CPS 230 Implementation: Your Guide to Compliance

Financial Services institutions are facing heightened operational risks that can affect business operations and impact resilience. In response to these challenges, the Australian Prudential Regulation Authority (APRA) introduced CPS 230, a new prudential standard aimed at improving the management of operational risks and improving business resilience within the financial sector. This blog provides an in-depth guide to APRA CPS 230 implementation to help an APRA-regulated entity understand its objectives, requirements, and key milestones to ensure compliance by 1^st July 2025.

What is CPS 230 and Who Does It Impact?

CPS 230 is a critical operational risk management framework developed by APRA, designed to strengthen the resilience of Australian financial services institutions. This prudential standard sets out requirements for entities to manage and mitigate operational risks, business disruptions, and third-party relationships – ensuring they have robust systems and processes in place to address any disruptions, failures, or crises that may arise.

The standard impacts a broad range of financial entities regulated by APRA, including banks, credit unions, insurers, superannuation funds, and other financial institutions. The aim and objective of CPS 230 is to ensure that these organisations can effectively manage operational risks related to critical operations, technology, and business disruptions that may negatively impact financial stability or undermine customer confidence.

What is CPS230 replacing?

Before CPS 230, APRA’s framework for CPS risk management relating to operational risk was largely governed by CPS 231 which was linked to outsourcing and wasn’t overly prescriptive about overall operational resilience. There was also CPS 232 which related to business continuity but was missing overall operational resilience requirements. CPS-230 introduces a more structured approach to managing critical operations, with a greater emphasis on business continuity, third-party risk, and overall resilience.

APRA CPS 230 guidance provides comprehensive approach to operational risk management addresses emerging risks, particularly concerning technological disruptions, cybersecurity threats, and increased dependence on third-party vendors.

CPS 230 Implementation Timeline and Key Milestones

Although CPS 230 was finalized by APRA back in 2023, the implementation has taken a phased approach to give organisations time to adjust their operations to align with the new requirements.

However, the hard deadline for implementation is 1 July 2025. By this date, regulated entities are expected to have risk management frameworks in place that align with the new standard and to have implemented comprehensive business continuity plans (BCPs) that safeguard against operational disruptions, including those related to cyber threats and third-party failures.

APRA CPS 230 requires ongoing compliance, and financial institutions must continuously assess and update their operational resilience strategies in line with emerging risks to remain compliant.

Key Considerations for CPS 230 Implementation

When looking to implement processes that align with CPS 230 requirements, organisations should consider the following areas:

1. Identify & Protect Critical Operations

A central component of CPS230 implementation is the identification and protection of critical operations to ensure they can continue in a crisis. Financial institutions must assess and prioritize their critical services, including core banking systems, payment platforms, and customer data systems to ensure they are protected against disruptions.

The goal of CPS 230 is to ensure that these critical operations can continue even in the face of major operational disruptions or cyber-attacks. Institutions will need to assess their critical operations and implement appropriate resilience measures & controls such as system backups, cybersecurity protocols, and incident response capabilities.

2. Third-Party Risk Management

As the financial services sector increasingly relies on a network of third-party vendors, and CPS 230 provides guidance on managing risks related to third-party relationships and service provider arrangements. To ensure compliance with CPS 230 requirements, firms should implement a best practice third-party risk management program. This involves building a vendor register, conducting regular vendor risk assessments, carrying out background checks & due diligence using third party risk intelligence providers, and monitoring performance against SLAs and KPIs. Firms must also ensure that their vendors and fourth parties have ample business continuity plans, meet any compliance requirements or standards required by the organisation, and have incident management processes and controls in place to ensure unexpected disruptions are resolved before their clients are impacted.

3. Business Continuity Planning

Under the prudential standard CPS 230, institutions are required to have detailed and comprehensive business continuity plans (BCPs) that encompass all critical functions. These plans must be regularly tested and updated to reflect emerging risks and technological developments. The aim is to ensure that financial institutions can continue to operate in the event of major disruptions such as natural disasters, cyber-attacks, or financial crises.

The standard stresses the need for effective recovery strategies, ensuring that institutions can quickly restore critical systems and services to minimise any potential losses or customer impact. CPS 230 implementation requires more than a written BCM plan, organisations must keep a business process log, perform business impact assessments, test their plans to identify gaps, and update plans regularly. They must also have clearly defined escalation routes and communication channels to ensure BCM plans can be activated quickly.

4. Operational Risk Frameworks and Governance

CPS 230 demands that financial institutions strengthen their existing operational risk frameworks and governance structures to align with the new requirements. For many organisations this means implementing a risk management software platform to ensure they have best practice risk management processes in place. Key processes include, maintaining an active risk register, performing regular risk assessments, implementing effective controls and testing them regularly, defining a risk appetite with Key Risk Indicators and monitoring risk levels on an ongoing basis.

Firms should also look to ensure that there is clear accountability and tolerance levels for risk and establish appropriate risk governance structures, such as risk committees, that have oversight over operational resilience matters. Institutions must also implement processes for identifying and mitigating operational risks – ensuring that key personnel, including the Chief Risk Officer (CRO) and senior management have a clear understanding of their roles and responsibilities in managing operational risks.

5. Upgrade Incident Management Processes

CPS 230 stipulates that organisations must have the ability to continue operations throughout unexpected disruptions and system downtime. Having a best-practice incident management process is essential to ensure incidents are logged, escalated and resolved in a timely manner.  

GRC software can provide a best-practice incident management solution. Employees can easily log incidents, potential hazards, and near misses via online forms. Each incident is escalated to the relevant stakeholder using predefined workflows. Case management workflows allow full documentation of the remediation process. This evidence of a best-practice incident management process provides proof to APRA that the organisation is proactively capturing and resolving incidents to prevent disruptions.

CPS 230 Implementation Roadmap: Steps and Best Practices

Implementing CPS 230 is no small task. Financial institutions will need to take several steps to ensure adequate compliance preparation in order to mitigate operational risks effectively and ensure long-term resilience. Here is a step-by-step guide and roadmap to CPS 230 implementation:

Step 1: Assess & Update Current Operational Risk Management Framework

As a starting point, financial institutions should conduct a review of their current operational risk management practices to identify any gaps between their current processes and the CPS 230 requirements to assess the impact of CPS 230 on their operations. For those that need to make improvements and adapt their operational risk framework, implementing a risk management platform is a great way for firms to implement best-practice risk management processes that meet CPS 230 requirements. These tools enable firms to set up an online risk register, automate the risk assessment process, implement controls, and carry out control testing. Firms can also use these tools to set KRIs, monitor risk levels against their risk appetite, report on risk, and implement remediating actions to reduce risk.  Using a risk management platform will also ensure accountability for risk – as each risk has a clear owner and escalation route. All these fundamental risk management processes will help firms to align their operations with CPS 230 requirements.

Step 2: Develop and Test Business Continuity Plans

Business continuity plans (BCPs) are essential for CPS 230 compliance. Institutions must ensure that their BCPs are comprehensive, cover all critical services, and include clear recovery strategies in case of operational disruptions. Regular testing of these plans is critical to ensure that they remain effective in mitigating risks.

Step 3: Implement Effective Third-Party Risk Management

Another one of the main CPS 230 critical operations involves implementing best-practice processes to manage third-party risk is another essential aspect of CPS 230 implementation. Institutions should establish clear processes for evaluating, onboarding, contractual arrangements, and managing third-party service providers, ensuring that they meet the same operational resilience standards as the financial institution itself. Firms should conduct regular vendor risk assessments and use risk intelligence sources to carry out background checks and monitor performance against SLAs and KPIs. Organisations should also ensure that vendors & material service providers have comprehensive business continuity management plans and incident response plans in place.

Step 4: Identify and Prioritize Critical Operations

Once best practice processes are implemented for risk management, business continuity and vendor risk, financial institutions must work to identify their critical operations and ensure that they are adequately protected. Risks to these processes should be added to the risk register, effective controls & policies should be implemented, and business continuity plans should be created. Regular testing and gap analysis should be carried out to ensure any new processes or emerging risks are continuously added and captured.

Step 5: Establish Governance and Risk Management Structures

CPS 230 requires that financial institutions have robust governance and risk management structures in place. Organisations should ensure that senior management, including the board of directors, have visibility into their operational risk profile and that clear responsibilities are assigned for managing these risks.

Step 6: Monitor and Report on CPS 230 Compliance

As part of CPS 230 compliance management, institutions should implement systems and processes that support them to monitor and report on their ongoing compliance with the standard. Firms can use GRC software to set up a CPS 230 compliance dashboard to help track key performance indicators (KPIs) and ensure that all relevant risk management, business continuity, and vendor risk processes are being followed.

Draft CPS 230 Guidance for APRA Regulated Entities

APRA has provided draft CPS 230 guidance to assist APRA-regulated entities in understanding the requirements and expectations of the standard. This guidance is an invaluable resource, providing practical examples and suggestions on how to implement the various provisions of the standard.

The draft guidance includes insights on governance structures, the management of operational risks, the implementation of controls, and the handling of third-party risks, and business continuity. Regulated entities should carefully review the CPS 230 guidance from APRA and integrate its recommendations into their GRC framework.

How You Should Begin the CPS 230 Compliance Process

The first step in the compliance journey is to familiarize your organisation with CPS 230 requirements. Financial institutions can then initiate the necessary amendments, implement changes to their governance structures, and ensure that appropriate resilience measures are in place for critical operations.

Working with external consultants or risk management software providers who specialize in CPS 230 compliance can help expedite the process and ensure that your organisation is on track to meet regulatory deadlines.

If you are currently using manual processes & resources like spreadsheets and emails to manage risk, business continuity, and vendor risk then you might want to implement a GRC platform. These tools offer best practice templates, frameworks, workflows and forms to enable firms to easily implement processes that align with CPS230 requirements.

These platforms can automate risk assessments & risk monitoring, provide a framework for best practice business continuity and incident reporting, and help institutions manage their third-party relationships. Firms can design a CPS 230 compliance dashboard in the platform to gain real-time insights into their risk management activities and make data-driven decisions to address emerging threats.

By proactively adopting CPS 230 guidance and implementing best practices, financial institutions can strengthen their operational risk management frameworks, improve business resilience, and ensure that they remain compliant with CPS 230 requirements.

Conclusion

The implementation of CPS 230 presents a significant opportunity for financial institutions to enhance their operational risk management and business continuity capabilities and safeguard their organisations from vendor risks. By understanding the requirements, adhering to the implementation timeline, and following the recommended best practices, organisations can ensure CPS 230 compliance and strengthen their ability to weather operational disruptions in an increasingly complex risk environment.

Check out our website or download our eBook for more information on how GRC software can support your organisation to structure processes in line with CPS 230 requirements.

If you are ready to start your CPS 230 software implementation journey, request a demo.