Overview
APRA CPS 231 sets out the requirements for the management of outsourcing arrangements by regulated entities in Australia. The standard aims to ensure that regulated entities maintain effective control over outsourced activities and manage associated risks appropriately, with a focus on maintaining operational resilience and protecting customer interests.
Key Requirements
- Board-Approved Outsourcing Policy: Comprehensive policy governing outsourcing arrangements, including risk assessment criteria, approval processes, and monitoring requirements
- Risk Assessment: Thorough evaluation of risks associated with outsourcing, including operational, financial, legal, and reputational risks
- Due Diligence: Detailed assessment of potential service providers, including their financial stability, technical capabilities, and compliance with relevant laws and regulations
- Contractual Safeguards: Appropriate contractual terms and conditions, including service level agreements, data protection requirements, and audit rights
- Business Continuity Planning: Robust plans for service disruption, including backup arrangements and disaster recovery procedures
- Ongoing Monitoring: Regular review of service provider performance, including compliance with contractual obligations and regulatory requirements
- Exit Strategy: Clear plans for transitioning services to alternative providers or bringing them back in-house if necessary
Applicability
APRA CPS 231 applies to:
- Authorized deposit-taking institutions (ADIs)
- General insurers and reinsurers
- Life insurers and friendly societies
- Superannuation entities and registrable superannuation entity licensees
- Private health insurers
Implementation Requirements
- Material Outsourcing Arrangements: Must be approved by the Board or its delegate
- Risk Management Framework: Must be established and maintained
- Service Provider Assessment: Must be conducted before entering into arrangements
- Contractual Documentation: Must be maintained and regularly reviewed
- Monitoring and Reporting: Must be conducted on an ongoing basis
Enforcement
The Australian Prudential Regulation Authority (APRA) enforces these requirements through:
- Regular supervision and assessment of regulated entities
- Review of outsourcing arrangements and risk management frameworks
- On-site inspections and audits
- Review of incident reports and compliance breaches
