The need for transparency and strong partnerships in an evolving regulatory landscape

Modern business ecosystems involve a complex web of outsourced provider relationships relied on for critical functions such as technology and operations. For regulated Financial Services companies, this reliance is coming under increasing regulatory scrutiny. Companies must not only understand the management of services and data by their service providers, but also ensure these are managed securely, resiliently and ethically. 

APRA’s regulations such as CPS 234 (Information Security), CPS 230 (Operational Risk Management), alongside the ATO's third party tax governance guide, and emerging considerations around Artificial Intelligence (AI) and Sustainability standards, emphasise a common theme: the need for deeper, more granular governance of third parties. This includes consideration of how these services are being delivered; whether they are secure and resilient and whether ethical considerations are part of the equation.

The landscape is challenging, and the maturity of Australian service providers to meet these heightened expectations varies significantly. Leading organisations are stepping up, making meaningful strides to provide greater transparency into their operations, controls and monitoring processes. But progress is uneven. While some providers are well-prepared, the broader industry needs to pick up the pace. Global outsourcing providers face an even steeper climb, juggling international regulations on cybersecurity, resilience, sustainability and AI — all while ensuring they meet the high standards expected in Australia. Meanwhile, many regulated companies, as consumers of these services, are still finding their footing. They’re yet to determine what outputs they need from third and even fourth-party providers.

This raises an essential question: How prepared are organisations and their service providers to collaborate and co-create the solutions needed to deliver the comfort and transparency regulators and customers demand?

For service providers, building a robust external reporting framework — one that showcases strong governance and controls to external stakeholders — requires strong foundations. While some regulatory requirements offer transitional periods, these windows are rapidly closing.

Development of significant regulatory obligations

Build transparency through collaboration

Transparency with your third and fourth-party service providers isn’t just a regulatory box to check — it’s a shared journey. Many regulated organisations are developing compliance strategies but haven’t yet initiated deep conversations with their service providers. To succeed, you’ll need to define clear service levels and consider co-developing dashboards and reporting that address requirements across resilience, AI and sustainability standards.

Your service providers are likely working with other clients who face similar regulatory challenges. By collaborating, you can align expectations, establish consistent reporting metrics and implement clear accountability measures. This approach builds trust, drives efficiency and creates a robust compliance ecosystem. 

Integrate and streamline your regulatory compliance response

Try not to consider each new regulation as a standalone hurdle. Instead, think of compliance requirements as pieces of a larger puzzle. Tackling them collectively can help you save time, reduce costs and improve outcomes.

For multinational organisations, a global compliance strategy can be especially effective. For example, aligning data protection policies with both Australia’s CPS 230 and CPS 234 ensures comprehensive security while minimising duplication. Similarly, linking new sustainability requirements with existing initiatives like data governance can streamline efforts and accelerate timelines by leveraging mature processes already in place.  

Sustainability extends beyond financial reporting, requiring a broader and more integrated approach to address risks and unlock opportunities. Organisations are encouraged to develop tailored methodologies and controls that align with sustainability priorities. Taking these steps not only addresses internal challenges but also prepares businesses for the growing expectations around mandatory assurance requirements.

As the reliance on third-party data continues to grow, ensuring its accuracy and reliability becomes a cornerstone of responsible decision-making. Establishing effective validation processes not only strengthens stakeholder trust but also equips organisations to navigate the increasing demand for transparency and ensuring the quality and reliability of their sustainability reporting to meet the assurance requirements effectively.

Proactive action in this space is more than compliance—it’s a strategic advantage. By preparing today, organisations can not only meet future regulatory requirements but also lead with confidence in a rapidly evolving sustainability landscape.