Key points included:

• a three‑month implementation period, with up to five months for older agreements
• consumers who complain before the scheme starts will no longer be asked to opt out
• consumers can accept redress offers immediately rather than waiting for a final determination
• firms will not be required to use recorded delivery and may communicate via a range of channels.

While these measures may reduce some administrative friction, the scale of potential redress liabilities and the operational effort required to comply remain significant. For many motor finance providers, the proposed scheme represents a material event, one likely to reshape the firm’s financial outlook and prompt strategic recalibration.
In this context, now is the time for firms to undertake a comprehensive business health check. This proactive step will help firms understand their resilience, determine whether they can absorb scheme-related obligations and ensure directors are fulfilling their duties during heightened scrutiny.

Throughout the lifecycle of any business, periods of stability and growth are impacted by material events, be they regulatory, market-driven or internal factors. A business health check is a forward-looking assessment of a company’s capacity to continue operating, meet its financial obligations and remain sustainable over the longer term.

It’s not simply a financial review. A robust assessment considers liquidity, operational capability, regulatory compliance and strategic flexibility. Done properly, it provides an integrated view of a firm’s resilience in the face of uncertainty.

Ahead of the proposed scheme, a structured assessment offers multiple benefits:

• Risk mitigation: A health check helps identify stresses that could impact liquidity or financial performance. Early detection of vulnerabilities gives firms time to act, including proactive cash management and engaging with key stakeholders
• Data-driven decision making: A redress scheme will often reshape what “business as usual” looks like, at least in the short term. A health check provides insight into likely financial and operational impacts, helping management make informed decisions on matters such as staffing, systems and third-party support
• Strengthening stakeholder confidence: Boards, capital providers and the regulator expect clarity during periods of turbulence. A well-documented, objective assessment can help secure ongoing support, maintain confidence and demonstrate responsible governance
• Strategic realignment: Beyond short-term liquidity considerations, firms must assess whether their operating model remains viable. A health check provides a platform to reassess market positioning, resource allocation and long-term strategy

Given the potential scale of the FCA’s proposed scheme, firms should adopt a systematic approach:

1. Defne the scope & objectives

Clearly articulate the purpose of the assessment, that being to evaluate the financial and operational impact of the scheme on liquidity and longer-term performance.

2. Conduct stress testing

Model “severe but plausible” scenarios for potential redress liabilities and operational costs. Stress testing helps identify trigger points and areas where financial or operational strain may arise.

3. Analyse cash flow & liquidity

Liquidity is essential. Firms must assess whether they have sufficient cash to meet financial obligations as they fall due, including both immediate liquidity needs and longer-term cash flow projections over the life of the scheme

4. Evaluate operational requirements

The scheme will place significant demands on operations. Firms should determine whether current workflows, personnel and technology platforms can support the delivery of the scheme, or whether additional investment or third-party support will be required.

5. Assess regulatory compliance & readiness

With any form of regulatory intervention, ensuring alignment with the FCA’s expectations is essential to reducing the risk of future challenge. Firms should be considering internal audits, quality assurance frameworks and governance enhancements to reduce future regulatory risk

6. Identify contingency plans

If the assessment highlights viability concerns, management should identify mitigating options, such as capital injection, cost rationalisation or a restructuring exercise. Management should consolidate findings, capturing assumptions, risks and recommended actions. From a governance standpoint, it is essential that all key strategic, operational and financial decisions are well-documented.

The FCA’s proposed industry-wide redress scheme represents a pivotal moment for the motor finance sector. While the latest announcement offers further insight into the scheme’s design, the financial and operational burden on firms is likely to be significant.

Conducting a business health check now is not only prudent but essential. It enables firms to anticipate challenges, strengthen resilience and demonstrate strong governance. For directors, it is also a critical tool in meeting their statutory duties and safeguarding the long-term sustainability of the business during a period of industry turbulence.