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AI solutions enable financial institutions to track regulatory requirements in real-time, ensuring that compliance obligations are met efficiently. Automated monitoring enhances operational risk management by detecting incidents early, preventing them from escalating into significant issues. Financial institutions must manage operational risks across business operations while ensuring business continuity management strategies align with prudential standard CPS 230. APRA expects regulated entities to maintain critical operations by integrating AI-powered monitoring tools that track risk management processes continuously. Implementing AI-driven solutions helps financial institutions enhance their operational resilience framework, support critical operations, and comply with legal or regulatory requirements in an evolving financial system.
Service provider arrangements, particularly those involving critical services and core technology services, require ongoing oversight to mitigate business disruptions. Financial institutions must strengthen risk management by identifying MSP’s and maintaining a material service provider register. Automation simplifies service provider management by evaluating minimum service levels, monitoring arrangements, and identifying potential financial impacts. APRA regulated entities must evaluate downstream service providers and non MSP’s to ensure compliance with prudential standard CPS 230. Automated third-party risk management enhances operational resilience by reducing reliance on manual processes and strengthening service provider management policies.
Digital risk mitigation strategies enable regulated entities to identify operations before they are affected by business disruptions. Predictive analytics play a vital role in operational risk management by assessing an entity’s operational risk profile and identifying material weaknesses. Financial institutions use predictive models to anticipate changes in tolerance levels, ensuring business continuity planning aligns with the operational resilience framework. Prudential standard CPS 230 requires financial institutions to conduct scenario analysis to prepare for severe disruptions and maintain critical business functions. By leveraging predictive analytics, financial institutions can manage operational risks proactively, reducing financial system vulnerabilities and supporting long-term compliance strategies.
Enterprises should align their compliance efforts with operational resilience to strengthen their overall risk management framework. Embedding compliance within business continuity management ensures that business disruptions do not impact critical operations. Prudential standard CPS 230 mandates that financial institutions integrate business continuity planning with material service provider arrangements to mitigate operational risks. Identifying MSP’s and maintaining a material service provider register enhances service provider management policies. Leveraging AI and predictive analytics enables financial institutions to develop strategies that proactively manage risks, strengthen service provider arrangements, and ensure compliance with legal or regulatory requirements across business operations.
Implementing a zero-trust security model and multi-factor authentication is crucial for safeguarding critical operations and defending financial institutions against cyber threats. Prudential standard CPS 230 requires financial institutions to strengthen operational risk management by implementing cybersecurity frameworks that align with business continuity planning. Regulated entities must maintain critical operations by developing strategies that prevent severe disruptions. Cyber resilience enhances service provider arrangements by ensuring that material service providers meet minimum service levels. Adhering to the financial accountability regime and implementing real-time threat monitoring can help financial institutions mitigate operational risk incidents and support compliance within the broader financial system.
Regulated entities increasingly rely on cloud-based solutions to enhance investment management and operational resilience. Financial institutions must conduct cloud security assessments to ensure compliance with prudential standard CPS 230 and maintain critical operations. Migrating to the cloud presents challenges in managing service providers. Financial institutions need to identify material service providers and evaluate the operational risks associated with these arrangements. Implementing strict tolerance levels and service provider management policies helps mitigate business disruptions. Integrating risk management into cloud transformation strategies ensures that financial institutions meet regulatory requirements while supporting critical services and business continuity within the financial system.
As financial institutions increase reliance on AI for risk management and compliance monitoring, regulatory frameworks will evolve to address emerging risks. Prudential standard CPS 230 emphasises operational resilience, and future regulations will likely introduce stricter guidelines for AI-driven compliance tools. AI governance is essential for ensuring the ethical use of AI and mitigating potential operational risks. Financial institutions must integrate ai governance into business continuity management, ensuring that automation supports critical business functions without introducing material weaknesses. As AI capabilities advance, regulated entities must align their risk management frameworks with new regulatory requirements to maintain compliance.
Traditional compliance models relying on periodic audits involving senior management are becoming obsolete. Financial institutions must transition to continuous compliance tracking to manage operational risks effectively. Prudential standard CPS 230 requires financial institutions to strengthen operational risk management by integrating compliance into business operations. Automated compliance solutions can monitor regulatory requirements in real time, reducing business disruptions and ensuring operational resilience. Financial institutions must assess their entity’s CPS 230 operational risk management profile, conduct scenario analysis, and strengthen continuity planning to meet evolving compliance obligations. Continuous compliance tracking will be essential in safeguarding the broader financial system from unforeseen regulatory risks.
To sustain compliance and operational resilience, financial institutions must enhance service provider management and strengthen oversight of material service providers. Prudential standard CPS 230 mandates that financial institutions maintain critical operations by improving business continuity management and refining service provider arrangements. AI-driven automation ensures compliance while reducing material weaknesses in risk management frameworks. Enterprises should proactively develop strategies to support critical operations and mitigate severe disruptions.
CPS 230 is a prudential standard introduced by the Australian Prudential Regulation Authority (APRA) to strengthen operational risk management, business continuity planning, and third-party risk management for APRA-regulated entities. It applies to financial institutions, including authorised deposit-taking institutions, insurers, and private health insurers, ensuring they maintain critical operations and mitigate operational risks in a rapidly evolving digital environment.
CPS 230 establishes key requirements for operational resilience, service provider management, and business continuity management. It mandates that financial institutions:
Implement strong operational risk management frameworks.
Identify and manage MSP’s.
Maintain a material service provider register.
Ensure service provider arrangements meet minimum service levels.
Conduct scenario analysis to assess potential business disruptions and risks.
CPS 230 replaces CPS 231 (Outsourcing) and CPS 232 (Business Continuity Management). The new framework expands the focus on third-party risk management, ensuring that financial institutions have a structured approach to material service provider arrangements and operational resilience across their business operations.
CPS 230 and DORA (Digital Operational Resilience Act) both focus on operational risk management but apply to different regions. CPS 230 is an APRA regulation focused on Australian financial institutions, while DORA is a European Union regulation targeting cyber resilience and ICT risk management. DORA has a stronger emphasis on cybersecurity frameworks, whereas CPS 230 focuses on business continuity, service provider management, and operational resilience frameworks.
To comply with CPS 230, organisations should:
Conduct a risk assessment to evaluate their operational risk profile.
Identify MSP’s and maintain a material service provider register.
Strengthen business continuity planning and test scenario analysis.
Enhance third-party risk management by improving service provider arrangements.
Implement AI-driven compliance monitoring to support critical operations.
