Banking, Insurance and Life Insurance (prudential standard) determination No. 1 of 2014 - Prudential Standard CPS 231 - Outsourcing
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Materiality
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This Prudential Standard only applies to the outsourcing of a material business activity as defined in this Prudential Standard.
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A ‘material business activity’ is one that has the potential, if disrupted, to have a significant impact on the regulated institution’s business operations or its ability to manage risks effectively, having regard to such factors as:
(a) the financial and operational impact and impact on reputation of a failure of the service provider to perform over a given period of time;
(b) the cost of the outsourcing arrangement as a share of total costs;
(c) the degree of difficulty, including the time taken, in finding an alternative service provider or bringing the business activity in-house;
(d) the ability of the regulated institution to meet regulatory requirements if there are problems with the service provider;
(e) potential losses to the regulated institution’s customers and other affected parties in the event of a service provider failure; and
(f) affiliation or other relationship between the regulated institution and the service provider.
- For the purposes of this Prudential Standard, the internal audit function is a material business activity.