How to Structure a Wind-Down Plan That Supports Solvent Exit

A Wind-Down Plan is not a compliance artefact. It is a test of whether your firm could actually stop regulated activity in an orderly way, pay what it owes, protect clients, and hand back permissions without causing harm. The FCA's WDPG makes this clear, and supervisors increasingly ask firms to prove the plan would work in practice, not just that it exists.

Start from the exit, not the trigger

Most weak plans start with early warning indicators and work forward. Strong plans start with the end state: permissions cancelled, clients transferred or paid out, staff exited, creditors settled, entity ready for dissolution or sale. Only once you have defined what solvent exit actually looks like for your business model can you work backwards to estimate time, cost, and resource.

This matters because the FCA's central question under WDPG is whether the firm has enough financial and non-financial resources to complete the wind-down without becoming insolvent mid-way. You cannot answer that without a concrete end state.

Quantify the wind-down period honestly

Firms consistently underestimate how long solvent exit takes. A plan that assumes 90 days is almost always wrong. For an asset manager with segregated mandates, client transition alone can take six to twelve months. For a payments firm, returning safeguarded funds and reconciling residual balances takes longer than most finance teams model.

Build a timeline that reflects: notice periods to clients, contractual termination terms with counterparties, system decommissioning, record retention obligations, run-off of complaints and claims, and the practical reality that your best people will leave early. Then stress it. If your plan still works when the wind-down takes 50% longer than base case, you have something defensible.

Model the cost base as it actually behaves

Wind-down costs do not decline linearly. Rent, technology contracts, audit, legal, insurance run-off, and retention payments for critical staff often rise as a proportion of a shrinking cost base. Regulatory fees continue. Professional advisers get more expensive, not less.

Build a month-by-month wind-down cost model that separates fixed, semi-variable, and ramp-down costs. Identify which contracts have break clauses, which do not, and what the exit cost is for each. The FCA will look for this granularity. A single annualised number is a red flag.

Define triggers that would actually be pulled

Trigger frameworks fail when they are set at levels no board would ever act on, or when they rely solely on lagging financial indicators. Good triggers combine: capital and liquidity thresholds above regulatory minima (so you exit solvent, not at the wire), leading indicators such as client outflows or revenue concentration loss, and qualitative triggers such as loss of a critical service provider or key person.

Each trigger should have a named owner, an escalation path, and a pre-agreed board decision point. Vague language such as "significant deterioration" is the single most common weakness in draft plans.

Address client assets and consumer harm explicitly

For firms holding client money, custody assets, or serving retail customers, the WDPG expects a specific plan for how harm is prevented during the wind-down. This includes communication strategy, complaint handling capacity as volumes spike, FOS exposure, and FSCS implications. Treat this as a standalone section, not a paragraph.

Governance: make the plan live

The plan should be owned by a named SMF, reviewed annually by the board with minuted challenge, and refreshed whenever the business model materially changes. Scenario testing should be documented. If your plan has not been updated since a strategic acquisition, a new product line, or a material outsourcing arrangement, it is already out of date.

The next decision

Before the next board cycle, ask one question: if we had to invoke this plan on Monday, would the executive team know what to do by Friday? If the honest answer is no, the plan needs work before the FCA asks to see it.

Frequently Asked Questions

How detailed should the financial model be?

Monthly cash flow across the full wind-down period, with separate lines for revenue run-off, cost base behaviour, one-off exit costs, and liquidity sources. Annual aggregates are not sufficient.

Does the FCA expect scenario analysis?

Yes. At minimum, an idiosyncratic scenario, a market-wide scenario, and a combined scenario. Each should test whether solvent exit remains achievable and identify where the plan breaks.

Who should own the Wind-Down Plan?

Typically the CFO or CRO, with board-level accountability through the Chair of Risk or Audit. Ownership should be explicit in SMCR responsibilities, not implied.

How often should it be refreshed?

Annually as a minimum, and immediately following material change: acquisitions, divestments, new permissions, major outsourcing, or significant changes in client composition.

What is the most common FCA challenge?

That the plan is theoretical. Supervisors push hard on whether assumptions have been tested, whether triggers would actually be acted on, and whether the firm has the operational capability to execute. Evidence of genuine rehearsal matters.