APRA’s latest Insight magazine contains a feature article on ADI Industry risks.

The article gives a statistical overview of the sector and identifies concerns external to the Australian economy.

With pressure on revenues in the current operating environment, APRA discusses risks associated with increasing efficiency such an increased use of outsourcing and offshoring arrangements and direct cost cutting through reductions in critical support functions. In particular APRA expresses concern that under-investment in risk management capabilities can leave ADIs more exposed to any future deterioration in economic conditions.

APRA specifically discusses outsourcing and technology risk:

Beyond entity-specific issues, the use across the industry of common vendors and common offshore locations creates concentration risks around certain service providers and countries.

From a technology risk perspective, APRA has observed a marked reduction in the number of high severity system outages. Nevertheless, serious outages still occur. Often the outages are avoidable and are the result of poor knowledge retention and a high reliance on third parties.

Bright Law can advise on outsourcing contracts and compliance with APRA’s standards.