Celebrated WWII leader, General George Patton, once said “Do not try to make circumstances fit your plans. Make plans that fit the circumstances.” Unfortunately, it’s advice that is not being fully heeded, according to the FCA’s latest thematic review on wind-down planning The FCA has concluded that “significant further work” is needed to ensure wind-down plans are credible and operable, and has urged all firms to ensure adequate procedures and resources (both financial and non-financial) are in place.

Perhaps it is in our nature to focus on proposals that envisage growth and success. A quick look on Amazon reveals over 80,000 books published to help would-be entrepreneurs hone their business plans. But it is arguably far more important to have a robust and comprehensive plan for the end of a business’s life. After all, a poor or inadequate approach to wind-down can lead to serious ramifications for owners, directors, lenders, creditors and customers. And whilst the FCA’s research was primarily focused on regulated firms’ wind-down plans in the midst of the pandemic (and their statutory obligation to hold adequate financial and non-financial resources, including liquidity), its conclusions apply to all businesses and owners who are seeking an orderly termination or cessation.

I would whole-heartedly echo the FCA’s key observations for good practice when it comes to liquidity for wind-down, namely: (1) Quantify – with prudence – the amount of liquidity that would be required to effect a wind-down in a non-stress environment; (2) Ring-fence that liquidity, ensuring it is kept separately from other existing liquidity requirements; (3) Implement adequate controls to ensure those funds remain segregated, so that they cannot be released without Board approval; and finally, (4) Ensure there is no right of set-off (for example, from a bank or creditor) against these segregated funds, so they cannot be used as collateral or security.

The FCA also notes that the best way to demonstrate that a plan is credible and operable is to test the outcomes for the benefit of the firm’s Board and the FCA. This is an area where experienced, expert third parties can really add value. Those experts can also help validate and confirm that any plans are proportionate to the nature, scale and complexity of the firm’s activities, and that group interdependencies have been fully considered. With their extensive experience of wind down situations, whether it be non-stress (solvent) or stressed (insolvent), Restructuring professionals are ideally placed to help prepare, review and challenge those plans.

Because – to quote another famous American leader, Benjamin Franklin, – by failing to prepare, you are preparing to fail.