Ultimate FCA wind down plan template with examples for financial firms. 9 Sections to be compliant.
As you may know, even proven business models can break under challenging circumstances at some point in time. There are many examples of companies that ended up with a messy business closure. Financial services firms are not an exception, and it is a severe issue for regulators, especially right now when the future of the world economy is uncertain. From summer 2020, the FCA imposed a requirement on non-bank PSPs (such as payment and electronic money institutions) to have a wind down plan to address this issue. To assist such firms with their obligations, we have created our so-called FCA wind down plan template, which is suitable for various UK PIs and UK EMIs, and drafted this article to explain how to use the template.
You will be able to download our free FCA wind down plan template at the end of this article.
P.S. While this article is focused on non-bank PSP, the article and our FCA wind down plan template are quite broad and, after some adjustments, are suitable for any UK regulated business which is required to have a wind down plan.
Why does the FCA require supervised entities to have a wind down plan?
FCA’s statutory objectives include the protection of consumers and ensuring that the financial markets function well. If you think about the FCA’s objectives, the requirement of having a wind down plan becomes apparent. The FCA aims to protect consumers and market participants reliant on non-bank payment service providers from a potential negative impact.
Without a detailed and well-thought-out plan, a firm has a higher chance of a disorderly and insolvent wind down. Wind down planning’s main idea is to avoid consumer harm such as loss of safeguarded funds in an insolvent situation, severe disruption to services, including those provided to other market participants, or delays in funds being repaid.
Another factor behind developing a wind down plan is to set early warning indicators and wind down triggers that the management will monitor to timely inform the board of directors about a potential failure. Early attention and timely decision-making can save the firm from an insolvent scenario. Moreover, it can protect the remaining shareholder’s assets and minimise reputational damage for the shareholders and management. Thus, wind down planning allows firms to be prepared to cease their activities and relinquish their regulatory permission(s) in an orderly manner when specific triggers are met.
The difference between the wind down plan, business continuity plan, and disaster recovery plan
You may have a question: “Why would we need a wind down plan if we must have a business continuity plan (BCP) and a disaster recovery plan (DRP)?” By default, payment and electronic money institutions must have a BCP explaining how they will continue to operate despite unforeseen circumstances hampering their business (e.g., unavailability of critical IT systems, substantial financial loss, natural disasters, loss of personnel, etc.) and a DRP that explains how a company can resume its operation after an unplanned incident promptly.
BCPs or DRPs do not substitute a wind down plan. BCPs and DRPs are focused on saving a business. At the same time, wind down plans are focused on activities and actions that must be undertaken by a firm deciding to cease operations when the business is no longer viable or when there is a strategic decision to wind down.
Does it mean that wind down should happen when business recovery and continuity attempts failed? No, business recovery and continuity attempts need to continue even when wind down has begun, and these two processes, in many instances, will operate in parallel.
What you should consider before drafting a wind down plan
The FCA is concerned that many UK payment institutions and electronic money institutions have submitted generic proforma wind down plans provided to them by their regulatory compliance consultants. On several occasions, FCA case officers noticed that such wind down plans contained references to the firm’s business lines, and products in question were neither authorised to provide nor had ever previously provided. Such a situation is unacceptable, and that is why our FCA wind down template is as broad as possible and has to be completed by a person who has a prerequisite practical knowledge of the inside workings of your firm.
Our experience and points raised by the FCA show that the best wind down plan is based on the business model and specific circumstances of each firm, including the firm’s organisational structure, operating model, internal processes, human resources, and systems that are interconnected and/or outsourced. Furthermore, a good plan addresses liquidity, operational, and resolution risks specific to the firm’s business and specific circumstances.
It means that a solid wind down plan that can satisfy FCA’s requirements should be based on the firm’s business model, including its revenue streams, clients, business partners, and profitability. The firm should clearly understand potential areas of risk and vulnerability, including internal and external interconnectedness, i.e., the firm’s dependencies on other parties, including the company’s group members (where relevant), and the dependencies that other firms have on the firm, which decided to wind down.
Your plan should be based on practical considerations rather than on a broad overview of business processes. To ensure that you know your business from the inside out, you should conduct interviews with product managers, heads of departments, senior officials and analyse the whole set of policies and procedures relating to the firm’s risk management framework.
Part 1 of the FCA wind down plan template [Introduction]
A wind down plan should start with an introduction and explanations of your wind down plan’s purposes and aims, i.e., what is its rationale and what the plan aims to achieve. Following it, you should include the following Sections:
Regulatory and Legal Considerations
In the beginning, your plan should describe legal implications relevant to your wind down plan. Such considerations may include, among other things, concerns relating to the сompany law (e.g., directors’ duties), Payment Services Regulations 2017, Electronic Money Regulations 2011, Money Laundering Regulations 2017, data protection requirements (you must consider any issues of transferring data), employment law (e.g., you should be aware of statutory protection) and FCA filing requirements (they vary for different permissions). It is advisable to explain the legal framework and refer to the relevant legislative provisions to ensure that it will be easier to change the plan if there are any amendments to the laws and regulations.
Assignment of responsibilities and functions
Ideally, after drafting your plan following this FCA wind down plan template, you should be able to prepare a list of responsibilities for all parties participating in the wind down process and preparation, reviewing, and updating of your plan. This section can summarise all responsibilities you have in your plan and specific functions you do not have elsewhere. You should update this part of your plan once you are done with other parts.
The most important responsibilities and functions (e.g., approving significant updates to the plan) should lie within your business’s governing body (most likely, it is your board of directors). The governing body shall have a general responsibility and accountability for the timely implementation of the wind down plan.
You should have a Winding-down Committee consisting of senior management members who will be responsible for reacting to early warning indicators and wind down triggers, reviewing and proposing amendments to this plan.
You should also consider what functions and responsibilities you want to assign to department heads, product managers, external consultants, and practitioners (e.g., insolvency practitioners).
Part 2 of the FCA wind down plan template [Triggering the plan]
The FCA underlines that you should wind down your regulated business not when it reaches a certain point of no return but rather when it is clear that recovery is impossible. Therefore this section of your wind down plan can be structured as follows:
Description of your risk-management framework
It is impossible to adequately consider scenarios and triggers to activate your plan without an effective risk management framework. The FCA underlines that a wind down plan is a dynamic document, and it is recommended to draft it in a way that will allow you to update it easily.
If your financial services business is managed in a sound and prudent manner, you will have a well-developed risk management framework addressing various topics, such as anti-money laundering, counterparty, liquidity, safeguarding, financial crime, and others alike. Based on your existing risk management framework, it is easy to set-up early warning indicators and triggers. Moreover, by monitoring updates in your risk management, it will be easier to review and update your wind down plan and ensure that it always corresponds to your actual vulnerabilities and risks.
Let us explain to you what are Thresholds in our FCA wind down plan template. A Threshold is the point of no return. It is a predefined condition or a set of conditions that, if met, indicate that your business is not viable. The FCA states that a regulated business is not viable when it no longer has adequate financial or non-financial resources to
- meet its regulatory requirements (e.g., requirements relating to the authorisation as a UK PI as enshrined in Reg. 6 of the PSRs 2017 including, for example, safeguarding requirements, ongoing capital requirements, etc.);
- carry on its regulated activities;
- to meet its contractual obligations.
In our FCA wind down plan template a Scenario is a description of a situation that eventually may lead to the point when a Threshold is reached. Various Scenarios may be associated with one or more Thresholds. For example, the loss of key clients, crisis leading to severe financial losses, loss of critical IT infrastructure, or loss of a vital business partner may lead to the situation when a certain Threshold is reached. It is essential to consider various Scenarios relevant specifically for your business model as different scenarios may require additional actions during the wind down process.
Triggers and Recovery Options
The FCA recommends not to wait until a Threshold is reached but rather to consider winding-down if it is clear that successful recovery chances are minimal. If you follow this recommendation, you increase your chances to avoid insolvent and chaotic wind down.
Our FCA wind down plan template allows you to identify situations where a Threshold is not reached, but it will be inevitably reached. If you fill in our template correctly, you will be able to identify such situations when there is still time left to prepare for a solvent and well-organised wind down. The FCA wind down plan template has two elements: Triggers and Recovery Options.
Triggers indicate that your company’s probability of reaching a certain Threshold has increased and that the situation requires immediate attention. A Trigger is usually linked to one or more Scenarios. Its function is to ensure that there is a procedure for reporting and monitoring management information, risk metrics and early warning indicators.
Recovery Options are the possibilities that your company may have to avoid reaching a certain Threshold in a particular Scenario. Identification of Recovery Options helps to see clearly whether it is possible to prevent the materialisation of a particular Scenario and whether there are chances to remain viable. You should note that Recovery Options you identified remain feasible only up to a certain point. Therefore you must weight them against the risk of a disorderly failure if the decision to wind down is delayed or deferred for too long.
If you want to decide wind down at the right time, you should have a committee that keeps abreast of the Triggers, Recovery Options and Thresholds. We recommend you to create a Wind-down Committee consisting of senior managers.
You should make individual employees responsible for monitoring Scenarios and Triggers. These employees must notify the Wind-down Committee as soon as there is a Trigger and/or reasonable suspicion that a Scenario may materialise.
One of this Committee’s goals is to evaluate the seriousness of the Trigger and report to the firm’s governing body (e.g., the board of directors) the underlying facts, options, and consequences of making a wind down decision. Wind-Down Committee may also be vested with the responsibility to lead the company’s recovery process, as long as it corresponds with its other policies and procedures.
Thus, once the Wind-down Committee is notified that a Trigger was noticed or there is a reasonable suspicion that a Scenario may materialise, the following options are possible:
- the Committee reports to the governing body that the Trigger can be neglected;
- the Committee reports to the governing body that preventive measures should be taken; however, the risk that a company will be unviable is minimum;
- the Committee reports to the governing body that preventive measures should be taken; however, the risk that a Threshold will be met is medium, and that constant monitoring of the situation by the Committee is required;
- when the risk dropped from medium to minimum or neglectable level, the Committee may decide to stop monitoring the situation;
- when the risk increased medium to high, the Committee must report to the governing body and transfer responsibility for monitoring the situation to the governing body.
- the Committee reports to the governing body that the risk to reach a Threshold is high and that it is now responsible for monitoring the situation;
- the Committee reports to the governing body that a certain Threshold will be reached inevitably, and it must a soon as possible make a decision wind down and approve the final action plan.
Don’t worry if at this point you are confused by the Wind-down Committee’s role, Thresholds, Scenarios, Triggers and Recovery Options. You will find more explanations and examples later in this article
Explanations on how to identify Thresholds, Scenarios, Triggers and Recovery Options and fill in the FCA wind down plan template
To identify relevant Thresholds, Scenarios, and Recovery Options for your business, you should think about critical income streams and business lines, what are the most vulnerable aspects of your business and where lie the most significant risks, what risk appetite and risk thresholds are set up in your risk management framework. You should think about any critical dependencies on third-party service providers and/or group members. A good starting point is reviewing your policies and procedures, audit reports, and compliance reports one more time. Such an approach will allow you to ensure that the wind down plan corresponds with your internal risk management framework.
You have to set precise qualitative and quantitative Triggers and Thresholds in your wind down plan. Additionally, a Trigger is a point between a moment when everything could be potentially fixed and the point of no return, you should base your quantitative and qualitative criteria on your risk appetite. You should find the right balance between Triggers that will indicate that the situation is severe and wind down is inevitable, and Triggers that are not serious enough and will only increase the Wind down Committee’s workload.
There are no universal criteria that would allow you to establish with ease that the business should be wound down. However, there are certain indicators that will be relevant to all firms. They include among the other- the situations where the firm suffers financial losses with no signs of another capital injection or increase in profitability; loss of key clients without a realistic prospect of their replacement in good time; loss of critical infrastructure (e.g. essential IT systems) with no signs of a timely recovery, etc. You should think carefully before filling in the FCA wind down plan template.
The governing body, such as the board of directors, should be responsible for deciding to wind down. It is crucial to ensure that the decision is not postponed until it is too late. By having clear Thresholds, Scenarios, Recovery Options, and Triggers, the Wind-down Committee will be able to report the situation to the governing body as soon as possible. It will be able to identify that wind down is inevitable when a company has enough resources and liquidity to allow it to wind down in a solvent and orderly manner.
Once the Wind-down Committee reported to the governing body and a decision to wind down has been taken, the governing body shall be responsible for coordinating and directing the implementation of the wind down process and ensuring that there is prompt dissemination of information relevant for decision-making at the governing body level.
Based on this FCA wind down plan template, the decision-making flow should be the following.
Case Study. Threshold, Scenario, Triggers and Recovery Options and decision to wind-down in a real-world situation (dependency on Wirecard)
We want you to understand how to fill in our FCA wind down plan template. That is why below there is an example that can help you to see what the end result of wind down planning might be. Our example underlines that one of the most critical aspects of risk management is to see your company’s vulnerabilities and dependencies.
Let’s suppose that it is 2-nd January of 2019, and Risk Manager Joe had a task to draft a wind down plan based on our FCA wind down plan template for a B2B self-funded EMI PayTechCorp LTD. PayTech Corp specialises in transfer, card payment and acquiring services for SMEs.
After analysing regulatory requirements for EMIs, Joe realised that PayTechCorp’s business is unviable when it is unable to maintain ongoing capital requirements. Thus, he decided that one of the Thresholds applicable to PayTechCorp is the inability to maintain ongoing capital requirements for more than three consecutive days.
Joe started to think about various Scenarios that can make PayTechCorp unviable. His first idea was that dependency on one big client or industry might be a weakness of PayTechCorp. However, it appeared that PayTechCorp’s client base is quite diversified.
Then Joe decided to interview heads of departments and ask their opinion. After conducting interviews, Joe found one of the main PayTechCorp’s vulnerability. Such vulnerability was a significant dependency on Wirecard, a common weakness of many EMIs and PIs in 2019.
It appeared that PayTechCorp’s services and infrastructure, such as card acquiring, card issuing, payment account and IBAN, money transfers and currency exchange, e-commerce gateway (basically, its entire business) was built around Wirecard.
At this point, we want to split our case study into two scenarios.
Scenario 1 (good risk management framework and wind down planning)
Joe read this article and downloaded the FCA wind down plan template. He identified that in a Scenario where Wirecard shuts down its operations, PayTechCorp might reach the point where it will not be able to comply with its ongoing capital requirements. He drafted Third-party Risk Management Policy for PayTechCorp. He ensured that employees monitoring Wirecard would report to the Wind-down Committee if there were a Trigger ‘Serious concerns about the viability of Wirecard’s business.’
Moreover, from that time, PayTechCorp had an action plan to react to negative news relating to Wirecard and other third parties on which PayTechCorp critically depended.
Taking into consideration that Wirecard was a German public company that was well-respected and considered reliable, Joe decided not to advise PayTechCorp prioritise lowering dependency on Wirecard but rather to create a realistic action plan on how to lower it gradually.
After the article published by Financial Times on 30 January 2019 regarding the Singapore investigation of Wirecard and other FT articles that followed throughout 2019, PayTechCorp accelerated implementation of its plan to lower the dependency on Wirecard, and the Wind-down Committee appointed a person responsible for monitoring the situation with Wirecard and making regular reports to the Committee. The Wind-down Committee started to consider various Recovery Options, including urgent capital injections, in the case where Wirecard’s failure happens before the company can find another service provider.
When on 26 June 2020, the FCA forced Wirecard Card Solutions to halt all regulated activities, PayTechCorp has already switched a considerable part of its business to another service provider, and the situation with Wirecard did not affect it significantly. Even if the FCA ban had happened earlier, PayTechCorp would have been in control of the problem and could adequately assess its Recovery Options and avoid a disorderly wind down.
Scenario 2 (inadequate risk management framework and wind down planning)
In this Scenario, this article and the FCA wind down plan template were neglected. It was decided that Wirecard is too big to fail. Nobody was responsible for monitoring news about Wirecard, and no attention was paid to FT articles. Instead, PayTechCorp became focused on the development of new services and features rather than diversification of risks. It even took a loan to fund the development of a payment initiation service.
When in the middle of June, it became clear that the risk to lose Wirecard services was too high, the Recovery Option to switch to another service provider was not feasible. When the FCA ordered Wirecard to shut down its operations, our imaginary company PayTechCorp and real companies such Curve, Payoneer, Crypto.com, Anna Money, Pockit and dozens of other companies could not provide their card services, and customers could not reach funds stored in their accounts. As the FT notes, the FCA’s ban on Wirecard UK left vulnerable without access to food and basic necessities for several days.
If the ban had lasted longer, PayTechCorp could have reached the point when it could not comply with capital requirements and other regulatory requirements for a considerable amount of time. Even the capital injection option was not available for the company, as its only investor did not have enough cash at hand.
Luckily for PayTechCorp, the FCA’s ban was temporary; otherwise, it could have ended up with a messy and insolvent wind down. If PayTechCorp had set up correctly Triggers and had robust risk management, it would have reacted to the situation earlier and realised the necessity to diversify. It would have had enough time to move parts or the whole of the products and services to a different infrastructure.
Companies with a sufficient level of diversification escaped the Wirecard’s failure with minimal disruption and/or losses. In contrast, those that did not react in time suffered significant business disruption and customer portfolio contraction.
Part 3 of the FCA wind down plan template [Action plan]
To ensure that your company can be wound down smoothly, you should think beforehand about actions you will take to wind down. Thus, you should have an action plan drafted in a quiet time to be fully prepared during the time of distress.
The action plan you draft following our FCA wind down plan template is not a final action plan, as the governing body must update it after a decision to wind down the company was made. The governing body shall be responsible for drafting the Final Wind down Action Plan based on your wind down plan written following our instructions. This Final Wind down Action Plan will be based on a real-life situation.
IT resilience and data protection
We recommended having a section dedicated to the cybersecurity, data protection, and maintenance of your IT systems in accordance with our FCA wind down plan template, which is an example of how a well-thought-out plan should look like. When a company is in the process of shutting down its operations, its management has higher chances to forget about IT resilience, data protection, and record retention. Thus, such a company is more vulnerable to IT risks, including insider threats. To ensure a smooth winding-down process, you should indicate in your wind down plan the policies and procedures relating to IT security, data protection, and record-keeping processes that your company will follow during a wind down and outline how you will ensure that data security and integrity will be maintained during various wind down Scenarios.
Most likely, your data protection policy does not address the issue of data protection compliance in case of a wind down. You can either include this section in your data protection policy or your wind down plan, as explained in our FCA wind down plan template.
As you have already understood, the whole idea behind the FCA’s requirement to have a wind down plan is to ensure that consumers are protected under all scenarios and that businesses (including other financial services providers) that rely on you are not adversely affected. That is why our FCA wind down plan has Annexes dedicated specifically to impact analysis. Thus, to prepare a wind down an action plan, you should analyse how your decision to shut down operations and various scenarios will impact different types of your clients (e.g., consumers using transfer services or merchants using acquiring services) and partners (e.g., your distributors of e-money or payment agents).
We also recommend you to think about your landlord and all third-parties you have contracts with (in any case, you will have to communicate with them if you wind down your business). Additionally, it is advisable to consider beforehand how a wind down will impact other third parties such as creditors, investors, and software providers.
The result of your impact assessment can be surprising. Impact analysis also aims to forecast the potential cost of the wind down (e.g., you may find out that you have penalties for early cancellation of your contracts). When you think about the potential impact of a wind down decision, you should not forget to consider various Scenarios and Thresholds.
Not only does our FCA wind-down plan encourages you to identify critical dependencies to ensure that you determine various Scenarios leading to nonviability, but it encourages you to identify dependencies in the context of the wind down action plan. It is a good practice to identify third parties’ roles in the process (such as vendors, outsourcing arrangements, other actors in the payments chain) that the firm would need to work with to achieve a successful and orderly wind down.
Remediation actions for customers and market participants
This section of our FCA wind down plan template is dedicated to remediation actions you can take to ensure that your customers and market participants can secure the continuation of payment or e-money services they are receiving. You should think about all potential risks and obstacles and how to mitigate them. For example, in this Section, you may outline the importance of selling or transferring for free your customers and partners portfolio to another payment/e-money service provider and outline how you plan to help your customers and partners. It is important to outline beforehand what data about your customers (including market participants relying on you) you may share with their new service providers (upon agreement of your customers, of course). The faster you transfer your customers, the quicker you will be able to close your business.
To think about the remediation action is essential as even when regulated businesses will cease to exist its senior official’s reputation can last forever.
Returning clients’ funds
In this section of the FCA wind down plan template, you should explain how you will reconcile clients’ funds and how fast you can return client money and custody assets. This Section is not about drafting theoretical scenarios; it is about assessing your existing policies, procedures, and practices and amending them if it is clear that returning your clients’ funds will be a disorderly and/or slow process.
If you have different customer groups, you should clearly explain how those customer groups can be identified and the processes that would need to be followed to contact and repatriate those customers’ funds effectively.
You should consider what has to be done differently in the insolvent wind down scenario and think beforehand about interactions with insolvency practitioners. The utmost priority for the insolvency practitioner is to be able to identify the safeguarding accounts and reconcile their balances with the customers’ liabilities quickly and efficiently. In your wind down plan, you should clearly identify the safeguarding accounts, list them in priority order, and keep updating that list on a regular basis. You must identify those individuals who can access such safeguarding accounts and explain how the payment orders are initiated and authenticated by your personnel. Your objective is to assist the insolvency practitioner in the process of taking over the operations of the company safely and soundly, quickly and efficiently, while keeping in mind the utmost priority of returning customers’ funds as practically and rapidly as possible.
The FCA underlines the importance of thinking about complaints beforehand. You should implement adequate measures for client complaints handling during a wind down and post-wind down following the best practices established in DISP.
Cancellation of a Regulatory Permit
There are different rules, procedures, and timelines that apply to different authorisations. You should have an action plan explaining when and how it will be done and detailing each step of the cancellation of the authorisation. Note that sometimes it is not easy to cancel regulatory permission, and it may take a significant amount of time for some businesses.
Shutting down operations
In this Section of our FCA wind down plan template, you should explain step by step how you are planning to close your business. You should clarify whether you will stop onboarding new clients (as a general rule, you should) and how you are planning to terminate contracts, make employees redundant, close branches and subsidiaries (if any). You have to be as specific as you can and explain each step (e.g., the vacation of premises, sale of fixed assets, and even the procedure for monitoring cash flows and outflows). You should know how and when you are going to perform certain actions. For example, initially, you may not have a necessity to fire all employees, and you may choose to fire employees on those duties that become redundant, for example, sales and marketing departments.
Your decision to fire employees and terminate contracts should not affect your business’s ability to comply with its regulatory and other obligations. Also, you should think about how you will retain employees (e.g., by incentivising them financially). As a general rule, employees are motivated to leave a firm in the wind down process as soon as possible. Consider that in many circumstances top management of the company will quit preserving their careers from more reputational damages, and incentives may not work to retain them. Consider hiring outside regulatory compliance consultants to assist you in a solvent wind down scenario. They will most likely be very effective, impartial, and cost less than the top executives.
Identify senior or middle-level officers required to complete specific actions in your plan (e.g., ensuring IT systems are maintained and safeguarding bank accounts can be accessed), the number of employees and contractors required for each department during the wind down process, including timelines for their retention. You should not forget to identify IT systems, including third-party software that you are using, and assess how long you need them and how much it will cost to maintain them. If you have to develop a wind down plan for a firm that is a part of the group and/or has subsidiaries, all these factors should be considered on a group and subsidiary level.
Additionally, you should explain whether a sale of all or part of the business is a viable option that can be done quickly and efficiently. If it is an option, you should consider regulatory constraints relating to the sale of all or part of a regulated business and address them in your plan. You should also think about your customers’ migration to a new business owner and how it will be communicated to them.
The FCA wind down plan template has a section dedicated to communicating before and during wind down process, because it is vital to think about the announcement of your wind down decision. Whom will you contact? What channels will you use? You can compare it to a plan to announce a product/new feature launch. The communication plan should include the relevant updates on the website, communication to a wide range of stakeholders such as regulators, employees, customers, service providers, shareholders, bondholders, relevant industry associations and trade bodies, and the media.
It is absolutely crucial to update relevant stakeholders about your situation and the risk your wind down decision may have on them. Moreover, consider communication before the wind down decision. It may be relevant for you to communicate with specific stakeholders, including regulators, between the occurrence of a Trigger and a decision to wind down.
NOTE: you should think about the effect of your communication. Will it lead a “run” on your firm? Will it be sufficient to persuade the stakeholders that everything goes smoothly? You should think about the right timing and correct words in your communications.
It is a usual practice in business continuity and recovery planning to assess financial and non-financial resources needed to ensure business continuity and recovery from a disaster. You should you the same approach when you deal with the FCA wind down plan template. You should know how much money will be spent on IT resources, human resources, premises, and equipment that your business requires to perform an orderly wind down during all its phases.
An orderly wind down means that you should not become more susceptible to risks than usual. For example, you must have adequate resources to ensure your IT resilience and compliance with your AML/CTF obligations and other regulatory obligations.
Take into consideration that your resources may be limited. Financials will not be as usual in these challenging times. You should think about all potential outflows (e.g., extra costs to shut down the business, redundancy payments, retainer premiums for essential employees, consultant fees (e.g., fees for regulatory compliance, insolvency, tax specialists), pension funds deficit payments, termination, and breach of contract penalties), costs associated with returning customer funds. Moreover, your income streams may not be as stable as before a wind down and will eventually phase out completely.
This Section of our FCA wind down template should contain a month-by-month schedule of revenue and expenses in the wind down period for both solvent and insolvent scenarios.
Ensure that your financial projections are regularly updated, that those risk-sensitive projections are realistic, and consider the market environment. If the financial projections are outdated and inaccurate, they are of little help to manage the insolvency risk. The FCA has seen adverse outcomes driven by unrealistic projections that fail to consider changes in the market environment, the most apparent example clearly being the Covid-19 pandemic.
After completing previous Sections of our FCA wind down plan template, you are ready to create a general timeline of your anticipated wind down process. The starting point of the timeline should be the point when the wind down decision was taken. The endpoint of your general timeline should be the point when the regulatory permission is cancelled or the moment when the company is dissolved.
Make the timeline as illustrative as possible by using OmniPlan, MS Project, Monday Project Management Software, or any other software you are using.
Part 4 of our FCA Wind Plan Template [Review and Updates]
You should keep your Wind down Plan based on the FCA wind down plan templatee as a living document and review it at least once a year. You should consider changes in your business (e.g., new business lines, products, etc.) and market conditions (e.g., new technologies, offerings, etc.). Ongoing document maintenance is essential since your business processes change. Each time your Wind down Plan is updated, it should be approved by the governing body.
In addition to the review based on changes of circumstances, you should also review the plan to determine if any elements are missing or inconsistent and make subsequent amendments. Ideally, you should simulate a wind down situation annually or more often when the company encounters a critical situation. You also should keep a written record of discussion of the wind down planning exercise, reviews, simulation, and updates.
Download our free FCA wind down plan template
We bet you were looking for a wind down plan example. Luckily for you, our template has some examples. Fill in the form below to download the FCA wind down plan template. You will receive it by email. Do not hesitate to contact us in case you need assistance with completing it.
How PSP can help you
As you understand, planning for a wind down is not easy and requires a lot of effort. You may need help with drafting your plan or an additional set of eyes to review it to ensure that once the FCA audits you, you will be fine and, most importantly, be well-prepared in an unfortunate event of a wind down. We can also answer your questions and explain how to fill in our FCA wind down plan template.
The PSP Lab team wishes you success and hopes that you will never experience a wind down. If you need any support, we are here to help you!