Document ID: chunk:federal_register_of_legislation:F2016L01436:body:0:p4
Version: federal_register_of_legislation:F2016L01436
Segment Type: other
Provision Reference: 
Character Range: 8467–11491

group as defined in GPS 001;
'Level 2 Head' means:
(a)          where an ADI that is a member of a Level 2 group is not a subsidiary of an authorised banking NOHC or another ADI, that ADI;
(b)          where an ADI that is a member of a Level 2 group is a subsidiary of an authorised banking NOHC, that authorised banking NOHC; or
(c)          the parent entity of a Level 2 insurance group as defined in GPS 001.
10.         'Outsourcing' involves an APRA-regulated  institution, or an institution within a group that is not an APRA-regulated institution, entering into an arrangement with another party (including a related body corporate) to perform, on a continuing basis, a business activity that currently is, or could be, undertaken by the institution itself.
11.         For the purposes of this Prudential Standard, 'offshoring' means the outsourcing by an APRA-regulated institution of a material business activity associated with its Australian business to a service provider[5] (including a related body corporate) where the outsourced activity is to be conducted outside Australia. Offshoring includes arrangements where the service provider is incorporated in Australia, but the physical location of the outsourced activity is outside Australia. Offshoring does not include arrangements where the physical location of an outsourced activity is within Australia but the service provider is not incorporated in Australia.
12.         Where the international business of a group outsources activities to a service provider in its local jurisdiction, this does not constitute offshoring as defined in paragraph 11.

Materiality
13.         This Prudential Standard only applies to the outsourcing of a material business activity as defined in this Prudential Standard.
14.         A 'material business activity' is one that has the potential, if disrupted, to have a significant impact on the APRA-regulated institution's or group's business operations or its ability to manage risks effectively, having regard to such factors as:
(a)          the financial and operational impact and impact on reputation of a failure of the service provider to perform over a given period of time;
(b)          the cost of the outsourcing arrangement as a share of total costs;
(c)          the degree of difficulty, including the time taken, in finding an alternative service provider or bringing the business activity in-house;
(d)          the ability of the APRA-regulated institution or member of the group to meet regulatory requirements if there are problems with the service provider;
(e)          potential losses to the APRA-regulated institution's or group's customers and other affected parties in the event of a service provider failure; and
(f)           affiliation or other relationship between the APRA-regulated institution or group and the service provider.
15.         For the purposes of this Prudential Standard, the internal audit function and the risk management function are material business activities.