Preparing for APRA CPS 230

In the ever-evolving landscape of financial regulations, staying ahead of the curve is paramount. In the wake of high-profile operational risk failures and business disruptions, the need for robust risk management practices has never been more pronounced for Australian businesses at large.

The introduction of APRA’s Prudential Standard CPS 230 Operational Risk Management is pivotal for APRA-governed organisations. The upcoming changes outlined in the guideline signifies a greater focus on enhancing the overall business resilience of APRA regulated organisations.

The guideline provides a framework to strengthen operational risk management by addressing identified weaknesses in existing practices, improve business continuity planning to mitigate severe disruptions, and enhance third-party risk management.

As organisations brace for these changes, understanding the key provisions and preparing for implementation are critical steps in ensuring compliance and resilience.

What is CPS 230?

It is clear the updated CPS 230 introduces several significant changes for APRA-regulated entities. Firstly, it outlines the need for detailed requirements for operational risk governance and management, for a robust and comprehensive approach.

Secondly, there’s a notable emphasis on real-time understanding of operational risk profiles, highlighting the importance of staying proactive and vigilant.

Thirdly, senior management is now entrusted with end-to-end responsibility for operational risk, underlining the critical role leadership plays in risk management. In the draft CPS 230, APRA noted that one of its key objectives is to focus the Board on the importance of operational resilience through requiring the setting of tolerance levels for disruptions to critical operations.

Also, there’s a shift from a ‘recovery’ focus to operating through a crisis in real-time, reflecting the evolving nature of risk management practices. Additionally, there’s increased scrutiny on vendor relationships and agreements, underscoring the significance of third-party risk management.

What does CPS 230 replace?

The APRA CPS 230 will replace:

• Prudential Standard CPS 231 Outsourcing (CPS 231)
• Prudential Standard CPS 232 Business Continuity Management (CPS 232)
• Prudential Standard SPS 231 Outsourcing (SPS 231)
• Prudential Standard SPS 232 Business Continuity Management (SPS 232)
• Prudential Standard HPS 231 Outsourcing (HPS 231)

What is the timeline for CPS 230 to be implemented?

Source: Response paper – Operational Risk Management | APRA

Impact of CPS 230 on APRA governed organisations

The implications of CPS 230 for APRA-regulated entities and their boards, could be profound for some organisations.

To adhere to the guideline, at a high-level, organisations will need to:

• Develop and maintain risk management frameworks.
• Enhance board governance and set clear parameters to control operational risks.
• Improve existing business continuity management.
• Uplift agreements with service providers.

Preparing for CPS 230 implementation

As organisations gear up for CPS 230 implementation, several steps can facilitate a smooth transition and ensure compliance:

1. Assess current practices: Conduct a comprehensive assessment of existing operational risk management, business continuity planning, and third-party risk management practices. Identify gaps and areas for improvement in alignment with CPS 230 requirements.
2. Develop an implementation plan: Develop a detailed implementation plan outlining tasks, timelines, and responsibilities for achieving compliance with CPS 230. Allocate resources and establish clear communication channels to streamline the implementation process.
3. Engage with stakeholders: Foster collaboration and engagement with key stakeholders, including board members, senior management, and relevant departments. Ensure buy-in and alignment with CPS 230 objectives to facilitate a cohesive approach to compliance.
4. Conduct training and awareness programs: Conduct training sessions and awareness programs to educate employees on CPS 230 requirements, their roles, and responsibilities in compliance, and the importance of robust risk management practices.
5. Strengthen your vendor relationships: Uplift contracts with material service providers to meet CPS 230 requirements, and have clear service provider management policy in place.

How Interactive can help support your road to CPS 230 compliance?

Interactive’s tailored solutions are key to the overall resilience posture of our clients. Our suite of Business Continuity, Disaster Recovery, Cyber Security and Back-Up services, paired with our collaborative approach to engagement provides our customers with the expertise to proactively prepare for CPS 230 implementation, ensuring regulatory compliance and operational resilience.

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