Leadership Must Take the Helm: Board-Led Scenario Planning in Payment Institutions

The UK Financial Conduct Authority's multi-firm review of payment institutions (PIs) and e-money institutions (EMIs), published on 26 June 2025, delivers a stark message: while firms have made some progress in embedding elements such as stress testing and establishing risk appetites, overall risk management frameworks remain underdeveloped and are often not commensurate with the scale and complexity of firms’ activities.

The Delegation Trap: Why Leadership Cannot Step Back

There is a troubling pattern: financial planning has become a mechanical exercise, routinely delegated to enthusiastic junior staff. This abdication of responsibility represents a critical misunderstanding of what effective risk management demands. Financial planning, particularly scenario-based planning, requires the strategic insight, market experience, and decision-making authority that only senior leadership can provide.

Leadership teams and boards must engage before the planning process even begins. They alone possess the comprehensive view of strategic challenges, market dynamics, and organizational vulnerabilities that meaningful scenario planning requires. The scenarios regularly debated in boardrooms (e.g. market disruptions, regulatory changes, technological failures, liquidity crises) must form the foundation of financial planning exercises, not remain abstract discussions disconnected from operational reality.

From Boardroom Discussions to Actionable Scenarios

While firms have made progress in establishing risk appetites and implementing stress testing, these efforts remain superficial without active leadership involvement. This means moving beyond high-level risk registers to detailed financial modeling of specific crisis situations.

When leadership drives scenario planning, several critical elements emerge:

• Realistic worst-case scenarios that reflect genuine market conditions rather than theoretical extremes

• Resource assessments grounded in senior management's understanding of organizational capabilities

• Decision trees that anticipate the difficult choices only leadership can make during crises

• Trigger points that reflect board-level risk tolerance rather than arbitrary metrics

The Financial Planning-Business Continuity Nexus

The FCA particularly emphasizes that business continuity plans without accompanying financial plans are fundamentally incomplete. This disconnect often occurs because junior staff developing continuity plans lack the authority and perspective to integrate financial considerations. Senior leadership must ensure that every operational scenario has a corresponding financial dimension, answering critical questions: What will this cost? Where will funding come from? What trade-offs must we make?

Working Backwards from Crisis: A Leadership Imperative

The most effective approach to scenario planning involves leadership teams fully embracing worst-case financial planning. This isn't pessimism - it is strategic foresight with solid financial foundations. At DNYC Ltd, our strategy advisory supports boards and senior executives in developing these critical scenario-based frameworks, ensuring that leadership insights translate into actionable planning.

When boards and senior executives personally drive scenario-based financial planning, risk management transforms from a defensive necessity into a competitive advantage. DNYC works alongside leadership teams to facilitate this transformation, bringing structured methodologies and industry expertise to complement internal knowledge.

By planning for the worst while hoping for the best, engaged leadership creates the robust foundations that make catastrophic scenarios increasingly unlikely—turning thoughtful preparation into the ultimate risk mitigation strategy.