CPS 231 Outsourcing Guide for APRA Institutions

Best Practice Guide

Why is APRA interested in risk to businesses?

The failure of just one regulated institution can undermine the stability of the financial system. For that reason, APRA is obliged to maintain a low incidence of failure among the entities it regulates.

Of course, APRA can only do so much. Instead, it must compel the management and directors of those entities (most likely the Board of Directors) to ensure that their own institutions remain sound.

APRA primarily does so through the imposition of prudential standards. These standards largely involve risk and business continuity management. The reason they are put into place is to increase resilience to business disruption arising from internal and external events and reduce impact on business operations, reputation, profitability, depositors, policyholders, and other stakeholders.

Key standards address capital adequacy, liquidity, and governance to ensure that systemic risks (i.e., risks that would endanger the system as a whole) are properly managed.

Outsourcing falls under this rubric, as well. And so, in July 2016, APRA released Prudential Standard CPS 231 Outsourcing, to which the subsequent guide provides a primer.

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