COS Objections

1. COS Objections Analysis of MRSO COS Objections Statistics January 2011 CONFIDENTIAL

2. Introduction • The IGG has asked that the COS Objections Process be enhanced, to address the New Supplier bias inherent in the current process • Following discussion with ICT this would require significant IT and process modifications (including Schema impacts) • Therefore such change would need to occur post-Harmonisation • In the meantime RMDS has investigated stats from MRSO relating to COS Objections (MM 012, 011, and 112). This presentation explores the following hypotheses: • As a result of this analysis a number of Next Steps are proposed. If accepted these could be pursued in 2011, ahead of efforts to directly modify the process • H1: The number of COS Objections as a percentage of overall market activity is increasing • H2: The rise in COS Objections raised is attributable to one or more suppliers in particular • H3: The rise in volumes of COS Objections received is attributable to one or more suppliers in particular • H4: There is variability in Supplier responses to COS Objections

3. Hypothesis 1 “The number of COS Objections as a percentage of overall market activity is increasing” • Method: • Divide the total numbers of COS Objections (112 MM) for each month by the total numbers of COS & New Reg Completions for each month for the period in question (Dec ’09 to Oct ’10) Chart 1 – Monthly COS Objection Rates in the ROI Market • Conclusions: • After allowing for changes in New Reg completions the volume of COS Objections proportionately has increased from 0.3% in Dec ’09 to 0.6% in Oct ‘10 • The hypothesis appears to be valid

4. Hypothesis 2 “The increase in COS Objections raised is attributable to one or more Suppliers in particular” • Method: • Plot absolute numbers of COS Objections raised (012 MM) per Supplier against each month for the period in question (Dec ’09 – Oct ’10) • Only include Domestic market suppliers Chart 2 - Numbers of COS Objections by Raising (Old) Supplier (Via 012 MM) • Conclusions: • Supplier A began the period responsible for the vast majority of COS Objections raised • Supplier B began the period with a low volume of COS Objections raised. By the end of the period they were responsible for the majority of COS Objections raised, although Supplier A was still responsible for a substantial proportion • Supplier C’s numbers of COS Objections raised have been low to non-existent through-out the period • The hypothesis appears to be valid

5. Hypothesis 3 “The increase in COS Objections received is attributable to one or more Suppliers in particular” • Method: • Plot numbers of COS Objections received (112 MM) per Supplier against each month for the period in question (Dec ’09 – Oct ’10) • Only include large Domestic market suppliers Chart 3 – Numbers of COS Objections by Receiving (New) Supplier (Via 112 MM) • Conclusions: • Supplier B began the period with a relatively high number of COS Objections received but this has fallen over time. • Supplier C’s numbers of COS Objections received have increased dramatically over the period (23 in Oct ’09 to 186 a year later, a nearly 8-fold increase). They now account for 70% of all COS Objections received • The hypothesis appears to be valid

6. Hypothesis 4 This figure believe to be a result of duplicates and/or re-sends “There is variability in Supplier Acceptance responses to COS Objections raised” • Method: • For each Supplier divide the number of COS Objections accepted by New Suppliers by the number of valid COS Objections issued by Old Suppliers to derive a monthly “COS Objection Acceptance rate” • Only include large Domestic market suppliers Chart 4 - Monthly COS Objection Acceptance Rates by Supplier • Conclusions: • Supplier B appears to have a high Objections Acceptance rate over the period with a lower variance than the other suppliers. • The other Suppliers appear to have very variable COS Objection Acceptance rates • The hypothesis appears to be valid

7. Summary & Conclusions The data analysed appeared to validate all the hypotheses under investigation • Investigation is needed into the reasons why specific COS Objections are being raised • The increased rate in COS Objections could be due to reasons other than “Erroneous transfers” • However this cannot be conclusively shown (not least because there is only one valid Reason Code) Conclusion Summary • The rate of COS Objections appears to be increasing ahead of the growth in changes of supplier (H1) Over the period analysed: • The balance of Suppliers raising COS Objections has shifted (H2) • The balance of Suppliers receiving COS Objections has shifted (H3) • The changing balance of market power would appear to account for these changes • There is variability amongst Suppliersin acceptancerates of COS Objections • One supplier is reliably able to process COS Objections, others vary from month to month (H4) • It is not clear why Suppliers differ in their ability to respond to COS Objections, it may be due to process, system or resourcing differences • This aspect of COS Objections could benefit from investigation

8. Next Steps • Investigate the circumstances of specific cases of COS Objections, ideally via an appropriately sized random sample of the customers involved • Identify best practice across suppliers in respect of handling of Change of Supplier Objections • In line with other jurisdictions, establish a “COS Code of Practice”, which takes account of all important conclusions from the above investigations

9. Appendix A Numbers of COS Objections, aggregated and net of rejections by MRSO, Dec 09-Oct 10

10. Appendix B Numbers of COS & New Reg Completions, Dec 09-Oct 10