In the modern financial environment, regulatory compliance is a non-negotiable aspect of maintaining trust, stability, and operational efficiency. One such regulation in focus is the CPS 230 standard. Introduced by the Australian Prudential Regulation Authority (APRA), CPS 230 aims to ensure that regulated institutions employ a robust risk management system, one that meets compliance requirements with an adept, resilient stance.
In this piece, we delve into the essentials of CPS 230 compliance, elucidating the key facets of this crucial regulation.
A Harmonised Regulatory Framework
The bedrock of CPS 230 compliance is the development and enforcement of a holistic regulatory framework. This framework should be tailored to tackle operational risks, including resilience and managed service providers, effectively and should align proportionately with the institution’s size, overall business complexity, and business mix. Under the regulatory guidelines of CPS 230, this encompasses a well-sculpted management structure, comprehensive risk identification processes, evolving risk mitigation strategies and regular inspection of the operational risk management framework to ensure its continued efficacy.
Demarcated Accountability and Persistent Transparency
Transparency and accountability aspects should be the twin pillars supporting the arch of CPS 230 compliance. Institutions under this mandate are encouraged to foster a culture where responsibility for managing operational risks is clearly defined and allocated across management levels. Furthermore, such allocation should be corresponding with the roles, ensuring decision-makers at various levels are equipped to manage their respective operational risks effectively. This culture of accountability harmonises with and reinforces the stringent transparency norms under CPS 230, enabling firms to enhance their resilience further.
Defining Risk Tolerance and Developing Comprehensive Policy
The creation of an operational risk tolerance statement stands as an integral part of CPS 230 compliance. This declaration outlines the levels of risk the institution is willing to assume while strategising for growth and delivering on its purposes. Alongside this statement, a dynamic, comprehensive operational risk management framework, covering resilience and service provider management, operates as the overall guiding compass. Rooted in the principles of adaptability, this framework should reflect the evolving nature of the business environment, both internal and external.
Continual Monitoring and Regular Reporting
Continuous monitoring forms the centre of CPS 230 compliance, allowing institutions to track the efficacy of their operational risk management activities and rectify any discrepancies promptly. Regular generation and submission of reports to the Board and other relevant stakeholders ensures a participative and transparent approach in achieving compliance. Frequent reporting facilitates executive management’s access to current, precise data enabling strategic and proactive decision-making.
Cyclic Review and Progressive Improvement
Beyond regular compliance activities, CPS 230 mandates a thorough review and improvement mechanism. Institutions should undertake systematic audits to assess the effectiveness of their risk management frameworks, ensuring that every facet delivers its desired outcome and contributes to overall organisational resilience. Audit results should be shared with management and the Board, inciting organisation-wide involvement in the path to improved compliance.
Navigating the CPS 230 compliance journey could appear challenging, but with the right understanding and a comprehensive approach towards these key elements, such challenges can transform into opportunities. Expert guidance can assist you in bolstering your risk management approach, fostering a culture of transparency, and constructing a robust, resilient organisation.
At RiskLogic, our team of seasoned professionals are committed to helping organisations steer through the intricacies of CPS 230 compliance. We provide extensive consultancy services using an AI-powered SaaS solution to help develop, actualise, and review your operational risk management frameworks. Grounded in real-world experience and industry knowledge, our team ensures that our clients are not only ready to meet basic compliance requirements but are also prepared to navigate an ever-evolving landscape of risks adeptly.