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APRA's CPS 230 A look into the future of Australian Governance
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Five years ago I produced a video on the new Senior Manager Certification Regime in the UK and how I saw enhanced governance oversight at board and senior manager level coming to Australian financial services. https://youtu.be/DqXfbgXbQko?si=u5NdKI38WsQzNwJO
Well after becoming a subject matter specialist on the UK's SMCR frameworks its brilliant to see aspects of this being introduced into APRA's CPS 230 prudential standard from July 1st 2025 for APRA regulated financial services entities.
I personally feel that its only a matter of time before a lot of the key components of both frameworks above becomes the norm for financial planning organisations, however before widespread panic sets in, let me say that its pretty easy and cost effective to set these frameworks and monitoring systems up.
I thought it valuable to give you a bit of an understanding of APRA's CPS 230 and Importantly, how to prepare for this at board and senior manager level, and then have a look at the synergies to SMCR in the UK to demonstrate how easy it should be to develop the programs and frameworks to adequately discharge your regulatory obligations.
Add in a bit of FMEA and ISO 31000 into the equation and you have a comprehensive governance oversight framework in place.
Understanding APRA CPS 230 and Preparing for Compliance
APRA CPS 230 is a prudential standard aimed at ensuring that APRA-regulated entities are resilient to operational risks and disruptions. This standard, effective from July 1, 2025, consolidates requirements for operational risk management, business continuity planning, and service provider management. Here's a brief overview of what to look for in readiness for CPS 230, especially focusing on the key requirements for boards and senior managers.
Key Requirements for Boards and Senior Managers
Clear Roles and Responsibilities:
Operational Risk Management:
Service Provider Management:
Similarities to the UK SMCR Responsibilities
The Senior Managers and Certification Regime (SMCR) in the UK, overseen by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), shares several similarities with APRA CPS 230:
Accountability and Governance: Both CPS 230 and SMCR emphasize clear accountability and governance structures. Boards and senior managers are held accountable for operational risk management and compliance.
Roles and Responsibilities: Under both regimes, senior managers have clearly defined roles and responsibilities. They are responsible for implementing and maintaining effective risk management frameworks and ensuring compliance with regulatory requirements.
Operational Risk Management: Both CPS 230 and SMCR require entities to identify, assess, and manage operational risks. They emphasize the importance of maintaining critical operations and managing risks associated with third-party service providers
Business Continuity Planning: Both standards mandate the development and maintenance of a credible BCP to ensure the continuity of critical operations during disruptions
By understanding these key requirements and similarities, boards and senior managers can better prepare for CPS 230 compliance and ensure their organisations are resilient to operational risks and disruptions.
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