In 2013, the Australian Prudential Regulation Authority (APRA) introduced Prudential Practice Guide CPG 235, a comprehensive framework designed to enhance data risk management across the finance sector. This guide provides financial institutions with principles and best practices to safeguard data integrity, confidentiality, and availability.

This blog explores CPG 235, its key components, compliance requirements, and how implementing the framework can enhance data security standards at your organization. By understanding and implementing the principles of CPG 235, financial institutions can build a resilient data security framework that protects against cybersecurity incidents and enhances overall operational stability.

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What is CPG 235?

CPG 235 is a comprehensive data management framework created by the Australian Prudential Regulation Authority (APRA). The APRA oversees the financial services industry to ensure stability, efficiency, and effectiveness across Australia. Introduced in 2013, CPG 235 provides principles and strategies to ensure data quality, integrity, and security across the data lifecycle, from capture through disposal. The framework helps APRA-regulated institutions effectively manage data risk in their organization.

The primary objective of CPG 235 is to assist financial institutions, insurance companies, and superannuation funds in managing their data risks and ensuring that their data governance practices are robust and in line with business objectives and regulatory expectations.

Key components of CPG 235

APRA's CPG 235 is a crucial resource that provides extensive and detailed guidelines for managing data risk within regulated entities. This prudential practice guide (PPG) is essential for effectively addressing data risk within the regulated sector.

Key components of CPG 235 include:

  • Principles-based approach: Entities are encouraged to adopt high-level principles, including data validation, correction at the point of capture, and timely detection and reporting of data issues.
  • Data management framework: Organizations must establish strong frameworks with clearly defined roles and responsibilities for data offices, custodians, and owners to ensure thorough data governance.
  • Risk management throughout the data lifecycle: CPG 235 emphasizes managing data risk at every stage of the data lifecycle, using data lineage diagrams to track data from origination to disposal, implementing data controls and validations, and ensuring data is fit for its intended purpose.
  • Data quality and issue management: CPG 235 expects organizations to establish a data quality management framework to identify, resolve, and report data quality issues regularly, ensuring continuous improvement in data quality over time.
  • Ongoing compliance and assurance: CPG 235 mandates regular assessments of data risk management and compliance checks for regulatory and legal requirements (internal audits or independent functions may complete periodic reviews).

Who must comply with CPG 235?

APRA's CPG 235 applies to all institutions regulated by the Australian Prudential Regulation Authority. These entities are required to adopt and implement the principles and guidelines outlined in CPG 235 to ensure effective data risk management and regulatory compliance.

Organizations that must comply with CPG 235 include:

  • Authorized deposit-taking institutions (ADIs): Banks, building societies, and credit unions
  • General insurers: Companies providing various insurance products like property, motor vehicle, and liability insurance
  • Life insurers and friendly societies: Organizations offering life insurance, annuities, and other related services
  • Private health insurers: Companies that provide health insurance coverage
  • Superannuation entities: Organizations and trustees of superannuation funds that manage retirement savings

Penalties for non-compliance

Penalties for noncompliance with APRA's CPG 235 can result in various enforcement actions, depending on the severity and impact of the non-compliance. These penalties include:

  • Formal enforcement actions: APRA has the authority to issue enforceable undertakings, impose fines, and take legal action against non-compliant institutions. However, APRA typically reserves these actions for severe breaches or repeated noncompliance.
  • Infringement notices and financial penalties: APRA can issue infringement notices, which may include financial penalties, that serve as a formal recognition of a breach and require corrective measures
  • Increased supervision and reporting requirements: APRA may scrutinize noncompliant institutions more closely, including more frequent reporting requirements, detailed audits, and regular reviews, to ensure security teams implement corrective actions properly.
  • Reputational damage and operational restrictions: Noncompliance can result in reputational damage to customers, investors, and other stakeholders. Additionally, APRA may impose operational restrictions limiting an institution’s ability to conduct certain types of business until it achieves compliance. 

These penalties and actions ensure that regulated entities take data risk management seriously and comply with the guidelines outlined in CPG 235 to protect the integrity and stability of the financial system.

Strengthen your organization’s data security standards using CPG 235

Financial organizations must maintain strong data security standards, especially in today’s digital landscape, where data breaches and cyber threats are increasingly sophisticated. Implementing CPG 235 manages data risk and creates a robust foundation to enhance data security within an organization. Below are key steps to implement CPG 235, focusing on strengthening data security.

Establish a data risk management framework

Developing a robust data risk management framework is the cornerstone of effectively managing data security. This framework should be comprehensive and align seamlessly with the organization’s overall business, IT, and security strategies. Key elements of this framework include establishing a clearly defined budget, allocating necessary resources, and setting specific timeframes for implementation.

The framework should also detail the roles and responsibilities for managing security risks, ensuring each team member understands their part in maintaining data security. By integrating data risk management into the organization’s change management processes, companies can ensure that data security measures evolve alongside business changes, maintaining resilience against emerging threats.

Implement data governance principles

Adopting and implementing robust data governance principles is crucial for maintaining data integrity and security. Key principles include restricting data access to those who need it for specific business processes, automating data validation and cleansing processes where feasible, and establishing mechanisms for the timely detection and reporting of data issues.

Restricting data access ensures that sensitive information is only available to authorized personnel, reducing the risk of unauthorized access or data breaches. Automating data processes, such as validation and cleansing, helps maintain data accuracy and consistency, reducing the reliance on manual processes prone to errors. Additionally, establishing robust mechanisms for the timely detection and reporting of data issues allows organizations to address potential problems swiftly, minimizing their impact.

Manage data risk across the data lifecycle

Organizations must thoroughly understand and control data throughout their entire lifestyle to effectively manage data risks. The entire data lifecycle includes origination, processing, retention, and disposal. Utilizing data lineage diagrams is an effective way to track data flows and transformations from inception to disposal. These diagrams help identify manual touchpoints where data is most vulnerable and implement controls to mitigate risks at each stage.

By managing risks at each data lifecycle stage, organizations can ensure that data remains secure, accurate, and fit for purpose. This comprehensive risk management approach protects the organization from potential data breaches and ensures compliance with regulatory requirements.​

Ensure compliance and regular assessments

Organizations should establish a comprehensive compliance function that monitors and enforces adherence to data risk management policies and standards. This function involves conducting periodic internal and external audits to verify compliance and identify areas for improvement.

Additionally, organizations should implement an exemption policy to manage instances of non-compliance. The policy should outline the procedures for granting, reviewing, and monitoring exemptions, ensuring that compensating controls are in place to mitigate residual risks. Compliance personnel should establish regular management reviews and reporting mechanisms to track compliance statuses and address any emerging issues promptly.​

Develop data architecture and control environments

A robust data architecture and control environment are essential for effective data risk management. A well-defined data architecture clearly explains how data is captured, processed, retained, and disposed of. Comprehensive data architecture should include detailed metadata defining data characteristics such as definitions, descriptions, sources, usages, update mechanisms, and quality requirements. This metadata is a foundation for establishing data quality metrics and monitoring data integrity.

Organizations should design a control environment to ensure that data risk management policies and procedures are consistently applied. This process includes implementing access controls to restrict data access to authorized personnel, establishing data validation and cleansing processes at the point of capture, and automating data handling processes where feasible. Controls should also encompass data privacy and security measures, protecting sensitive data from unauthorized access and breaches.

Establish incident management and reporting

Proper incident management and reporting protocols can continuously improve organizations' data risk management practices.​ A robust incident management and reporting framework is critical for quickly identifying, responding to, and mitigating data-related incidents. This framework should include well-defined processes for detecting, investigating, resolving, and reporting data issues, ensuring security teams manage these issues efficiently and effectively.

Organizations should implement monitoring systems to detect data issues as early as possible and reporting mechanisms to ensure data incidents are documented and communicated to relevant stakeholders. Additionally, all personnel should follow regulatory requirements for reporting significant data breaches or incidents to ensure comprehensive compliance.

UpGuard protects the financial services industry from cyber risks

Financial organizations looking to secure their assets and protect themselves from third-party risk can benefit from UpGuard. Check out our webinar on mastering third-party risk in finance, featuring Greg Pollock, VP of Cyber Research at UpGuard, and Amy Voegeli, Senior Manager of Information Security at Morningstar. 

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