As Australia’s CPS 230 regulation reshapes operational risk management across financial services, banks and insurers are finding that compliance is as much a testing and assurance challenge as it is a governance one.
With the Australian Prudential Regulation Authority (APRA) enforcing the standard since 1 July 2025, QA and software testing teams are now under sustained pressure to validate business continuity, third-party resilience, and system robustness through repeatable, data-driven tests that stand up to supervisory scrutiny.
“Although no one is starting from a zero base, the task ahead should not be underestimated,” stressed Rody Posthuma, Business Consulting Partner, Oceania at Ernst & Young (EY).
He pointed out that “APRA is raising the bar with more prescriptive operational risk management expectations, the need to develop a critical operations view and an uplift of third-party risk management practices.”
According to Posthuma, the standard required “significant progress in mapping end-to-end business processes by mid-2024, covering the crucial path to delivering critical operations,” with tolerance levels for those operations to be finalised “by the end of 2024.”
Now that CPS 230 is fully enforceable, those artefacts are no longer theoretical. QA testing, scenario simulation, and resilience validation are emerging as essential mechanisms for demonstrating that mapped processes and tolerance levels actually work under severe but plausible conditions.
APRA’s stance has been clear. Having run out of patience with slow compliance under earlier regimes such as CPS 234 on information security, the regulator has put the sector on notice.
As Posthuma explained, the intent was “to flag any concerns early and make course corrections,” leaving “six months for entities to gain confidence in their ability to routinely test the design and operating effectiveness of the internal controls for these critical operations and operational risks more broadly.”
That period has now passed, shifting the emphasis squarely onto execution, evidence, and repeatability.
For QA and testing professionals, this has translated into a move away from static assurance models toward continuous, operational resilience testing. Systems that once relied on periodic reviews must now support ongoing validation of failover mechanisms, data integrity, cyber-recovery, and dependency mapping.
From mid-2024 onward, APRA expected “detailed gap analysis against the requirements – identifying areas of challenge to implementation and putting in place actions to resolve these challenges.”
Now, in late 2025, those gaps are expected to be closed, tested, and demonstrable.
Regulatory shift
This regulatory shift is echoed by technology and data leaders working directly with regulated institutions.
Reflecting on CPS 230’s intent, Andy Milburn, Regional Director for APJ at Datadobi, has warned that the standard is “not just about ticking boxes, they are a chance to rethink how businesses approach operational continuity and resilience.”
Operational risk, if left unaddressed, can seriously disrupt core business processes, harm reputations, and threaten financial stability, he argues. CPS 230 places particular emphasis on rapid recovery and the ability to maintain continuity following incidents such as cyber-attacks or system failures.
“This isn’t just about IT. Organisations need to understand that operational resilience touches everything, from financial operations to human processes,” Milburn explained.
“Regulators are making it clear that pre-contract due diligence is no longer enough.”
– Andy Milburn
Leadership and governance are central to this shift. “The new regulations drive the impetus that the board, as the ultimately accountable party, is very much part of the compliance journey,” Posthuma wrote in a recent EY analysis.
“APRA is expecting boards to oversee operational risk management, approve impact tolerance levels and review the risks associated with a much broader cohort of material service providers.”
Milburn has observed a similar change under CPS 234, noting that board accountability is already altering behaviour. “We’re seeing boards stepping up in a way they haven’t before. Operational resilience is now recognised as a top-level business priority, not just an IT concern.”
EY’s findings show that while many Australian financial institutions had advanced CPS 230 programmes ahead of the deadline, QA, IT, and testing leaders are now increasingly embedded in cross-functional delivery and assurance teams.
“Given the cross-functional change required, a top-down approach is essential,” said Posthuma, stressing that institutions must extend their oversight “to include third and fourth parties.”
That extension remains one of the most demanding aspects of CPS 230 from a testing perspective. Since 1 July 2025, firms must be able to evidence that they understand and can verify the resilience of their most critical third- and fourth-party service providers.
This requires integrated vendor testing frameworks, shared data, and scenario testing that goes well beyond pre-contract checks.
“Regulators are making it clear that pre-contract due diligence is no longer enough,” Milburn said. “Companies need full lifecycle management of third-party relationships.”
Posthuma reinforced that message, describing third-party risk management as an enduring supervisory priority. “Third-party risk management has been, and will be, a regulatory focus for the foreseeable future,” he observed, adding that suppliers are “already pushing back on fourth-party requirements,” signalling that “a collaborative industry approach” may be needed.
Data resilience
Data resilience is also emerging as a practical constraint on recovery testing. Milburn highlighted the challenge of unstructured data sprawl, arguing that poor data visibility can undermine even well-designed recovery plans.
“Imagine walking into a library without any system for cataloguing books. That’s the data challenge most businesses face today,” he said. “You can’t protect or recover what you can’t find.”
Beyond initial compliance, both experts caution against viewing CPS 230 as a one-off exercise. Posthuma warned that it is not a “set-and-forget project.”
As institutions evolve through restructures, system changes, or new product launches, business process maps “will change,” requiring repeated testing and refinement.
Drawing on UK experience, he noted that “scenario testing in particular took much longer than institutions expected,” with early exercises often exposing weaknesses that forced firms “to reset and retest.”
For QA and software testing teams, that reality is redefining their role. CPS 230 is pulling resilience testing, third-party assurance, and operational risk validation directly into the software delivery lifecycle. What began as a regulatory obligation has become an ongoing discipline that blends testing, data management, governance, and accountability.
As Posthuma concluded, CPS 230 represents not just a compliance milestone but “a new organisational mindset about the boundaries of responsibility.”
For testing and assurance professionals across Australian financial services, it is now a live, enforceable standard: one that demands continuous proof that systems, suppliers, and people can withstand disruption across every digital layer of the organisation.
Why not become a QA Financial subscriber?
It’s entirely FREE
* Receive our weekly newsletter every Wednesday * Get priority invitations to our Forum events *
REGULATION & COMPLIANCE
Looking for more news on regulations and compliance requirements driving developments in software quality engineering at financial firms? Visit our dedicated Regulation & Compliance page here.
READ MORE
- Leapwork engineering head: Why test automation so often fails to deliver
- World Economic Forum warns financial sector must strengthen AI risk controls
- How Banca Progetto is hard-wiring quality into Italy’s digital banking space
- How Wealthsimple builds quality into the product, not around it
- Digital revamp puts spotlight on internal controls at China Construction Bank
WATCH NOW
QA FINANCIAL PODCASTS
Listen to Sudeepta Guchhait on Nasdaq’s new Mimic AI testing platform
QA Financial sits down with Sudeepta Guchhait, Senior Director of Product Framework & Quality Engineering at Nasdaq
——–
Listen to Wesley Scheffel and Robin Rain on Schroders’ DevOps strategy
We catch up with Wesley Scheffel, Head of Cloud Platform and Product Engineering at Schroders, and Robin Rain, Head of Cloud Platform Architecture
——–
Listen to Citi’s Jason Morris on Lightspeed and the future of continuous delivery
Jason Morris, Head of Developer Pipelines for Securities Markets and Banking at Citi, talks about Lightspeed
