Topic | Key material topic | Risk level | Trend | Risk summary | Opportunity summary |
|---|---|---|---|---|---|
Competition | Financial performance and position |  |  | Pressure on market share, volumes and pricing impacting revenues and profitability | Outperforming market with high delivery quality and network coverage Investments in Digital and initiatives to increase our customer satisfaction |
Substitution | Accessible and reliable postal services | | | Acceleration of decline in physical mail impacting revenues and profitability | Demonstrating the value of physical mail as relevant communication channel for customers; Stimulate growth in letterbox packages |
Implementation of strategic change projects | Digitalisation and data |   |  | Delay in digital transformation and achieving our business objectives due to challenges with executing a broad range of large change projects at the same time. This may impact our medium-term targets on customer experience and operational efficiency | Strengthening our governance, capabilities and investments in digital domain as foundation for acceleration of our digitalisation Solid prioritising initiatives to shorten time to market of relevant changes through our agile operating model and customer journey factory |
Climate change | Climate change | | | Failure to achieve our long-term carbon emission reduction targets can have adverse impact on our licence to operate, reputation and financial performance | Providing innovative solutions to help logistic partners (outsourced transport) accelerate towards low carbon operations through value chain collaboration Influence policy makers to develop new regulatory requirements that align with the climate-related strategy of the company and is therefore less difficult and more cost efficient to adopt The acceleration of emission-free city logistics creates potential to help other, less well prepared parties, with logistic services in zero-emission zones in cities |
Network capacity and flexibility | Customer experience; Accessible and reliable services | | | Network not flexible to scale up or down swiftly in response to increase/decrease in volumes, which imposes higher risk of operational failures, inefficiency, higher costs and a decrease in customer satisfaction which may have an impact on our competitive position. | Creating flexibility in our network capacity enabling us to scale up or down swiftly in response to market volatility to safeguard customer and consumer service levels. |
Competition continues to put pressure on our market share, volumes, and prices in the e-commerce related activities, which could have an adverse effect on revenues and profitability. Three main areas in the competitive landscape relate to developments by established logistics players, new entrants with new business models, and the rise of platform business New entrants with significant funding are disrupting the traditional market with innovative, digital and data driven business models, to attract both smaller and larger customers. Large platform businesses are becoming more dominant leading to concentration of volumes and increased purchasing power. In addition, value chain integration is developing fast, enabling parties to offer distinctive customer experiences.
Margin management, efficiency improvements, leveraging from economies of scale
Accelerating digitalisation, redesign of our customer journeys with a standardised methodology and furthering sustainability across the company in order to improve NPS
Multiple commercial initiatives, including service level differentiation, (new) products and pricing, and quality improvements in relation to network coverage and operational excellence
Be even more customer centric in improving our business by ensuring flexibility during the peak season, thereby safeguarding customer and consumer service levels.
Further information regarding competition can be found in the chapter 'Our strategy'.
The ongoing trend of increased digital communication in society is leading to continuing decline in the physical mail market. Faster than anticipated volume decrease could impact the ability to deliver accessible, reliable and affordable postal services. Volume decline could impact our revenue and profitability. And it could require PostNL to adapt our organisation faster than anticipated, leading to higher cost of change and challenges in our quality levels.
The sensitivity of our normalised EBIT for changes in addressed mail volumes amount to approximately €7 million based on a market decline by one percent. This mail volume amount is based on addressed mail sales less variable costs to arrive at a gross margin.
Taking commercial initiatives to slow down or adapt to substitution, for example by introducing a range of new services and solutions, and the rationalisation of existing services and solutions
Marketing the value of physical mail, for example helping e-commerce players discover the power of physical direct mail
Adapting our operational business model to become more flexible in our response to future volume decline.
More information can be found in the chapter 'Customer value'.
To make progress on the three elements of our strategic foundation (manage Parcels for growth, manage Mail in the Netherlands for value, and accelerate digitalisation), we are implementing different strategic changes simultaneously. Not making sufficient progress on any of our pillars will negatively impact our growth, profitability, operational efficiency, cash conversion, and required cost savings.
Implementing strategic changes requires focus on effective stakeholder and project management in order to adequately prioritise the allocation of resources. Organisational agility is also key to foresee short term developments and changes in business needs. Due to a tight labour market, hiring sufficient people to implement change projects is challenging and placed our capacity to change at the desired pace at risk. Delays in planned improvements in line with our ambitious digitalisation programme will negatively impact our competitive position as PostNL may not be able to keep up with the pace of technological development in the logistics sector. Implementing strategic change projects inherently increases the risk of temporary ineffective internal controls.
Generating stable and sufficient cash flow to allow for acceleration of our digitalisation through significant investments
Strengthening our governance, capabilities and organisation through formalising and expanding our digitalisation activities in a new business unit
Reorganisation that leads to a clear and effective structure that allows us to better anticipate and respond to developments in the market and technology. We will achieve this through clear division of tasks and responsibilities, fewer discrepancies in decision-making, and fewer layers within the organisation. Additionally, we will ensure there are no duplication of roles and actionable and manageable management responsibilities and tasks.
Further information regarding competition can be found in the chapter 'Our strategy'.
The growth of our business not only means we require more energy for our buildings and transport, it also places greater urgency on reducing our greenhouse gas emissions. We have set ambitious targets towards 2030 to significantly decarbonise our business, and have identified three key risk factors that could impair our ability to meet these targets. 1. Our dependency on reducing the emissions of outsourced transport, which accounts for a significant percentage of our transport activities. 2. Our dependency on technological innovations, such as the availability of zero emission or low-carbon vehicles, and the availability of the correct loading infrastructure and energy. 3. The agility of our logistics business model, particularly at Parcels. Not being able to adapt our business and operational model in a commercially viable way in time to meet the increasing expectations of customers and society in general will negatively impair our reputation and financial performance. This could lead to a loss of revenue based on customer decisions, and increase costs due to expensive investments or carbon taxes.
Executing and refining our concrete action plan in the short-, medium-, and long term towards our target year 2030, focusing primarily on the transition towards an electric fleet and renewable fuels and energy as a transitional measure to cut carbon emissions
Realise network efficiencies through innovative solutions to cut the number of kilometres we transport, and become less carbon intensive in our operations
Collaborate with customers on reducing greenhouse gas emissions in the value chain, for example by developing green products and services, and more detailed information on carbon emissions and data per customer/delivery routes/parcels
Engagement with delivery partners on awareness, strategy on mutual objectives, financial incentives to help transition to electric fleet, and ensure sufficient charging infrastructure
Use sustainable finance to stimulate our environmental investments
Continue to enhance the sustainability and energy efficiency of our buildings and facilities.
More information on our climate change performance can be found in the ‘Environmental value’ chapter.
Increased volatility in the market and stabilising volume growth at Parcels may put pressure on the required flexibility of our network capacity to scale up or down. Investments in our logistical infrastructure are typically fixed in the short term. Not being able to scale up as required may impose a higher risk of operational failures, for example due to disruptions in logistic processes and a decrease in customer satisfaction. Not being able to scale down as required may also increase the risk of operational inefficiencies and higher costs, which may impact our competitive position. Uncertainties due to macroeconomic events requires us to have a more flexible network.
PostNL is constantly adjusting its network capacity to the projected and – where possible – actual volume developments within the limits of a tight labour market. The necessary flexibility for peak season will be maintained to safeguard customer and consumer service levels
Collaborating with partners in the e-commerce value chain to manage volume expectations and to manage the peak moments in our operational volumes
A new approach to the utilisation of our network, in which we can turn off specific sorting capacity if it is not necessary.
Topic | Key material topic | Risk level | Trend | Risk summary | Opportunity summary |
|---|---|---|---|---|---|
Execution of cost saving initiatives | Engaged people; | | | Unsuccessful or delayed cost saving initiatives, impairing cost savings and employee engagement | Use our experience in realising cost savings as example for implementing other similar initiatives. Job mobility opportunities from Mail to Parcels |
Information technology | Customer experience; Digitalisation and data | | | Ineffective IT management systems leading to issues in e.g., availability, integrity, and confidentiality may impair the quality of our business processes, cost effectiveness and/or reputation | Phasing out legacy systems and becoming more data driven to enhance insights for PostNL and customers in a faster, more accurate and more meaningful way. |
Employee attraction, development and retention | Engaged people; | | | Lack of motivated employees due to a tight labour market and/or not being an attractive employer | Strengthen employee branding of PostNL to promote the company as attractive employer and as a diverse global company, for example on digitalisation and a diverse (IT) talent pool. |
Availability of energy resources | Customer experience; Accessible and reliable services | | | High prices and scarcity of energy resources leading to unavailability may impact the quality and continuity of our business processes, our cost effectiveness and our reputation | Price advantage by buying energy on the futures market PostNL contributes to a social goal when becoming more sustainable Less consumption and more self-generation lead to less dependence on the volatile energy market and energy infrastructure. |
Due to market decline in our mail business, realising cost savings is one of the key elements for a sustainable mail business. Examples include streamlining of our workforce, enhancing the efficiency of our infrastructure, and reducing overhead costs. Delays in or ineffective execution of cost saving initiatives could lead to inefficiencies, negatively impact the quality of our services, including our required delivery quality levels, as well as impacting the employee motivation levels. These may result in lower profitability and cash flow, and damage our reputation.
Cost savings projects are executed via enhanced programmes and are monitored continuously by a transformation office
Mechanisms to adjust to changing circumstances have been implemented and are reviewed periodically. Execution via pilots and in close collaboration with the Works Council enables smooth implementation on a larger scale
Acceleration of the digitalisation of our core logistics processes and systems as well as commercial engine to increase the pace of changes with limited temporary impact on our business.
Additional information on these initiatives can be found in the 'Customer value' chapter.
Information technology (IT) is vitally important to our business and we are increasingly depending on it. Threats to the availability, confidentiality or integrity of our IT networks, systems or (customer) data caused by IT disturbances, cyberattacks or lack of appropriate security and infrastructure measures may disrupt our business activities. Given our more connected IT ecosystem, weaknesses in the IT and cyber security of our partners may also harm PostNL. IT or cyber-related issues may disrupt operational processes and systems and therefore negatively impact our ability to provide our services as required and with sufficiently high quality. It may also result in loss or theft of customer data, material cost increase, penalties, as well as damage our reputation.
Professional and dedicated IT and cyber security management at Group level supported by decentral cyber security coordinators on all relevant IT systems used by PostNL including continuous improvement based on issues identified and IT and cyber related developments
Management of cloud suppliers through robust assessments based on a strict control framework
Improvements in our data management based on monitoring and steering by our Data governance board
Evaluating and improving the resilience of critical applications based on frequent measurements and testing against stringent criteria, and implementation of action plans to keep our applications up to date
Continuing to phase out legacy systems to improve the overall IT application and infrastructure stability.
People are at the heart of the services we provide to our customers. The labour market has become extremely tight, especially for operational and IT-related positions. Inherent to PostNL's business, the employee turnover rates are relatively high compared to other sectors. The reports of alleged human rights breaches despite mutual agreements (e.g., a lack of fair remuneration for employees in the chain) may also negatively impact the reputation of PostNL as an attractive employer. These factors impose risks for PostNL in attracting, developing and retaining qualified personnel. In a big battle for talent in our markets it is important to be distinctive and attractive as an employer.
Innovation through online recruitment techniques and continuously improving the employee experience, for example by investing more in employer branding in addition to recruiting for individual jobs
Prioritising the safety and well-being of people more effectively in challenging times to demonstrate the care for our people, by continuing to invest in training and health and safety measures
Scarcity in the labour market related to high profile IT functions remains challenging. To increase PostNL’s attractiveness as an employer, we are investing in branding for potential employees as well as retraining, retention, and development of our current staff.
The risk of disruption due to high prices and/or scarcity of energy resources may impact the quality of our business processes, cost effectiveness and/or reputation. Fuel and energy represent a substantial expense for our company and is an important aspect of our logistical operating model. Increased complexity and uncertainty associated with the environmental changes and the geopolitical situation may affect our operational and financial performance through higher than anticipated autonomous cost and/or scarcity of energy resources.
Purchase energy on the futures market so that the company's energy requirements are as secure as is possible. At the same time, secure the necessary contract/delivery capabilities per location, and spread risk by using multiple suppliers (back up). We will also engage external energy advisers to monitor the risk regularly, and further manage energy data so that we are sure that we are purchasing the energy we require
Generate as much energy as we can to reduce our dependency on external sources (e.g., working towards self-sufficient buildings) and look for alternative forms of (temporary) energy generation/self-sufficiency
Reduce energy consumption by making assets more sustainable and identify energy storage areas in the event of grid congestion.
Topic | Key material topic | Risk level | Trend | Risk summary | Opportunity summary |
|---|---|---|---|---|---|
Regulatory developments and compliance | Accessible and reliable postal services | | | Non-compliance with current or inadequate adaptation with future laws and regulation adversely impacting business operations, our reputation and on our financial performance. | Continuing management focus on understanding and implementing new and revised regulatory requirements and anticipating on potential impacts. Continuous dialogue with governmental and non-governmental stakeholders about compliance requirements to manage our compliance effectively. |
Regulatory requirements are increasing and becoming more complex in the markets we are operating in. These regulations relate to a broad range of topics, such as (but not limited to) tariff regulation, transport and safety law, competition law, regulation related to dangerous and prohibited goods, customs regulations,labour practices,data protection and privacy as well as environmental. Changes in regulatory requirements could materially impact our business activities.
In relation to our responsibilities as designated operator under the Universal Service Obligation (USO) for mail in the Netherlands, changes in the postal law (which are in development), ruling on the Sandd take-over and Article 47 Competition Act may lead to additional operational costs. It may also impose additional legal and administrative costs.
Compliance with laws and regulation is essential and important to demonstrate our commitment to sound business conduct and maintaining our license to operate. Misinterpretation of new or changed regulations or ineffective internal controls could lead to non-compliance. This may lead to sanctions such as fines and business restrictions which could materially negatively impact our financial performance, continuation of services to customers and our reputation.
Continuous implementation and improvement of appropriate policies, processes and internal control procedures to limit exposure to complex legal and regulatory requirements, such as competition law, labour-related laws and regulations, USO requirements and anti-bribery acts
Operating a robust integrity programme that includes business principles and creating awareness
Have dialogues with governmental and non-governmental stakeholders on continuous basis about interpretation of, and compliance with regulations, for example in relation to the USO regulations on national and EU levels
Ensure we adapt our operations in time to changes in the legal and regulatory requirements.
Topic | Key material topic | Risk level | Trend | Risk summary | Opportunity summary |
|---|---|---|---|---|---|
Total cost of labour | Financial performance and position | | | Higher than anticipated total cost of labour and opportunity costs due to operational disruptions | Realising agreements with trade unions on mutually beneficial conditions based on good relationships Timely and effective updating of collective labour agreements for our people |
Financial risk management | Financial performance and position | | | Adverse effects of financial risks on financial position and results | Improving our financial position to increase credit ratings |
Liability for loss or damage | Financial performance and position |  | | Exposure to claims for loss or damage adversely impacting our financial performance | Using data and analysis to identify the most impactful improvement areas in our loss prevention and quality levels |
Being a good employer is vitally important to us. One aspect of this is the terms and conditions under which we hire our personnel and employ outsourced labour. These terms and conditions, including salaries and other secondary benefits, represent a substantial expense for our company and are an important component of our operating model. Our financial performance could be affected by higher than anticipated total cost of labour and/or other related expenses. In addition, opportunity costs due to operational disruptions as a result of action from trade unions and/or actions triggered by media attention may impact our financial performance. Employee expectations regarding salary increases may be higher than we can offer financially in order to achieve our strategic objectives while taking into account the highly competitive market.
Maintaining good relations with trade unions and social partners based on mutual recognition of shared interests. In addition, we are evaluating the sustainability and financial feasibility of our labour model and are researching alternative solutions, as an attractive employer, to make it future-proof.
We are exposed to a variety of financial risks, such as currency risk, interest rate fluctuations, credit risk, liquidity risk, price risk and cash flow risk. These risks can have an adverse effect on our financial position and results.
Using various techniques and financial derivatives to mitigate financial risks, which arise in the normal course of business. Examples include hedging both currency and interest rate risks in accordance with the relevant Group policies
Adherence to our Group policy on financial risk management enables us to fund the acceleration of digitalisation across our key activities
Focusing on being able to pay dividend, underscoring our significantly improved financial position.
For more information, see the financial statements.
We are exposed to claims for loss or damage. Some of these exposures are covered under conventions such as the United Postal Union, the Warsaw Convention or the Convention on the Contract for the international Carriage of Goods by Road, as well as PostNL’s general terms and conditions. PostNL also has limited liability under the Postal Act. Claims for loss or damage not covered under these conventions or PostNL’s general terms and conditions may negatively affect our financial performance. Our exposure to this risk is increasing as a result of the growing volume of e-commerce parcel deliveries in our portfolio, which on average are higher in value.
Maintaining insurance policies in relation to our business and assets with reputable underwriters and/or insurance companies against claims for loss or damage to the extent not covered by conventions, and to the extent that is usual for companies like ours
Strengthening physical security management through a dedicated steering committee 'loss prevention'.
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