what is in a strategic business plan

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Why Is Strategic Planning Important?

• 06 Oct 2020

Do you know what your organization’s strategy is? How much time do you dedicate to developing that strategy each month?

If your answers are on the low side, you’re not alone. According to research from Bridges Business Consultancy , 48 percent of leaders spend less than one day per month discussing strategy.

It’s no wonder, then, that 48 percent of all organizations fail to meet at least half of their strategic targets. Before an organization can reap the rewards of its business strategy, planning must take place to ensure its strategy remains agile and executable .

Here’s a look at what strategic planning is and how it can benefit your organization.

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What Is Strategic Planning?

Strategic planning is the ongoing organizational process of using available knowledge to document a business's intended direction. This process is used to prioritize efforts, effectively allocate resources, align shareholders and employees on the organization’s goals, and ensure those goals are backed by data and sound reasoning.

It’s important to highlight that strategic planning is an ongoing process—not a one-time meeting. In the online course Disruptive Strategy , Harvard Business School Professor Clayton Christensen notes that in a study of HBS graduates who started businesses, 93 percent of those with successful strategies evolved and pivoted away from their original strategic plans.

“Most people think of strategy as an event, but that’s not the way the world works,” Christensen says. “When we run into unanticipated opportunities and threats, we have to respond. Sometimes we respond successfully; sometimes we don’t. But most strategies develop through this process. More often than not, the strategy that leads to success emerges through a process that’s at work 24/7 in almost every industry.”

Strategic planning requires time, effort, and continual reassessment. Given the proper attention, it can set your business on the right track. Here are three benefits of strategic planning.

Related: 4 Ways to Develop Your Strategic Thinking Skills

Benefits of Strategic Planning

1. create one, forward-focused vision.

Strategy touches every employee and serves as an actionable way to reach your company’s goals.

One significant benefit of strategic planning is that it creates a single, forward-focused vision that can align your company and its shareholders. By making everyone aware of your company’s goals, how and why those goals were chosen, and what they can do to help reach them, you can create an increased sense of responsibility throughout your organization.

This can also have trickle-down effects. For instance, if a manager isn’t clear on your organization’s strategy or the reasoning used to craft it, they could make decisions on a team level that counteract its efforts. With one vision to unite around, everyone at your organization can act with a broader strategy in mind.

2. Draw Attention to Biases and Flaws in Reasoning

The decisions you make come with inherent bias. Taking part in the strategic planning process forces you to examine and explain why you’re making each decision and back it up with data, projections, or case studies, thus combatting your cognitive biases.

A few examples of cognitive biases are:

• The recency effect: The tendency to select the option presented most recently because it’s fresh in your mind
• Occam’s razor bias: The tendency to assume the most obvious decision to be the best decision
• Inertia bias: The tendency to select options that allow you to think, feel, and act in familiar ways

One cognitive bias that may be more difficult to catch in the act is confirmation bias . When seeking to validate a particular viewpoint, it's the tendency to only pay attention to information that supports that viewpoint.

If you’re crafting a strategic plan for your organization and know which strategy you prefer, enlist others with differing views and opinions to help look for information that either proves or disproves the idea.

Combating biases in strategic decision-making requires effort and dedication from your entire team, and it can make your organization’s strategy that much stronger.

Related: 3 Group Decision-Making Techniques for Success

3. Track Progress Based on Strategic Goals

Having a strategic plan in place can enable you to track progress toward goals. When each department and team understands your company’s larger strategy, their progress can directly impact its success, creating a top-down approach to tracking key performance indicators (KPIs) .

By planning your company’s strategy and defining its goals, KPIs can be determined at the organizational level. These goals can then be extended to business units, departments, teams, and individuals. This ensures that every level of your organization is aligned and can positively impact your business’s KPIs and performance.

It’s important to remember that even though your strategy might be far-reaching and structured, it must remain agile. As Christensen asserts in Disruptive Strategy , a business’s strategy needs to evolve with the challenges and opportunities it encounters. Be prepared to pivot your KPIs as goals shift and communicate the reasons for change to your organization.

Improve Your Strategic Planning Skills

Strategic planning can benefit your organization’s vision, execution, and progress toward goals. If strategic planning is a skill you’d like to improve, online courses can provide the knowledge and techniques needed to lead your team and organization.

Strategy courses can range from primers on key concepts (such as Economics for Managers ), to deep-dives on strategy frameworks (such as Disruptive Strategy ), to coursework designed to help you strategize for a specific organizational goal (such as Sustainable Business Strategy ).

Learning how to craft an effective, compelling strategic plan can enable you to not only invest in your career but provide lasting value to your organization.

Do you want to formulate winning strategies for your organization? Explore our portfolio of online strategy courses and download the free flowchart to determine which is the best fit for you and your goals.

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What is Strategic Thinking?

Strategic thinking is simply an intentional and rational thought process that focuses on the analysis of critical factors and variables that will influence the long-term success of a business, a team, or an individual.

Strategic thinking includes careful and deliberate anticipation of threats and vulnerabilities to guard against and opportunities to pursue. Ultimately strategic thinking and analysis lead to a clear set of goals, plans, and new ideas required to survive and thrive in a competitive, changing environment. This sort of thinking must account for economic realities, market forces, and available resources.

Strategic thinking requires research, analytical thinking, innovation, problem-solving skills, communication and leadership skills, and decisiveness.

Why is Strategic Thinking Important?

The competitive landscape can change quickly for any organization. New trends may emerge quickly and require you to take advantage of them or fall behind. By incorporating everyday strategic thinking into your work and life routines, you will become more skilled at anticipating, forecasting, and capitalizing on opportunities.

On an individual level, thinking strategically allows you to make a greater contribution in your role, become more essential to your organization, and prove that you’re ready to control greater resources.

What is Strategic Thinking in Business?

During an organization’s annual strategic planning process, leaders often compile, analyze, and synthesize external and internal data and ideas to develop its strategic intent and build a strategic narrative. This document will guide the company into the future for a defined period of time. Leaders then choose and plan specific actions that will accomplish these strategic initiatives.

Businesses also need to schedule a time for strategic thinking and reviews throughout the year. Leadership teams should periodically examine their strategic initiatives to ensure execution is taking place, review, and sustain the effort across the organization.

What is Strategic Thinking in Leadership?

Business leaders and stakeholders use strategic thinking and analysis to decide what product mix they’ll offer, what competitive landscape to compete in (or not compete in), and how limited resources will be allocated such as time, employees, and capital. They must decide how to best structure enroll others to achieve important objectives and to avoid putting resources at unnecessary risk of loss.

What are the Components of Strategic Thinking?

If you’re working on your company’s strategy, you’ll need to engage in analysis, problem-solving, decision making, and leading through change.

As you create a strategic direction or plan, you’ll analyze:

• Business opportunities and vulnerabilities
• Feasible of each idea or risk
• The costs associated with each move you are considering
• The likelihood that various tactics will be effective
• Methods of aligning objectives with the overall plan
• The effects of competitors, suppliers, customers, and new substitutes might have on your strategic plans

As you discover obstacles during the planning process, you’ll problem-solve by:

• Gathering relevant information about the problem
• Clearly defining the problem from a strategic point of view
• Brainstorming possible solutions
• Imagining further challenges and how to overcome them
• Delegating assignments of various parts of this strategy to key associates

Strategic thinking requires agility and decisiveness in choosing a plan and sticking with it. However, you have to be aware of new, more promising opportunities. It is a balancing act between consistency and flexibility. You and your team will:

• Make sure decisions are well-informed by thorough research
• Choose objectives and accompanying metrics
• Prioritize objectives
• Follow a standard decision-making process
• Build consensus, when necessary

During strategic planning, you will need to communicate ideas to your staff and gather feedback from them. You’ll then utilize effective channels to communicate a compelling vision of the completed plan to all employees and keep them focused on their contribution to the plan.

How to Improve Strategic Thinking Skills

There are five steps to improving your strategic thinking skills:

1) Set aside time to reflect and plan for the future, identify trends, prioritize tasks, and determine where to allocate resources

2) Uncover your own biases so you can think more clearly about strategy

3) Listen to subject matter experts and opinion leaders in your organization to obtain higher quality information you can use in your strategic thinking

4) Learn to ask good questions to uncover better options and plans—questions such as “Is this idea from a credible source?” and “Is this idea logical?”

5) Explore all the consequences of different strategies and directions

Get more details by reading CMOE’s article, “5 Ways To Improve Your Strategic Thinking Skills Today.”

Books on Strategic Thinking

To develop strategic thinking on your own, consider studying the following books:

Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life : This strategy classic came out in 1991. It’s a great introduction to practical ideas for using good strategic plans to outmaneuver your competition.

Ahead of the Curve: CMOE’s research-based books and publications can help employees at all levels develop better strategic thinking skills and perform more like a leader.

How to Teach Strategic Thinking

Attending a quality workshop is a quick way to improve your strategic thinking skills or to help your employees develop them through strategic thinking exercises. Rather than simply discussing skills, the goal of instruction should be to help you immediately apply strategic thinking to your unique job role.

Strategic thinking is taught best when a workshop is led by experienced facilitators. They should give you feedback as you develop a plan that you can take back to your job and implement right away. Strategic thinking training will help you see how you can improve your organization.

The workshop should:

• Identify learning goals and desired outcomes
• Include pre-reading material of both classic and contemporary articles on strategy
• An opportunity to review, discuss, and clarify best practices, frameworks, and actionable tools and concepts.
• Simulations or learning labs that allow people to practice strategic thinking skills immediately
• Debrief and review simulation or learning lab results and highlights strategic success factors that work. Mistakes and failures are important to learn from and provide insights and discoveries.
• An accurate assessment of your unique mix of existing strategic thinking skills and areas where gaps exist.
• Support and provide guidance in creating a customized and strategic plan that you can immediately apply to your work.

As with any skill, you’ll improve at strategic thinking the more you practice it and the more experience you gain. It’s definitely worth the time and effort; importantly, strategic thinking distinguishes mediocre businesses and workers from those that excel.

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How to write an effective business plan in 11 steps (with workbook)

February 02, 2023 | 14 minute read

Writing a business plan is a powerful way to position your small business for success as you set out to meet your goals. Landmark studies suggest that business founders who write one are 16% more likely to build viable businesses than those who don’t and that entrepreneurs focused on high growth are 7% more likely to have written a business plan. 1 Even better, other research shows that owners who complete business plans are twice as likely to grow their business successfully or obtain capital compared with those who don’t. 2

The best time to write a business plan is typically after you have vetted and researched your business idea. (See How to start a business in 15 steps. ) If conditions change later, you can rewrite the plan, much like how your GPS reroutes you if there is traffic ahead. When you update your plan regularly, everyone on your team, including outside stakeholders such as investors, will know where you are headed.

What is a business plan?

Typically 15-20 pages long, a business plan is a document that explains what your business does, what you want to achieve in the business and the strategy you plan to use to get there. It details the opportunities you are going after, what resources you will need to achieve your goals and how you will define success.

Why are business plans important?

Business plans help you think through barriers and discover opportunities you may have recognized subconsciously but have not yet articulated. A business plan can also help you to attract potential lenders, investors and partners by providing them with evidence that your business has all of the ingredients necessary for success.

What questions should a business plan answer?

Your business plan should explain how your business will grow and succeed. A great plan will provide detailed answers to questions that a banker or investor will have before putting money into the business, such as:

• What products or services do you provide?
• Who is your target customer?
• What are the benefits of your product and service for customers?
• How much will you charge?
• What is the size of the market?
• What are your marketing plans?
• How much competition does the business face in penetrating that market?
• How much experience does the management team have in running businesses like it?
• How do you plan to measure success?
• What do you expect the business’s revenue, costs and profit to be for the first few years?
• How much will it cost to achieve the goals stated in the business plan?
• What is the long-term growth potential of the business? Is the business scalable?
• How will you enable investors to reap the rewards of backing the business? Do you plan to sell the business to a bigger company eventually or take it public as your “exit strategy”?

How to write a business plan in 11 steps

This step-by-step outline will make it easier to write an effective business plan, even if you’re managing the day-to-day demands of starting a new business. Creating a table of contents that lists key sections of the plan with page numbers will make it easy for readers to flip to the sections that interest them most.

• Use our editable workbook to capture notes and organize your thoughts as you review these critical steps. Note: To avoid losing your work, please remember to save this PDF to your desktop before you begin.

1. Executive summary

The executive summary is your opportunity to make a great first impression on investors and bankers. It should be just as engaging as the enthusiastic elevator pitch you might give if you bumped into a potential backer in an elevator.

In three to five paragraphs, you’ll want to explain what your business does, why it will succeed and where it will be in five years. The executive summary should include short descriptions of the following:

• Business concept. What will your business do?
• Goals and vision. What do you expect the business to achieve, both financially and for other key stakeholders, such as the community?
• Product or service. What does your product or service do — and how is it different from those of competitors?
• Target market. Who do you expect to buy your product or service?
• Marketing strategy. How will you tell people about your product or service?
• Current revenue and profits. If your business is pre-revenue, offer sales projections.
• Projected revenue and profits. Provide a realistic look at the next year, as well as the next three years, ideally.
• Financial resources needed. How much money do you need to borrow or raise to fund your plan?
• Management team. Who are the company’s leaders and what relevant experience will they contribute?

2. Business overview

Here is where you provide a brief history of the business and describe the product(s) or service(s) it offers. Make sure you describe the problem you are attempting to solve, for whom you will solve it (your customers) and how you will solve it. Be sure to describe your business model (such as direct-to-consumer sales through an online store) so readers can envision how you will make sales. Also mention your business structure (such as a sole proprietorship , general partnership, limited partnership or corporation) and why it is advantageous for the business. And be sure to provide context on the state of your industry and where your business will fit into it.

3. Business goals and vision

Explain what you hope to achieve in the business (your vision) as well as its mission and value proposition. Most founders judge success by the size to which they grow the business using measures such as revenue or number of employees. Your goals may not be solely financial. You may also wish to provide jobs or solve a societal problem. If that’s the case, mention those goals as well.

If you are seeking outside funding, explain why you need the money, how you will put it to work to grow the business and how you expect to achieve the goals you have set for the business. Also explain your exit strategy—that is, how you would enable investors to cash out, whether that means selling the business or taking it public.

4. Management and organization

Many investors say they bet on the team behind a business more than the business idea, trusting that talented and experienced people will be capable of bringing sound business concepts to life. With that in mind, make sure to provide short bios of the key members of your management team (including yourself) that emphasize the relevant experience each individual brings, along with their special talents and industry recognition. Many business plans include headshots of the management team with the bios.

Also describe more about how your organization will be structured. Your company may be a sole proprietorship, a limited liability company (LLC) or a corporation in one or more states.

If you will need to hire people for specific roles, this is the place to mention those plans. And if you will rely on outside consultants for certain roles — such as an outsourced CFO — be sure to make a note of it here. Outside backers want to know if you’ve anticipated the staffing you need.

5. Service or product line

A business will only succeed if it sells something people want or need to buy. As you describe the products or services you will offer, make sure to explain what benefits they will provide to your target customers, how they will differ from competing offerings and what the buying cycle will likely be so it is clear that you can actually sell what you are offering. If you have plans to protect your intellectual property through a copyright or patent filing, be sure to mention that. Also explain any research and development work that is underway to show investors the potential for additional revenue streams.

6. Market/industry analysis

Anyone interested in providing financial backing to your business will want to know how big your company can potentially grow so they have an idea of what kind of returns they can expect. In this section, you’ll be able to convey that by explaining to whom you will be selling and how much opportunity there is to reach them. Key details to include are market size; a strengths, weaknesses, opportunities and threats (SWOT) analysis ; a competitive analysis; and customer segmentation. Make it clear how you developed any projections you’ve made by citing interviews or research.

Also describe the current state of the industry. Where is there room for improvement? Are most companies using antiquated processes and technology? If your business is a local one, what is the market in your area like? Do most of the restaurants where you plan to open your café serve mediocre food? What will you do better?

In this section, also list competitors, including their names, websites and social media handles. Describe each source of competition and how your business will address it.

7. Sales and marketing

Explain how you will spread the word to potential customers about what you sell. Will you be using paid online search advertising, social media promotions, traditional direct mail, print advertising in local publications, sponsorship of a local radio or TV show, your own YouTube content or some other method entirely? List all of the methods you will use.

Make sure readers know exactly what the path to a sale will be and why that approach will resonate with customers in your ideal target markets as well as existing customer segments. If you have already begun using the methods you’ve outlined, include data on the results so readers know whether they have been effective.

8. Financials

In a new business, you may not have any past financial data or financial statements to include, but that doesn’t mean you have nothing to share. Preparing a budget and financial plan will help show investors or bankers that you have developed a clear understanding of the financial aspects of running your business. (The U.S. Small Business Administration (SBA) has prepared a guide you can use; SCORE , a nonprofit organization that partners with the SBA, offers a financial projections template to help you look ahead.) For an existing business, you will want to include income statements, profit and loss statements, cash flow statements and balance sheets, ideally going back three years.

Make a list of the specific steps you plan to take to achieve the financial results you have outlined. The steps are generally the most detailed for the first year, given that you may need to revise your plan later as you gather feedback from the marketplace.

Include interactive spreadsheets that contain a detailed financial analysis showing how much it costs your business to produce the goods and services you provide, the profits you will generate, any planned investments and the taxes you will pay. See our startup costs calculator to get started.

9. Financial projections

Creating a detailed sales forecast can help you get outside backers excited about supporting you. A sales forecast is typically a table or simple line graph that shows the projected sales of the company over time with monthly or quarterly details for the next 12 months and a broader projection as much as five years into the future. If you haven’t yet launched the company, turn to your market research to develop estimates. For more information, see “ How to create a sales forecast for your small business. ”

10. Funding request

If you are seeking outside financing such as a loan or equity investment, your potential backers will want to know how much money you need and how you will spend it. Describe the amount you are trying to raise, how you arrived at that number and what type of funding you are seeking (such as debt, equity or a combination of both). If you are contributing some of your own funds, it is worth noting this, as it shows that you have skin in the game.

11. Appendix

This should include any information and supporting documents that will help investors and bankers gain a greater understanding of the potential of your business. Depending on your industry, you might include local permits, licenses, deeds and other legal documents; professional certifications and licenses; media clips; information on patents and other intellectual property; key customer contracts and purchase orders; and other relevant documents.

Some business owners find it helpful to develop a list of key concepts, such as the names of the company’s products and industry terms. This can be helpful if you do business in an industry that may not be familiar to the readers of the business plan.

Tips for creating an effective business plan

Use clear, simple language. It’ll be easier to win people over if your plan is easy to read. Steer clear of industry jargon, and if you must use any phrases the average adult won’t know, be sure to define them.

Emphasize what makes your business unique. Investors and bankers want to know how you will solve a problem or gap in the marketplace differently from anyone else. Make sure you’re conveying your differentiating factors.

Nail the details. An ideal business plan will be detailed and accurate. Make sure that any financial projections you make are realistic and grounded in solid market research. (If you need help in making your calculations, you can get free advice at SCORE.) Seasoned bankers and investors will quickly spot numbers that are overly optimistic.

Take time to polish it. Your final version of the plan should be neat and professional with an attractive layout and copy that has been carefully proofread.

Include professional photos. High-quality shots of your product or place of business can help make it clear why your business stands out.

Updating an existing business plan

Some business owners in rapidly growing businesses update their business plan quarterly. Others do so every six months or every year. When you update your plan make sure you consider these three things:

• Are your goals still current? As you’ve tested your concept, your goals may have changed. The plan should reflect this.
• Have you revised any strategies in response to feedback from the marketplace? You may have found that your offerings resonated with a different customer segment than you expected or that your advertising plan didn’t work and you need to try a different approach. Given that investors will want to see a marketing and advertising plan that works, keeping this section current will ensure you are always ready to meet with one who shows interest.
• Have your staffing needs changed? If you set ambitious goals, you may need help from team members or outside consultants you did not anticipate when you first started the business. Take stock now so you can plan accordingly.

Final thoughts

Most business owners don’t follow their business plans exactly. But writing one will get you off to a much better start than simply opening your doors and hoping for the best, and it will be easier to analyze any aspects of your business that aren’t working later so you can course-correct. Ultimately, it may be one of the best investments you can make in the future of your business.

Business plan FAQs

What are common mistakes when writing a business plan.

The biggest mistake you can make when writing a business plan is creating one before the idea has been properly researched and tested. Not every idea is meant to become a business. Other common mistakes include:

• Not describing your management team in a way that is appealing to investors. Simply cutting and pasting someone’s professional bio into the management section won’t do the trick. You’ll want to highlight the credentials of each team member in a way that is relevant to this business.
• Failing to include financial projections — or including overly optimistic ones. Investors look at a lot of business plans and can tell quickly whether your numbers are accurate or pie in the sky. Have a good small business accountant review your numbers to make sure they are realistic.
• Lack of a clear exit strategy for investors. Investors may want the option to cash out eventually and would want to know how they can go about doing that.
• Slapdash presentation. Make sure to fact-check any industry statistics you cite and that any charts, graphs or images are carefully prepared and easy to read.

What are the different types of business plans?

There are a variety of styles of business plans. Here are three major types:

Traditional business plan. This is a formal document for pitching to investors based on the outline in this article. If your business is a complicated one, the plan may exceed the typical length and stretch to as many as 50 pages.

One-page business plan. This is a simplified version of a formal business plan designed to fit on one page. Typically, each section will be described in bullet points or in a chart format rather than in the narrative style of an executive summary. It can be helpful as a summary document to give to investors — or for internal use. Another variation on the one-page theme is the business model canvas .

Lean plan. This methodology for creating a business plan is ideal for a business that is evolving quickly. It is designed in a way that makes it easy to update on a regular basis. Lean business plans are usually about one page long. The SBA has provided an example of what this type of plan includes on its website.

Is the business plan for a nonprofit different from the plan for other business types?

Many elements of a business plan for a nonprofit are similar to those of a for-profit business. However, because the goal of a nonprofit is achieving its mission — rather than turning a profit — the business plan should emphasize its specific goals on that front and how it will achieve them. Many nonprofits set key performance indicators (KPIs) — numbers that they track to show they are moving the needle on their goals.

Nonprofits will generally emphasize their fundraising strategies in their business plans rather than sales strategies. The funds they raise are the lifeblood of the programs they run.

What is the difference between a business plan, a strategic plan and a marketing plan?

A strategic plan is different from the type of business plan you’ve read about here in that it emphasizes the long-term goals of the business and how your business will achieve them over the long run. A strong business plan can function as both a business plan and a strategic plan.

A marketing plan is different from a business plan in that it is focused on four main areas of the business: product (what you are selling and how you will differentiate it), price (how much your products or services will cost and why), promotion (how you will get your ideal customer to notice and buy what you are selling) and place (where you will sell your products). A thorough business plan may cover these topics, doing double duty as both a business plan and a marketing plan.

Explore more

Editable business plan workbook

Starting a new business

1 . Francis J. Green and Christian Hopp. “Research: Writing a Business Plan Makes Your Startup More Likely to Succeed.” HBR. July 14, 2017. Available online at https://hbr.org/2017/07/research-writing-a-business-plan-makes-your-startup-more-likely-to-succeed.

2 . CorpNet, “The Startup Business Plan: Why It’s Important and How You Can Create One,” June 29, 2022.

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• PRA 2024/25 Business Plan

Embedding competitiveness and growth

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The PRA's latest Business Plan , covering 2024/25, was published on 11 April. The programme of work is intended to maintain the resilience of the UK's banking and insurance sectors and deliver against the same four strategic priorities as last year. The key areas of focus, as expected, are financial and operational resilience, enforcement policies, and diversity and inclusion. Emerging risks called out include the financial risks of climate change, the impacts of artificial intelligence and machine learning, and digital money and innovation.  

There is nothing inherently new or surprising in the Business Plan for firms as it follows relatively soon after the 2024 supervisory priority letters for international banks , UK deposit takers and insurers . However, it is interesting to note the PRA's ongoing concerns about the potential impacts of NBFIs on financial stability and its continuing ambition to become a more dynamic and responsive regulator. 

Competitiveness and growth

This will be the first full year in which the PRA operates under the Financial Services and Markets Act (FSMA 2023), which expanded its rulemaking responsibilities and gave it a new secondary growth and competitiveness objective (the SGCO) in the UK. A significant portion of the plan considers how the PRA will balance the SGCO with its primary commitments to safety and soundness of the banking and insurance sectors. 

The following key initiatives underpin the PRA's work to promote UK competitiveness and growth:

• The 'Strong and Simple' (SDDT) regime  — simplifying regulatory requirements for smaller, non-systemic banks banks and building societies, in order to reduce compliance burdens without compromising on robust prudential standards.
• Reforms to bank ring-fencing  — following the independent Skeoch Review .
• The 'Solvency UK' reforms of insurance capital standards  — aiming to reduce bureaucracy in the regulatory regime, while allowing insurers to invest in a wider range of productive assets.
• Insurance special purpose vehicles (ISPVs)  — consulting on reforms to allow a wider range of transaction structures in the UK regime, improve the speed of the application process, and clarify expectations of UK insurers who cede risks to ISPVs.
• Improvements to the authorisation processes  — building on progress in improving the speed and efficiency of authorisations. Also, introducing a new 'mobilisation' regime to facilitate entry and expansion for new insurers from 31 December 2024. 

Strategic Priorities

The PRA's four strategic priorities (SPs) are to:

• Maintain and build on the safety and soundness of the banking and insurance sectors and ensure continuing resilience.
• Be at the forefront of identifying new and emerging risks, and developing international policy.
• Support competitive and dynamic markets, alongside facilitating international competitiveness and growth, in the sectors that it regulates.
• Run an inclusive, efficient, and modern regulator within the central bank.

SP1 — Maintain and build on the safety and soundness of the banking and insurance sectors and ensure continuing resilience.

Financial resilience priority areas for banks include:

• Basel 3.1  — implementation is due to start in 1 July 2025, with a transitional period of 4.5 years to 1 January 2030. This is in line with the previously communicated timeline. The second near-final policy statement, on the remaining elements of credit risk, the output floor and Pillar 3 disclosure and reporting requirements, will be published `in due course'.  The PRA expects both sets of near-final rules to be made final later in 2024, once the relevant parts of the Capital Requirements Regulation (CRR) have been revoked.
• Stress testing  — in 2024 the Bank of England (BoE) will carry out a desk-based exercise, supported by the PRA. The BoE and PRA will also review and update the framework for concurrent stress testing. Stress tests based on firm submissions will resume in 2025.
• Exposures to non-bank financial institutions (NBFI)  — particularly private equity financing and private credit — the PRA will look for further improvements in firms' ability to identify and assess correlations across financing activities with multiple clients. 
• Model risk management (MRM)  — banks are expected to embed and implement the expectations set out in SS1/23 which takes effect on 17 May 2024. The PRA will also focus on the `hybrid' approach to mortgage modelling, the IRB repair programme and continued assessment of the adequacy of post-model adjustments (PMAs).
• Liquidity risk management  — the PRA will follow up on how firms are responding to lessons learned from market events. It will continue its engagement on authorised firms' access to the BoE Sterling Monetary Framework and monitor closely how how firms consider changes in depositor behaviour and future changes in bank funding and liquidity conditions.
•   Credit risk management  — focus will be on the evolution of credit risk management practices, whether they can be `robust and adaptable' in changing conditions, whether there is appropriate consideration of downside and contagion risks, and firms' monitoring and planning for the impacts of customer refinancing. There will be a thematic review of smaller firms' credit risk management frameworks. The PRA will monitor changes to firms' business mix and credit exposures and exposures to vulnerable segments (e.g. cyclical sectors, key international portfolios, and traditionally higher-risk portfolios such as buy-to-let, credit cards, unsecured personal loans, small to medium-sized enterprises, leveraged lending, and commercial real estate). It will also continue to assess whether the policy framework for trading book risk management, controls, and culture is adequate, robust and accessible. 
• Capital  — the PRA will review its Pillar 2A methodologies once the Basel 3.1 rules are finalised and aims to consult on proposed changes in 2025.
• Securitisation regulation  — simultaneously with the FCA, the PRA will publish final rules to replace or modify the relevant firm-facing provisions in the Securitisation Regulation and related Technical Standards. It also intends to consult on draft PRA rules to replace firm-facing requirements, subject to HMT making the necessary legislation. 

Financial resilience focus areas for insurers include:

• Solvency UK implementation  — the PRA is consulting on how to transfer remaining Solvency II requirements from assimilated law into the PRA Rulebook. It will also streamline internal model and matching adjustment approval processes, supported by the establishment of dedicated, specialised teams, and publication of templates to facilitate firms' implementation of new requirements. 
• Matching adjustment (MA) reforms  — publication of final policy in June 2024. The bulk of the reform will take effect at end-June, with the remainder on 31 December 2024. This staggered approach is in response to insurers' concerns about ability to produce attestations in time for mid-year results. The PRA will also explore creating 'sandboxes' to allow for either self-certification or further expansion of MA-eligible assets.
• Single regulatory reporting insurance taxonomy  — this will be published in Q2 2024, followed by industry roundtables to support implementation by year end.
• Stress testing  — the next stress test will take place in 2025. This will be the first time that the PRA publishes the individual results of the largest annuity-writing firms and the first time an exploratory scenario will be included to assess exposure to the recapture of funded reinsurance contracts. In 2025, the PRA will run its first dynamic stress test for general insurers — details will be published in 2024.
• Cyber underwriting risk  — there will continue to be supervisory focus on cyber exposure. The PRA is monitoring the risk landscape, including contract uncertainty.
• Model drift  — in 2024, the PRA will address perceived systemic trends that may weaken the robustness of internal models across the market as a whole, and continue to address firm-level model drift.
• Funded reinsurance  — this continues to be a key policy and supervisory area of concern. In 2024, the PRA will finalise and implement its policy expectations. Assessing resilience of funded reinsurance arrangements is also part of the 2025 life insurance stress test.
• Impact of claims inflation  — the PRA will continue to monitor data throughout 2024 to assess if further work is needed.  Concerns remain around optimistic assumptions.
•   Liquidity risk management  — following market events, the PRA will develop liquidity reporting requirements for insurance firms most exposed to liquidity risk. 
• Credit risk management  — as insurers' exposure grows, the PRA will monitor how firms' credit risk management evolves as a result. Areas of focus are concentrations in exposure to internally valued and rated assets.

Other regulatory reforms:

• Operational risk and resilience  — the PRA will continue working with the FCA to assess firms' progress on their ability to deliver important business services within defined impact tolerances during severe but plausible scenarios (no later than March 2025).
• Critical third parties to the UK financial sector  — the PRA will continue working with other authorities to develop a final policy and oversight approach in 2024 on CP26/23 (Operational resilience: critical third parties to the UK financial sector).
• Review of enforcement policies  — following the principles of PS1/24 (Bank of England's approach to enforcement).
• Diversity and inclusion in PRA-regulated firms  — the PRA will continue industry engagement and provide a further update in due course.

 SP2 — Be at the forefront of identifying new and emerging risks, and developing international policy

The PRA will continue to use its horizon-scanning programme to focus on:

• International engagement and influencing regulatory standards — participating actively in bodies such as the BCBS, IAIS and FSB.
• Promoting supervisory co-operation  — via colleges and existing memoranda of understanding (MoUs).
• Overseas bank branches — consulting on targeted refinements to its approach to banks branching into the UK, reflecting lessons from the failure of SVB.
• Operational and cyber resilience  — continuing its work on the G7 Cyber Expert Group and other similar bodies.
• Managing the financial risks of climate change  — publishing thematic findings in 2024 on banks' processes to quantify the impact of climate risks on expected credit losses and commencing work to update SS3/19.
• Artificial intelligence and machine learning  — the third joint PRA/FCA survey on machine learning in UK financial services will be conducted in Q2 2024.
• International policy on digitalisation  and managing associated risks.
• Digital money and innovation  — continuing to work with HMT and the FCA on issues such as a regulatory regime for crypto-assets, and wholesale payments/ settlements and their interaction with retail payments.

SP3 — Support competitive and dynamic markets, alongside facilitating international competitiveness and growth (in the sectors that it regulates)

In addition to the areas mentioned above, the PRA will focus on developing proportionate and efficient prudential requirements including:

• Regulatory change  — embedding its approach to rulemaking, using its new powers under FSMA 2023 to repeal and replace assimilated law relating to financial services. 
• The Banking Data Review  — intended to reduce the burden on firms by focusing our data collection on the most useful and relevant information.
• Ease of exit  — the policy statement on solvent exit planning for insurers is expected in H2 2024.
• Remuneration reforms  — the PRA will consult on any changes in H2 2024.
• Changes to the Senior Managers & Certification Regime (SM&CR)  — consulting alongside HMT and the FCA on proposed changes in H1 2024.
• Improvements to the PRA Rulebook and Cost Benefit Analysis  (CBA) framework. 

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• Johnson & Johnson-stock
• News for Johnson & Johnson

Johnson & Johnson’s Strategic Settlement Plan Bolsters Buy Rating

TD Cowen analyst Josh Jennings maintained a Buy rating on Johnson & Johnson ( JNJ – Research Report ) on May 1 and set a price target of $195.00.

Josh Jennings has given his Buy rating due to a combination of factors concerning Johnson & Johnson’s strategic approach to resolving its ongoing legal issues. Central to this optimistic outlook is JNJ’s new plan to settle all current and future ovarian cancer talc claims. The company aims to distribute a present value of $6.475 billion over the next quarter-century to claimants. By negotiating directly with the claimants, rather than through plaintiff lawyers, JNJ is confident that this new strategy will be more successful than previous ones, alleviating the uncertainty that has been affecting the company’s stock.

Jennings’s conviction in his rating is further reinforced by JNJ’s expressed confidence in securing a favorable vote from at least 75% of claimants, which would allow for a “prepackaged” bankruptcy arrangement to be filed. This confidence is based on the belief that the financial settlement proposed is preferable for claimants compared to potential trial outcomes, where JNJ has historically prevailed in the majority of cases. Furthermore, the potential dismissal of claims based on the scientific scrutiny of plaintiffs’ experts during an upcoming Daubert hearing could also incentivize claimants to accept the settlement plan. With the solicitation period for the claimants’ votes already in motion, clarity on the outcome is expected by the end of the summer, potentially removing a significant legal overhang on JNJ’s stock.

In another report released on April 18, DZ BANK AG also maintained a Buy rating on the stock with a $176.00 price target.

Based on the recent corporate insider activity of 69 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of JNJ in relation to earlier this year.

TipRanks tracks over 100,000 company insiders, identifying the select few who excel in timing their transactions. By upgrading to TipRanks Premium, you will gain access to this exclusive data and discover crucial insights to guide your investment decisions. Begin your TipRanks Premium journey today.

Johnson & Johnson (JNJ) Company Description:

Johnson & Johnson provides healthcare products across three segments: Consumer, Pharmaceutical, and Medical Devices. The Consumer segment includes products used in the baby care, oral care, beauty, over-the-counter pharmaceutical, women’s health, and wound care markets. The Pharmaceutical segment focuses on therapeutic areas such as immunology, infectious diseases ad vaccines, neuroscience, oncology, cardiovascular and metabolism, and pulmonary hypertension. The Medical Devices segment offers products used in the orthopedic, surgery, cardiovascular, diabetes care, and eye health fields. The company was founded by Robert Wood Johnson I, James Wood Johnson and Edward Mead Johnson Sr. in 1886 and is headquartered in New Brunswick, NJ.

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