What is APRA CPS standard?

What is APRA CPS?

The Australian Prudential Regulation Authority (APRA) is the regulatory body responsible for supervising and regulating financial institutions in Australia. One of their key areas of focus is the establishment and maintenance of prudential standards that aim to ensure the sound operation of these institutions. APRA's prudential standard on Information Security Management, known as CPS 234, sets out the requirements for APRA-regulated entities to protect their information assets from security risks. It applies to all APRA-regulated entities, including banks, credit unions, private health insurers, and superannuation industries. CPS 234 requires senior management to take ultimate responsibility for information security and establishes key requirements relating to the management of material information security incidents, security capabilities, and controls, as well as business continuity planning. It also provides detailed guidance on third-party risk management and the appropriate security control assurance and testing. Overall, CPS 234 aims to enhance the resilience of the financial sector and protect against the potential consequences of security threats and vulnerabilities.

Overview of the prudential standard

The prudential standard, known as APRA CPS 234, is a regulatory requirement imposed by the Australian Prudential Regulation Authority (APRA). The purpose of this standard is to ensure that APRA-regulated entities have robust security controls in place to protect against information security incidents and operational risks.

The objectives of APRA CPS 234 are twofold. Firstly, it aims to ensure that APRA-regulated entities maintain an appropriate level of security capability commensurate with the size and complexity of their business operations. This includes implementing a comprehensive security control framework, conducting regular security control testing, and addressing any security control deficiencies or weaknesses. Secondly, the prudential standard aims to minimize the potential consequences of information security incidents through effective security incident management and response plans.

APRA CPS 234 applies to all APRA-regulated entities, including banks, credit unions, insurance companies, and superannuation funds. The scope of the standard covers both internal and external information security-related risks, as well as risks arising from material service providers. APRA-regulated entities are required to have a security policy framework in place, which includes various key requirements such as regular security control assurance, third party risk management, and business continuity planning.

To ensure compliance with the prudential standard, APRA-regulated entities are required to appoint a senior manager to oversee the operational risk management function. The entities are also expected to have a documented and board-approved information security policy, conduct periodic business impact assessments, and have plans in place to respond to and recover from severe disruptions. Failure to comply with the standard may result in regulatory action or penalties.

Regulatory requirements

Regulatory requirements play a crucial role in ensuring the stability and security of the financial industry. For APRA-regulated entities, compliance with these requirements is of utmost importance in maintaining the trust and confidence of stakeholders. APRA CPS 234 sets out the prudential standard for information security management, outlining the necessary measures that entities must take to protect sensitive data and mitigate the risks posed by cyber threats. These requirements encompass a wide range of areas, including internal and external information security risks, third-party risk management, business continuity planning, and security control frameworks. By adhering to these standards, APRA-regulated entities can enhance their operational resilience, minimize the potential consequences of security incidents, and uphold the standards expected in the financial industry.

The scope of APRA-regulated entities

APRA, the Australian Prudential Regulation Authority, is responsible for regulating and supervising various financial institutions in Australia. The scope of APRA-regulated entities is extensive and includes authorized deposit-taking institutions, general insurers, life insurers, friendly societies, private health insurers, reinsurance companies, and superannuation funds.

APRA regulations, such as CPS 234, CPG 234, and CPG 235, apply to all entities under APRA's authority, regardless of their industry. These regulations aim to ensure the sound operation of the financial system and protect the interests and funds of customers and policyholders.

Authorized deposit-taking institutions, which include banks, credit unions, and building societies, are subject to APRA's prudential standards and reporting requirements. General insurers and life insurers, on the other hand, must adhere to APRA regulations that govern their capital adequacy, solvency, and risk management practices.

Friendly societies, private health insurers, reinsurance companies, and superannuation funds also fall under APRA's supervision and must comply with applicable regulations. This includes ensuring effective governance, risk management frameworks, and compliance obligations.

Senior management responsibilities

In APRA CPS standards, senior management plays a crucial role in ensuring information security within an organization. They bear the responsibility of understanding and managing information security risks effectively.

One of the key aspects of senior management responsibilities is to have clearly defined roles and responsibilities in managing information security risks. This ensures that each member of the senior management team understands their specific obligations and can effectively contribute to the organization's overall information security posture. With clear roles and responsibilities, senior management can effectively coordinate and delegate tasks related to information security, ensuring that all aspects are covered and risks are adequately addressed.

Furthermore, senior management's understanding of their responsibilities in ensuring effective information security governance is of utmost importance. They need to comprehend the significance of information security and the potential consequences of inadequate security measures. It requires them to stay updated with industry standards and best practices, as well as to regularly assess and improve the organization's security controls, policies, and processes.

Key requirements and expectations

The APRA CPS 234 standard outlines key requirements and expectations for senior management of APRA-regulated entities in managing information security risks. These requirements aim to ensure that entities have robust security controls in place to protect against potential information security incidents and to maintain the resilience of their operations.

The key requirements outlined in APRA CPS 234 include:

1. Governance: Entities must have a comprehensive information security policy framework that is approved by the board. This framework should define the entity's approach to managing information security risks and set out clear responsibilities and accountabilities for senior management.
2. Information Security Capability: Entities should have an information security function that is adequately resourced and has the appropriate skills and expertise to design, implement, and maintain effective security controls. This function should also provide assurance on the effectiveness of these controls.
3. Third-party Risk Management: Entities must have a comprehensive service provider management policy that outlines how they assess and manage the risks associated with their material service providers. This includes conducting due diligence on service providers' information security capabilities and ensuring that contractual arrangements include appropriate security requirements and termination provisions.
4. Incident Management: Entities should have effective processes and procedures in place to respond to and manage information security incidents. This includes having clear incident response plans, conducting regular exercises to test these plans, and promptly notifying APRA of material information security incidents.
5. Testing and Assurance: Entities must have regular testing and assurance activities to verify the effectiveness of their information security controls. This includes conducting security control testing, vulnerability assessments, and penetration testing.
6. Board Reporting: Entities are expected to provide regular reporting to their boards on the effectiveness of their information security controls. This includes reporting on any material information security control deficiencies and their plans for addressing these deficiencies.

By adhering to these key requirements and expectations outlined in APRA CPS 234, APRA-regulated entities can enhance their operational resilience and effectively protect against information security risks.

Operational risk management

Operational risk management is a crucial aspect of any organization's risk management framework. It involves identifying, assessing, and mitigating risks that can arise from various operational activities and processes. Effective operational risk management ensures that an entity can anticipate and address potential disruptions before they occur, safeguarding the integrity and stability of its business operations. It encompasses various areas such as business continuity planning, information security, incident management, and third-party risk management. By implementing robust operational risk management practices, entities can minimize the likelihood and potential consequences of operational risks, protect their reputation, and maintain compliance with regulatory requirements.

Security controls and capability

APRA CPS 234 requires apra-regulated entities to have robust security controls and capabilities in place to effectively manage third-party risk. These controls are essential for protecting material information and ensuring the secure functioning of business operations.

To meet the requirements of CPS 234, organizations need to have a comprehensive and well-defined security policy framework that covers third-party risk management. This framework should include procedures for assessing the security capabilities of third parties, ongoing monitoring of security controls, and incident response plans for potential security incidents.

Regularly assessing the information security capability of third parties is crucial to ensure that they have the necessary controls and measures in place to protect material information. This assessment should include evaluating the security controls and processes implemented by third parties, as well as their security control testing and assurance activities.

Continuous monitoring of threats is equally important for effective third-party risk management. Organizations should actively monitor the Internet and dark web for cyber threats and vulnerabilities that may affect their third-party relationships. Additionally, they should regularly monitor public and private sources of reputational, sanctions, and financial information to mitigate any risks associated with third-party involvement.

Material service providers and business operations

Material service providers play a crucial role in the operations of APRA-regulated entities in relation to the APRA CPS standard. These service providers are external entities that provide significant services, infrastructure, or software that are critical for the functioning of an organization's business operations. They have direct access to the organization's systems and data, making them potential sources of operational risks and information security threats.

To ensure the security of the organization's information and protect against potential risks, APRA-regulated entities must assess the information security capability of these material service providers. This assessment involves evaluating the provider's security controls, processes, and measures that are in place to safeguard material information. It also includes assessing their ability to respond effectively to security incidents.

Furthermore, evaluating the design of information security controls implemented by these providers is important. APRA-regulated entities need to ensure that these controls align with their own security policy framework and meet the necessary standards. This evaluation helps to identify any potential control weaknesses and ensures that the providers have appropriate security measures in place.

Comprehensive service provider management policies are instrumental in addressing potential information security incidents and control weaknesses. These policies should outline the requirements and expectations for material service providers, including measures to monitor and mitigate risks, incident response procedures, and termination provisions. Such policies enable APRA-regulated entities to effectively manage the security capabilities of material service providers and ensure the integrity and confidentiality of their information.

Material information security incidents and control weaknesses

Material information security incidents and control weaknesses play a crucial role in the overall security and operations of APRA-regulated entities in compliance with the APRA CPS standard.

These incidents refer to any security breaches or unauthorized access to important information within the organization. Control weaknesses, on the other hand, pertain to vulnerabilities or gaps in the security measures designed to protect this information. Both incidents and weaknesses present significant risks to the integrity, confidentiality, and availability of material information.

The impact of these incidents and weaknesses on APRA-regulated entities is substantial. They can result in severe disruptions to business operations, financial loss, reputational damage, and non-compliance with regulatory requirements. Additionally, such incidents can compromise client data, leading to loss of trust and potential legal consequences.

To effectively manage and address these concerns, APRA-regulated entities must adhere to key requirements as laid out in the APRA CPS standard. These include implementing comprehensive security control measures, conducting regular risk assessments and control testing, developing robust incident response plans, and fostering a culture of security awareness and training. Furthermore, the standard emphasizes the importance of regularly reviewing and updating security policies and procedures to ensure they remain effective in the face of evolving threats.

By proactively managing and addressing material information security incidents and control weaknesses, APRA-regulated entities can safeguard their operations, protect the integrity of material information, and maintain compliance with regulatory obligations.

Comprehensive service provider management policy

The comprehensive service provider management policy is an essential aspect of the Australian Prudential Regulation Authority's (APRA) CPS 234 standard. CPS 234 provides prudential requirements for managing information security risks within APRA-regulated entities. The policy outlines the expectations and requirements for managing information security risks associated with service providers.

Under CPS 234, APRA-regulated entities are responsible for ensuring that service providers, including related parties and third parties, have appropriate controls in place to protect material information. This includes conducting due diligence when engaging with service providers, ensuring that contractual obligations and security expectations are clearly defined, and conducting regular assessments of service providers' information security control effectiveness.

APRA-regulated entities are also required to assess and monitor any information security control deficiencies identified in their service providers' operations. This includes regular testing of controls and reviewing the effectiveness of the control environment. Internal audit activities play a critical role in assessing the adequacy of controls and providing assurance on the effectiveness of information security measures.

Additionally, APRA-regulated entities must assess the business continuity plans of their outsourced service providers. This includes evaluating the service providers' preparedness to respond to and recover from material operational incidents and disruptions.

By implementing a comprehensive service provider management policy, APRA-regulated entities can effectively manage information security risks associated with their service providers and ensure the integrity and confidentiality of material information.

Business continuity planning for critical operations

According to APRA CPS 234, APRA-regulated entities are required to have a robust business continuity planning (BCP) framework in place for their critical operations. Critical operations refer to functions, systems, or processes that are essential for the entity to continue its business operations and fulfill its regulatory obligations.

The BCP for critical operations should include:

1. Identification and Classification: APRA-regulated entities must identify and classify their critical operations based on their importance and potential impact on the entity's ability to meet its obligations. This includes determining the maximum tolerable downtime for each critical operation.
2. BCP Development: The entity must develop detailed, documented business continuity plans for each critical operation. These plans should outline the strategies, procedures, and resources required to respond to disruptions and maintain or restore critical operations within the defined tolerable downtime.
3. Testing and Review: The BCPs for critical operations should be regularly tested, reviewed, and updated as necessary. This ensures their effectiveness and the entity's ability to execute the plans when needed. Testing should include scenarios that simulate various disruption events, such as natural disasters, cyber-attacks, or system failures.
4. Material Service Providers: APRA-regulated entities must ensure that all material service providers, including related parties and third parties, have appropriate BCPs in place for their services. The entity should assess the adequacy of the provider's BCP and evaluate their preparedness to respond to and recover from disruptions.

In the event of a disruption to a critical operation that exceeds the defined tolerable downtime, the APRA-regulated entity must promptly notify APRA. The notification should provide details about the disruption, its potential consequences, and the actions being taken to manage and resolve the situation.

By complying with the business continuity planning requirements outlined in APRA CPS 234, APRA-regulated entities can ensure the continuity of their critical operations and minimize the impact of disruptions on their business and customers.

Security policy for private health insurers, credit unions, and financial institutions

APRA CPS 234 sets out the prudential standard for information security management for APRA-regulated entities, including private health insurers, credit unions, and financial institutions. The standard outlines the key requirements and expectations for these entities to ensure that they have robust security policies in place.

Private health insurers, credit unions, and financial institutions must develop and maintain a comprehensive security policy that addresses the specific risks and challenges faced by their respective industries. The security policy should provide a framework for managing information security risks and protecting critical assets.

Key elements that these entities need to include in their security policies to ensure compliance with the standard include:

1. Business environment and risk assessment: The security policy should identify and assess the unique risks and threats faced by the entity based on its business operations and the data it handles. This includes considering the potential consequences of security incidents and the impact they may have on the entity and its customers.
2. Security control framework: The policy should outline the security controls and measures that will be implemented to mitigate identified risks. This includes establishing appropriate security controls and implementing security capabilities commensurate with the identified risks.
3. Security incident management: The policy should define the entity's approach to detecting, responding to, and managing security incidents. This includes establishing clear processes and responsibilities for reporting and addressing security incidents promptly.
4. Security capability: The policy should outline the entity's security capability, including the resources, processes, and controls in place to manage information security risks effectively. This includes ensuring that the entity has the necessary security controls, systems, and infrastructure to protect against security threats.

By incorporating these key elements into their security policies, private health insurers, credit unions, and financial institutions can ensure compliance with APRA CPS 234 and demonstrate their commitment to effective information security management.

APRA CPS 234 implementation guidance

To effectively address the requirements and expectations set out in APRA CPS 234, entities should follow the implementation guidance provided. This guidance offers detailed instructions on various aspects of information security management, including security control measures, security capability assessment, third-party risk management, and the development of security policies and response plans.

Implementing security control measures requires entities to identify and assess operational risks, determine the appropriate security controls, and implement security capabilities that align with those risks. This includes implementing security safeguards, such as access controls, encryption, and incident monitoring, to protect critical assets. Regular testing and evaluation of these controls should also be carried out to ensure ongoing effectiveness.

Assessing security capabilities involves evaluating the entity's existing security controls, processes, and resources to determine if they are adequate to manage information security risks. This assessment should consider factors such as the entity's size, complexity, and the nature of its business operations. Adjustments and enhancements may be necessary to ensure that the security capability is commensurate with the identified risks.

Managing third-party risk is crucial to ensure the overall security of the entity. This involves implementing a comprehensive service provider management policy that addresses the selection, monitoring, and termination of material service providers. Entities should conduct due diligence on potential providers, review contractual arrangements and termination provisions, and ensure that third parties adhere to the same security standards.

Developing security policies and response plans requires entities to establish a comprehensive and enforceable security policy framework. This framework should define the entity's approach to information security management and outline the roles, responsibilities, and processes for incident reporting and management. Regular reviews and updates should be conducted to ensure the policies remain effective and relevant.

By following the implementation guidance for APRA CPS 234, entities can effectively address the requirements and expectations set out in the prudential standard to enhance their information security posture and protect critical assets.