APRA Issues Final Guidance to Strengthen Operational Resilience

The Australian financial services industry is being pushed to significantly strengthen its defenses against operational disruptions and outsourcing risks under tough new rules from the prudential regulator.

The Australian Prudential Regulation Authority (APRA) has finalized comprehensive guidance aimed at forcing banks, insurers and superannuation funds to beef up their operational resilience and continuity planning.

The new Prudential Practice Guide CPG 230, released today, fleshes out APRA's heightened expectations for operational risk management that were outlined in its updated Prudential Standard CPS 230 last year.

While reaffirming its focus on protecting critical operations and managing third-party risks, APRA has made some concessions for smaller players in the final guidance. Non-significant financial institutions will get an extra year to implement certain requirements around business continuity planning and scenario analysis.

However, the overall thrust is to drive a major uplift in how the financial sector identifies and guards against disruptive operational incidents that can cripple their ability to deliver vital services.

The guidance prescribes more rigorous testing of critical operations, as well as comprehensive mapping and monitoring of key third-party service providers like cloud operators, custodians and other outsourcing partners.

APRA is demanding boards and executives take more accountability for operational resilience, with stringent requirements around risk appetite statements, audit practices and business continuity plans needing approval at the highest levels.

To assist the industry's implementation efforts, APRA has included a "day one" checklist and flagged a three-year roadmap outlining how it will embed the new standard through its supervision approach.

The changes take effect from July 2025, following industry consultation. APRA has indicated it will be vigorous in enforcing the new cross-industry benchmark for operational resilience.

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