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Megatrend Successfully capturing new business trends

Poste Italiane’s strategy allows us to capture business trends and deliver growth across all our segments, as we intend to affirm our role as an omni-channel platform, serving evolving customers’ needs, adapting to a fast-changing world.
 
When comparing to the other developed markets we still have huge potential in our key business areas.
 
Starting from Italy’s B2C e-commerce penetration, which is well below EU’s average. The pandemic has in fact accelerated B2C parcel growth, confirming our strategy to push on a parcel-based network.
 
Customers’ digital behaviour has strongly accelerated, especially in Italy, where we expect digital transactions to converge towards the EU average. PostePay’s bundled payment/telco offer will address these trends.
 
In the financial segment, the low interest rate environment has increased liquidity on current accounts and we intend to leverage on low penetration of managed products in Italy. Our enhanced service model is well equipped to attract wealth and assist our customers in diversifying their portfolios, thanks to our life-insurance products. P&C penetration, in Italy, is indeed well below European average and this represents an opportunity for the plan.
Increased longevity combined with low birth rate resulting in a change in the generational distribution of customers.

 
MAIN TRENDS POTENTIAL SIGNIFICANT IMPACTS FOR POSTE ITALIANE MAIN RISK MANAGEMENT METHODS
The process of ageing population is a phenomenon that is already clearly visible in the economies of the Eurozone and is destined to become more accentuated in the coming decades, with a reduction in the working-age population compared with the older population, which will instead tend to increase.

Ageing could also significantly affect economic growth and have a negative impact on productivity. This aspect is also accentuated by the change in the balance between the active population and the retired population as well as by the irregular and low income capacity of younger people with consequent unfavourable effects on the social security system.

However, the rise in life expectancy and the increase in average age could support the emergence of new markets and new businesses.

Trend: Increasing

Risks impacted:

- Operational 
- Financial and Insurance

SBUs impacted: 
- Insurance Service 
- Mail, Parcels and Distribution 
- Payments and Mobile 
- Financial Services
Negative impacts:

- Inadequacy of product offers (e.g., mobile phone price plans) and postal services (e.g., excessive digitisation of services) for changing consumer needs.

- Increase in insurance costs borne by the Group relating to care, assistance and welfare expenses for the elderly.

- Difficulty in developing reliable forecasting models that allow the Group to predict market developments.
Aware of the opportunities linked to the ageing of the population and considering the strong impact of demographic trends on its services, the Group has developed specific products for segments of the population with evolving needs (e.g. in relation to the growing need for supplementary healthcare, accident coverage, etc.), such as, for example, the insurance product “Posteprotezione Infortuni Senior Più” specifically dedicated to people aged between 59 and 79. Each product offered by the Company is always accompanied by clear and usable information to all types of customers in order to allow them to always choose consciously.

Moreover, Poste Italiane launched the “Silver Economy” Programme designed for senior citizens, with the aim of managing all the Group’s actions dedicated to this important segment of the population in a single synergistic framework. It is a package of financial and savings services, insurance, telephony, shipping and delivery, ideal solutions tailored to specific customers, making Poste Italiane a single point of contact able to meet different needs. In addition, the programme aims to help improve knowledge of financial and digital tools, through a training course led by Poste Italiane’s financial and digital experts.

A pilot project, “Maestri di Mestiere” (Masters of Trades), has also been developed to enhance the skills of senior resources to encourage the transfer of skills to junior professionals.

The Group has also created a prototype of a device that responds immediately to the needs of this specific customer target, equipped with a simple interface that can connect the user immediately to dedicated services (recurring purchases of basic necessities and medicines; simplified communication with family members and the community; postal services; emergency notifications).
Opportunities:

- Increased business opportunities due to changes in consumer needs, based on meeting the needs of the more mature population.

- Increased demand for life and non-life insurance products
Tightening of the reference legislation applicable to the business with particular reference to environmental variables. 

 
MAIN TRENDS POTENTIAL SIGNIFICANT IMPACTS FOR POSTE ITALIANE MAIN RISK MANAGEMENT METHODS
The increase in the level of detail and complexity of the regulatory obligations required by the competent authorities in relation to the regulations issued requires a growing cultural change within companies, which are called upon to review their operational activities in order to adapt to the increasingly frequent and pervasive amendments in the applicable national and international regulations.

Trend: Increasing

Risks impacted:

- Compliance 
- Operational 
- Reputational 
- ESG

SBUs impacted: 
- Mail, Parcels and Distribution 
- Payments and Mobile 
- Financial Services 
- Insurance Service
Negative impacts:

- Failure to respond in a timely manner to regulatory requests (for example, regarding governance structures, responsible finance, etc.), partly in view of the complexity and operational heterogeneity of the Poste Italiane Group.

- Potential penalties for non-compliance with applicable regulations.

- Growing impact of non-compliance with regulations on reputational risk, also in view of Poste Italiane’s economic and social role in the local area.
In view of the complexity of Poste Italiane and the numerous business sectors in which the Group operates, as well as the legal and reputational impacts, the Company has defined an integrated compliance process at Group level, with the specific aim of monitoring - in a structured way for each level of the Company and in a manner appropriate to each business sector - the risks of non-compliance to which the Group is exposed, thus fully implementing the principles of integrity, transparency and legality.

As part of the Integrated Compliance process, Poste Italiane continuously monitors the external regulations relevant to the Group and translates the set of regulatory principles into the body of rules required to ensure their application. The inventory of all regulations relevant to the Group is managed in an integrated manner on the dedicated GRC platform.

Poste Italiane also takes part in technical and working groups on regulatory developments, in order to ensure analysis of changes in the regulatory framework, guaranteeing its correct implementation, and represent the Company’s position on these issues to national and international bodies, in order to support the Company’s business.

In addition, in order to comply with environmental regulations and meet the needs of consumers who are increasingly attentive to sustainability issues, Poste Italiane is gradually adapting its products to meet ESG regulatory requirements (sustainable investment products, responsible investment products, ecc.).
Opportunities:

- Launch of products that encourage prevention and responsible behaviour (e.g. ethical investment solutions).

- Potential regulatory amendments to benefit the business.

- More timely than competitors in complying with complex regulations.

- Redirection/creation of new business business areas.
Global spread of new pandemics.

 
MAIN TRENDS POTENTIAL SIGNIFICANT IMPACTS FOR POSTE ITALIANE MAIN RISK MANAGEMENT METHODS
In an increasingly globalised world, the emergence or mutation of viruses and bacteria can have serious impacts on the macroeconomic environment, disrupting national economies and undermining the health of the population, with consequent impacts on business operations and consumer behaviour.

Trend: New

Risks impacted:

- Strategic 
- Operational 
- Compliance 
- Reputational 
- Financial and Insurance 
- ESG

SBUs impacted: 
- Mail, Parcels and Distribution 
- Payments and Mobile 
- Financial Services 
- Insurance Service
Negative impacts:

- Possible economic repercussions from a global recession, resulting in a reduction in consumption of the products offered by Poste Italiane and difficulties in dealing with recovery.

- Adoption of new work models, which can create greater exposure to cyber attacks and fraudulent use of data.

- Difficulties in the timely management of new pandemics and inability to guarantee business continuity in the provision of its services.

- Amplification and acceleration of the effects of the main existing or emerging risks (e.g., disruption of the supply chains needed to carry out Poste Italiane’s business activities and remote management of personnel).

- Focusing attention on the development of the pandemic, with reputational impacts due to reduced commitment to ESG issues (e.g. reduction of environmental investments)
The experience gained over the last year in the management of the health emergency resulting from the spread of Covid-19, has allowed the Group to develop operating methods that have significantly reduced the potential impact on business continuity (e.g. organisational measures to reshape operations for the branch network and logistics-postal activities; purchase of laptops and software to carry out activities in remote working mode; expansion and strengthening of tools for remote connection, suspension of travel). In particular, the Group has been actively involved in constantly monitoring the evolution of the virus, which has allowed proactive management of its effects, also in the long term, through investments in new technologies, in the security of IT infrastructures and in personnel training, making it possible to provide services in compliance with the security protocols necessary to combat the spread of Covid-19. To this end, committees and coordination structures have also been set up to analyse the evolution of the contingent situation and to take and implement decisions on informative, organisational and preventive measures for the Health and Safety of Workers.

These structures, which are now part of the Group’s organisation and operations, may represent useful resources for the management of any future emergency conditions.

With regard to the management of a new pandemic, the Group can also leverage some specific strengths linked to the diversification of its activities, its multichannel approach and the growth of its digital business, which ensure the service is also provided outside traditional post offices. The majority of the Group’s overall revenue will not be linked to shortterm commercial activities and the business model of BancoPosta is capital light, not assuming credit risk. In addition, the current pandemic has accelerated the Group’s digitisation path, which has therefore not only developed digital products and services, sustainable over time, in the postal, insurance, financial and payment areas, but also introduced new ways of selling and communicating with customers, improving the performance of Poste’s Digital Assistant, for example, through the introduction of the voicebot, which is able to address numerous standardised and repetitive service requests, giving valuable time to employees in the Customer Service area to manage more complex and emerging situations.

In addition, while managing the health emergency, Poste Italiane is focused on pursuing sustainable development by continuing to invest in projects aimed at strengthening ESG initiatives. In this regard, in its constant attention to Sustainability, the Group has decided to adhere, together with 110 other signatories among associations, entities and companies, to the Manifesto “Coming out of the pandemic with a new Green Deal for Italy”.

 
Opportunities:

- Increased efficiency and productivity due to the adoption of remote working models and digital solutions to support the business.

- Acceleration of the transition to digitisation, with a consequent increase in demand for the digital products offered by Poste Italiane.

-  Increased business opportunities due to changes in consumer needs, based on meeting the needs determined by the effects of the pandemic on the evolution of the socioeconomic context.

- Cost reduction (e.g. travel; property management).
Adverse consequences for people, businesses and ecosystems due to the development of innovative technological solutions (e.g. digital inequalities, digital market concentration, etc.).
MAIN TRENDS POTENTIAL SIGNIFICANT IMPACTS FOR POSTE ITALIANE MAIN RISK MANAGEMENT METHODS
Digital transformation and technological advances have not only created a wide range of benefits for companies, but have also amplified the risks that need to be understood and managed. In particular, the development of technology is a process that generates impacts that move in a twofold direction: positive, for the innovations that allow to pursue more efficient and sustainable solutions; negative, for the consequences that robotics and data centers can have on the environment, in terms of polluting emissions and energy consumption.

Moreover, in view of the activities carried out by Poste Italiane, it is necessary to consider that the e-substitution is drawing a new market perimeter, produced by the exceedance of the digital market (electronic communications) and the Parcels segment (especially due to the spread of e-commerce), as well as changes in the habits and behavioural patterns of the population.

The technological evolution of the business and the use of innovative digital solutions, requires increasing attention to the aspects of cyber security. Attacks on IT systems can compromise IT infrastructure, allowing company and customer data to be stolen or used, or malware to be planted, in order to access company funds and/ or to damage the company’s reputation and brand.

Trend: Increasing

Risks impacted:

- Operational 
- Strategic
- Compliance 
- Reputational

SBUs impacted: 
- Payments and Mobile 
- Financial Services 
- Insurance Service 
- Mail, Parcels and Distribution
Negative impacts:

- Inability to maintain attractiveness, due to the excessive digitisation of the products and services offered, towards part of Poste Italiane’s traditional customers and/or potential target customers not reachable due to the digital divide.


- Inadequacy of standard products for changing consumer needs y Difficulty in responding in a timely manner to the digital drive in the sectors in which Poste Italiane operates y Interruption of digital services provided by Poste Italiane.

- Removal of sensitive information for Poste Italiane, with economic, reputational and compliance impacts (e.g. removal of biometric data of customers acquired for the management of payment systems).
Through a path of digitisation of services, Poste Italiane intends to make available integrated digital solutions. In particular, a “Digital Platform of Integrated Communication” will be realised to support the process of digital communication between citizens, companies and PA, safeguarding citizens in digital divide.

Among the actions aimed at reducing the digital divide, in recent years, Poste Italiane has undertaken a path of digital education of citizens, carried out through the organisation of several training sessions with the aim of providing a valuable contribution to the digitisation of Italy. Through the programme, the Group has adopted a highly inclusive approach to facilitate and simplify the use of new technologies to all its customers and beyond.

In addition, Poste Italiane has invested in infrastructure and innovation, focusing on technological knowledge and digitisation. In particular, Poste Italiane is one of the 10 operators engaged in Italy in providing digital identity to citizens, the so-called “SPID”, the Public Digital Identity System. This service has made it possible to bridge the gap between citizens and the Public Administration and make many claims easier and faster. Furthermore, the Group is committed to facilitating the transition from physical to digital payments by organising digital literacy programmes for citizens.

In the field of Cyber Security, Poste Italiane has adopted advanced systems and technologies, developing a constant commitment to the security of digital communications and the combat against cybercrime. To ensure better management, responsibility for the Group’s IT security has been assigned to a Chief Information Security Officer (CISO). In order to ensure adequate levels of confidentiality, integrity and availability of data, information and services provided to customers, Poste Italiane has further developed and adopted a specific IT security framework.
Opportunities:

- Great ability than competitors to understand customer needs, also with reference to targets in the “digital divide”.

- Higher IT infrastructure security levels than competitors.

- Increased demand for the products offered by Poste Italiane, thanks to customer confidence in its handling of privacy and sustainability issues.
Possible impacts of climate change phenomena on Poste Italiane’s business.

 
MAIN TRENDS POTENTIAL SIGNIFICANT IMPACTS FOR POSTE ITALIANE MAIN RISK MANAGEMENT METHODS
In the coming decades, a rise in average temperatures of 3 degrees Celsius compared to preindustrial levels could trigger disastrous chain effects. The combat against climate change, therefore, is not an option but a must. It is therefore necessary to consider these aspects when defining the strategies and operational activities of companies.

Trend: Increasing

Risks impacted:

- Reputational 
- Operationel 
- Strategic 
- Compliance

SBUs impacted: 
- Mail, Parcels and Distribution 
- Payments and Mobile 
- Financial Services 
- Insurance Service
Negative impacts:

- Restrictions on Poste Italiane’s business operations due to extreme weather conditions.

- Inadequacy of the products and services offered with respect to the demands of consumers increasingly driven by sustainability issues. 
Poste Italiane analyses, among others, the risks related to climate change also in relation to the long term.

In particular, the risk management model adopted by the Group considers both the possible impacts that climate change-related phenomena (e.g. extreme climate events, temperature rise, rising sea levels, etc.) may have on the business of Poste Italiane (indirect impact) and those that Poste Italiane’s activities may have on the climate (direct impact). The process of identifying and assessing risks and environmental management methods also extends to counterparties (suppliers, business partners, other companies), impacting the procurement processes and any extraordinary finance transactions, providing, among other things, for the identification of suppliers and partners that may present risks related to environmental protection, also through a multi-dimensional analysis that takes into account parameters such as: possession of environmental, quality and energy performance certifications and adoption of environmental management systems, ethical standards of conduct and Minimum Environmental Criteria (MEC). The correct identification and assessment of climate-related risks and opportunities is also ensured by listening to stakeholders. They are periodically involved in the Multi-stakeholder Forums organised by Poste Italiane and have a reporting system that allows them to bring any perceived risks to the attention of the Company.

Poste Italiane is actively engaged in developing existing products/services with alternatives that take ESG criteria into account (e.g., investments, insurance) in order to ensure an increasingly wide range of products and services that integrate high ethical standards and environmental criteria (e.g., the development of insurance solutions that both encourage the adoption of sustainable and responsible behaviour by their policyholders and mitigate ESG risks). As part of the Poste Italiane Group’s strategy for pursuing its sustainability objectives, the integration of ESG principles into its investment processes is also of particular importance, with investments in sectors that contribute to the Sustainable Development Goals (“SDGs”) (e.g. investments in bonds in the “Green”, “Social” and “Sustainable” categories in line with the standards and principles defined by the International Capital Market Association).

In order to reduce the direct impact that the Group’s activities may have on climate, Poste Italiane is making constant progress in using energy sources that do not use fossil fuels (e.g. solar energy from photovoltaic panels on buildings) and in reducing energy consumption (e.g. replacing neon lights and using LEDs), partly in order to deal with potential sudden changes in energy prices. Among other things, Poste Italiane, in line with its adhesion to the Paris Agreement and the New Green Deal, has set itself the ambitious goal of making its contribution to the achievement of international carbon neutrality objectives by 2030, well ahead of the timeframe defined by the European Union.

In order to guarantee business operations even in the event of extreme weather conditions, Poste Italiane has adopted business continuity plans and actions aimed at preventing physical damage to structures. In addition, for the coordination of emergency and recovery activities, the Group maintains a dialogue with institutions (e.g. Civil Protection, Civil Defence) as well as interfacing with relevant bodies and international protection and defence organisations (e.g. participation in drills or other initiatives, etc.).
Opportunities:

- Increased business opportunities due to changes in consumer needs (e.g. development of low-emission services; development of investment and insurance products for climate adaptation).

- Possible access to new markets and new customer segments requiring insurance coverage.

- Advantages deriving from the greater reliability of the supply chain and Poste Italiane’s improved ability to operate in various conditions compared to its competitors.


 
Change in consumer purchasing behaviour in relation to the payment instruments to be used (e.g. cryptocurrencies, fintech, etc.) also due to the introduction of new payment methods.
 
MAIN TRENDS POTENTIAL SIGNIFICANT IMPACTS FOR POSTE ITALIANE MAIN RISK MANAGEMENT METHODS
Internet access and the use of electronic payments is spreading worldwide. Consumers who shop online are also looking across borders for the products and services they want, and are developing new habits and needs geared towards the use of electronic payment solutions.

Trend: Increasing

Risks impacted:

- Operational 
- Strategic 
- Reputational 
- Compliance

SBUs impacted: 
- Payments and Mobile
Negative impacts:

- Poste Italiane’s untimely response to emerging payment trends resulting in loss of market share.

- Inability to maintain attractiveness to traditional customers, potentially more averse to digital channels, for Poste Italiane’s electronic payment services.

- Increase in Poste Italiane’s competitors in the payments sector (e.g. organisations introducing new payment systems).
In order to provide new payment solutions and respond to the changing needs of its customers, Poste Italiane is developing new digital payment services, intercepting and driving customer habits in the context of digital transformation, through the creation of innovative products and services that simplify everyday life, such as: 

- Postepay Connect, first integrated payment and mobile product that allows managing, through a single app, telephony and payment services in an intuitive and secure way; 

- Postepay app, the e-wallet that allows paying for purchases directly with a smartphone in all stores that accept contactless payments, thanks to the recent introduction of the Google Pay service in the app; 

- Codice Postepay, an app that allows buying in stores using a QR Code and getting discounts and benefits at affiliated partners. The proposal of a fully digital acquiring offer, using QR codes, will help accelerate Italy’s transformation from using cash in payments to digital solutions, using a technology well known in major Asian markets; 

- Collaboration agreements with start-ups for the development of innovative solutions in the financial services and payments area.


 
Opportunities:

- Adoption of strategies to increasingly personalise the offer of payment services.


- Adoption of new technologies that can be extended to the current customer target of Poste Italiane.
- Segmentation and differentiation of the offer, through the expansion of Poste Italiane’s customer target (e.g. young people).

- Creation of a specific offer for Poste Italiane’s digitally evolved customers.

- Launch of new products (e.g. platforms and instruments for cryptocurrency payments).

 
Need to review business models and delivery operations due to the introduction of new mobility models, technological evolution of vehicles, sharing mobility.

 
MAIN TRENDS POTENTIAL SIGNIFICANT IMPACTS FOR POSTE ITALIANE MAIN RISK MANAGEMENT METHODS
The transport sector is undergoing a profound transformation, driven primarily by technological innovations and by the impact that digital is bringing to habits, needs and mobility preferences of passengers and businesses. In addition, the shift towards more sustainable modes of transport, the control of polluting emissions, the environmental sustainability of major works are issues that increasingly guide the preferences of citizens and the choices of transport operators.

Trend: Increasing

Risks impacted:

- Operational 
- Reputational 
- Compliance

SBUs impacted: 
- Mail, Parcels and Distribution 
Negative impacts:

- Restrictions on Poste Italiane’s operations, with particular reference to deliveries, due to traffic restrictions (e.g. restrictions on polluting vehicles).

- Limited availability of “green” vehicles suitable for carrying out Poste Italiane’s logistics and delivery activities.

- Negative impacts on the environment and on Poste Italiane’s reputation due to the use of polluting vehicles.




Poste Italiane, aware that the vehicles used to carry out its logistics and delivery activities do not lend themselves to any type of optimisation, has been replacing them with equivalent electric-powered vehicles in recent years, improving its fleet in order to reduce atmospheric pollution. Among companies in the utility sector, Poste Italiane has one of the largest fleets of 100% electric commercial vehicles in the country.

The Group has entered into a partnership with Nissan for the supply of a new fleet of 70 full electric vans to add to the 1,000 Free Duck electric vehicles that have been delivering mail in city centres every day for years, covering more than 2 million kilometres and avoiding the emission of over 300 tonnes of CO2 compared to the use of a traditional motorcycle.

In addition, there are approximately 1,700 natural gas vehicles, more than 1,000 LPG vehicles and 41 hybrid vehicles.

In conclusion, the Group is introducing in several cities the use of new three-wheeled electric motorcycles, to make the delivery of parcels and correspondence by Poste Italiane environmentally friendly, easy and safe. The new tricycles are completely electric-powered, with a capacity of 4 kW that guarantees a maximum speed of 45km/h in line with the limits imposed by the Highway Code in towns and cities, and energy self-sufficiency of about 60 km that enables postmen to complete their daily delivery round with a single charge. For each new vehicle, Poste Italiane will also install a new electric recharging station, confirming its desire to ensure greater environmental sustainability throughout the country and allow its electric fleet to spread throughout all Italian regions.

 
Opportunities:

- Reduce the Group’s total energy consumption from non-renewable sources (e.g. fossil fuels).


- Reduction of emissions related to the use of the vehicles that make up the company fleet.

- Leaner and more efficient management of operations.

- Cost reduction.