Banking, Insurance and Life Insurance (prudential standard) determination No. 1 of 2014 - Prudential Standard CPS 231 - Outsourcing
Assessment of outsourcing optionsAssessment of outsourcing options
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Assessment of outsourcing options
- A regulated institution must be able to demonstrate to APRA that, in assessing the options for outsourcing a material business activity to a ‘third-party’[7], it has:
(a) prepared a business case for outsourcing the material business activity;
(b) undertaken a tender or other selection process for service providers;
(c) undertaken a due diligence review of the chosen service provider;
(d) involved the Board, Board committee, or senior manager with delegated authority from the Board, in approving the agreement;
(e) considered all the matters outlined in paragraph 26, that must, at a minimum, be included in the outsourcing agreement itself;
(f) established procedures for monitoring performance under the outsourcing agreement on a continuing basis;
(g) addressed the renewal process for outsourcing agreements and how the renewal will be conducted; and
(h) developed contingency plans that would enable the outsourced business activity to be provided by an alternative service provider or brought in-house if required.
- A regulated institution must be able to demonstrate to APRA that, in assessing the options for outsourcing to related bodies corporate, it has taken into account:
(a) the changes to the risk profile of the business activity that arise from outsourcing the activity to a related body corporate and how this changed risk profile is addressed within the regulated institution’s risk management framework;
(b) that the related body corporate has the ability to conduct the business activity on an ongoing basis;
(c) the required monitoring procedures to ensure that the related body corporate is performing effectively and how potential inadequate performance would be addressed;
(d) contingency issues in accordance with Prudential Standard CPS 232 Business Continuity Management (CPS 232) should the outsourced activity need to be brought in-house; and
(e) the need to apply any of the requirements set out in paragraph 23 to the extent they are relevant to outsourcing agreements with related bodies corporate.