The new cross-industry APRA CPS 230 regulations cast a wide net, encompassing not only cybersecurity and operational risk management but also delving into the intricate web of supply chains that underpin the operations of financial institutions. Let’s explore the far-reaching implications of APRA CPS 230 on supply chains and discuss strategies for navigating these regulatory waters.
The importance of supply chains
Supply chains are the lifeblood of financial institutions, ensuring seamless operations and uninterrupted service delivery. However, material service providers and their contractors can threaten business continuity and security. From technology vendors to third-party service providers, the integrity of the supply chain is paramount for maintaining operational efficiency and safeguarding against potential risks. Any disruption or compromise within the supply chain can have ripple effects, impacting the stability and reputation of financial institutions.
The implications of APRA CSP 230 on supply chains
With the advent of CPS 230, the focus on supply chain integrity has been further heightened. Financial institutions are now required to assess the cybersecurity risks posed by their suppliers and ensure that robust risk management frameworks are in place throughout the supply chain ecosystem. This shift in regulatory focus necessitates a deeper understanding of the interdependencies within the supply chain and proactive measures to mitigate associated risks and gain operational resilience.
The new standards will come into effect for financial institutions from 1 July 2025, and begin at the next contract renewal date for service providers, with 1 July 2026 being the latest this could occur. As the finalisation of CPS 230 looms, it is imperative to business continuity management that institutions undergo consultations with every level of their supply chain and make arrangements with service providers.
Strategies for ensuring APRA CPS 230 compliance in supply chains
Risk Management frameworks
A key implication of CPS 230 on supply chains is the need for enhanced due diligence and oversight. Financial institutions must thoroughly assess their suppliers, evaluating their cybersecurity practices and resilience to potential threats. These assessments include scrutinising suppliers' security measures, assessing their ability to detect and respond to cybersecurity incidents, and ensuring compliance with relevant regulatory requirements.
One element that also must be considered is the requirement for regulated entities to have a ‘fourth party management policy’. All APRA-regulated entities must prepare to be held liable for their third-party service providers' shortcomings and any subcontractors they have hired to work within the entity's supply chain. Providers should be willing and able to provide information on their subcontractors to ensure that the supply chain is strong.
Regulated entities should compile a list of suppliers and providers to identify any possible weak points and maximise service provider management before the implementation of APRA CPS 230.
Collaboration with partners
In addition to heightened due diligence, CPS 230 necessitates greater collaboration and transparency within the supply chain ecosystem.
In light of the changes, financial institutions are encouraged to work closely with their suppliers to foster a culture of collaboration and information sharing. These changes will affect the entire chain, and all elements and parties must work together to ensure the security of customer information and money.
This includes sharing insights and best practices, conducting joint risk assessments, and establishing clear lines of communication to facilitate rapid response to emerging threats. Financial institutions should consider building or restructuring internal teams that work with all levels of the supply chain so that they have regular and sustained communication lines. Through consultation with service providers, institutions can ensure they meet the new requirements across the supply chain and strengthen the management of operational risk.
Leveraging technology
From advanced analytics to real-time monitoring tools, technology can empower financial institutions to proactively identify and mitigate cybersecurity risks across the supply chain. By harnessing the power of automation and machine learning and correctly using artificial intelligence , financial institutions can streamline compliance processes, enhance threat detection capabilities, and improve overall resilience against cyber threats.
Identify opportunities or supply chain optimisation and compliance
In the lead-up to the implementation of APRA CPS 230, the motto for regulated entities should be ‘check, check and check again’. In this new regulatory landscape shaped by CPS 230, there will be plenty of opportunities to identify supply chain optimisation and compliance. By conducting comprehensive risk assessments and evaluating the effectiveness of existing controls, financial institutions can pinpoint areas for improvement within the supply chain ecosystem. This includes optimising vendor relationships, consolidating suppliers where feasible, and investing in technologies that enhance supply chain visibility and resilience.
Change can be achieved
APRA CPS 230 will have significant and wide-ranging impacts on supply chains within the financial sector. From heightened due diligence to greater collaboration and technological innovation, financial institutions must adapt and evolve to comply with the new regulatory requirements. By establishing robust risk management frameworks, fostering collaboration with supply chain partners, and leveraging technology for enhanced compliance and monitoring, financial institutions can confidently navigate the regulatory waters, ensuring the integrity and resilience of their supply chains.
For more on how automated solutions and AI can help your institution comply with new regulations, check out our APRA CPS 230 hub, or get in touch with us for a personalised demo.
