world's third largest engine He has experience for driving the growth of revenue and increased operational efficiency. This is one care area where Rail Co greatly needs to improve considering the inefficiencies in operating costs and poor growth ofreveny. ‘He was the Finance director of Ceeland Rail for 3 years. whichis desirable for desirable for Rail Coase will have excellent knowledge of financial ‘management requirements Recommendation Candidate A is more suitable as he is more experienced CEO with 16 years of experience and has more comprehensive understanding of the rail industry compared to candidate B. () Propare two presentation sides, with accompanying notes to explain tothe NCG, the contribution which the chief executive should be expected to ‘make in terms of talent management, to support the necesstly change programme requted a Ral Co. (marks) Professional skills marks ae available for demonstrating communications {in conveying televant information in an appropriate tone tothe NCG(@maris) asked ‘You have been asked by the chair of the audit and risk committe to review the findings ofthe financial controller and present report which requires you to do the following: (@) Analyse the information presented inthe spreadsheet produced by the financial contlle, questioning any assumptions he may have made, and explain the implications ofthe findings Tor Rail Co, Report ‘To:Chair of the Audit and Risk com From: Internal Auditor Subject: Analysis of Fraud Date:06-12-22 This report analyses the information presented in the spreadsheet produced by the financial controller, assumptions he may have made, and the implications Analysis In Region 1, there are 10 stations out of which only 4 stations do not have ticket barriers, From the Spreadsheet it canbe seen that the stations which do not ha compazed 9 station have ticket barriers ranging. rom 11% ta 1.63 ticket batets have the highest rate of fraud (ranging ffom 7.54% to 9.78%) as )‘The preventable amount of Fraud from Region- is $27,130,338. If thsi extrapolated then the total fraud over 20 regions would be $ $42,606,752. This is very significant amount of revenue being lost Rail Co immediately noods to create and improve existing contols to reduce the frau. ‘Questions regarding Assumptions used ‘The esimated % railway users per town needs further investigation, How was this calcuated? Is his based on surveys or demographic factors or both? Its assumed that all regions are of sina size to region-1, This s very unlikely to be the ease, Therefor the actual amouot of fraud may be very diferent from the calclations done. Further information is required to understand how the figure for unpreventable fraud was ated at Implications ‘This spreadsheet shows tht rail co lost significant amount of revenue on 20X6 by not installing ticket buries a al its stations. This amount represents 13% of the revenue . Ral Co immediately needs to create and improve existing controls to reduce the fraud to an acceptable level. (b) Recommend to the audit and risk committe, with justifications, suitable measures or safeguards which could be implemented by Rail Coto reduce the Tevels of fraud occuring on the network, Install Ticket bariers Employ adequate Ticket inspectors Increase fine or penalty for passengers found without ticket Increase Ticket counters at stations Inroduce online ticket booking aeilty Professional skills masks ae available for demonstating commercial acumen skills in making sound recommendations for suitable measutes and safeguards to redhce fraud Takes‘You have boon asked by the director of Projects and Infrastructure to write a busines eae to the board a which you will: (j) Justify why the investment in online ticket sales could assist Rail Co in producing det ‘lationship management timely customer data to assist in customer Business Case Current Situation Presently Rail Co does not operate online ticketing system. All tickets are purchased from the ticket counters inthe station. Tis hos caused dissatisfaction among customers as they have to wait lang qucs tobe able to purchase ticket. Some customers are preferring alternative mode of transportation while others are teavelling without tickets. Without ticket bartirs and adoquats ticket inspectors, Ral Co is losing revenue. Proposed Option Rail Co may consider investing in online ticket system, Ths should make it easier for customers to purchase ateket, Benefits of Proposed Option ‘CRM helps in building one-to-one relationship with customers using internet technologies. Electorie CRM in form of online ieket system n customer retntion and and customer acquisition. Customer Retention The online system can be used to send reminders to customers about their scheduled time to board the tran, Passengers can caily make payments online without the hassle of waiting i long ques and cen track the status of their ticket after booking online, Customer Acquisition ‘Though the Online Tc Ioyalty whereas curently Rail Co is losing customer ro «system, Rail Co willbe able to have beter interaction and comunication with customers overall increasing revenue and customer iyRail Co wil be ale to provide aftersales service suchas take measures on complaints placed by passengers or answer any queries placed. Factors to consider A detailed Cost benefit analysis need tobe undertaken to understand the financial viability ofthe investment in online ticket system, Furthermore Customers peteeption ofthe systm neads toe considered. Old aged passengers may not use the system as they are unfamiliar with the system or may'be reluctant fo ‘change. Young aged customers may weleome the change as they are more familiar withthe technologies. (©) Produce. project initiation document (PID) which could be used by Rail Co to assist in planning the implementation of an online ticket sales system Project Initiation Document (PID) ‘pe & Benefits [fo implement an online eket sles yale fo increase esfomer satsetion and revenue iDeuiled Cost Benefit Analysis tobe underiakea \Conts- Hardware Costs, Software Licensing Costs, Website Development Costs, Inenefts ost Benefit Analysis «increase in Revenue + Reduction in numberof passengers without ticket + Customer convinience and satisfaction ‘+ Reduction in long ques in ticket Booths lroiect Sponsor It Director Rail Co-Tomas Kline Project Manager Projects and Infrastructure of Rail Co zojet Team (Outsourced 19 External Developers Rey Stakeblders Passengers [Board of Directors Rail Co Trust Board(Goverament [Duration (Online ticket sales system fully operational within 12 months Time Overrun sks (Costs Overrun ‘System security Breaches Funding ofthe Project onsteant Human Resourses