Pressure-Testing Strategic Direction With Regulators Before You Commit

Start by deciding what you actually need to learn

Most validation exercises fail because they begin with stakeholder lists, not with the specific question that needs answering. Before you contact anyone, write down the two or three propositions in your strategy that, if wrong, would force a material rethink. Not the strategy in full. The load-bearing assumptions.

For a bank considering a non-bank acquisition, that might be: the PRA will accept our capital treatment, the FCA will not require a separate authorisation perimeter, and the Treasury Select Committee will not single us out. For an insurer entering a new product line, it might be a single question about conduct expectations under Consumer Duty.

If you cannot reduce the strategy to three falsifiable assumptions, you are not ready to test it. Go back and sharpen.

Build the soundings list from the decision, not the org chart

The instinct is to list every regulator, trade body and political contact. Resist it. For each assumption, identify the three to five people whose view actually determines the outcome. These are rarely the most senior names. They are the technical specialists, the policy leads, the heads of supervision team, the committee secretariats.

A good test: if this person said no, would the decision still happen? If yes, they are not on the critical path. Remove them.

Alongside the regulators, include two categories often missed. First, the former regulators now in advisory roles who shaped current thinking and still talk to their old colleagues. Second, the competitors or adjacent firms who have recently been through a similar conversation. Their scar tissue is the cheapest intelligence you will buy.

Run the conversations in the right order

Sequence matters more than people realise. Start with the periphery: ex-regulators, trade body policy leads, peer firms. These conversations let you refine the question, stress-test your framing, and learn the current vocabulary regulators are using. You will almost certainly discover your initial framing was slightly off.

Only then approach the regulators themselves, and do it through the correct channel. A supervisor meeting requested via your usual relationship manager carries different weight than a policy team conversation requested via a public affairs route. Pick deliberately. The wrong channel signals the wrong thing about your intent.

Keep the conversations short, specific and asymmetric: you are asking for reactions to a defined proposition, not pitching. The moment it sounds like a pitch, you stop getting useful signal.

Read the signals properly

This is where most exercises go wrong. Regulators rarely say no. They ask questions, raise considerations, note precedents. Senior people inside the firm hear this as encouragement. It usually is not.

Calibrate against these patterns:

• Genuine support sounds like specific procedural guidance. "You would want to engage X team early" is a green light.
• Polite skepticism sounds like repeated questions about a single area. If three different people probe the same point, that is the issue that will sink you.
• Real opposition sounds like references to precedent cases that went badly, or to the wider political context. When a regulator talks about "how this would look," they are telling you the answer.

Write up each conversation within 24 hours, separating what was said from what you inferred. Six weeks later you will not remember which was which, and the inferred parts are where bias accumulates.

Synthesise into a go, refine or stop decision

After ten to fifteen conversations, you should have enough to take a view. Force the synthesis into three buckets: assumptions confirmed, assumptions requiring modification, assumptions invalidated. If anything sits in the invalidated bucket, the strategy needs rework before any further investment, not a workaround.

The output should be a one-page note to the executive committee that states what was tested, who was consulted (anonymised if needed), what was learned, and what now changes. If your note reads as uniformly positive, you have done the exercise wrong. Real soundings always surface something uncomfortable.

The next decision

Before you start: write down the three load-bearing assumptions. If you cannot, the issue is not validation. It is strategic clarity. Fix that first.