Document ID: chunk:federal_register_of_legislation:F2012L02223:body:0:p3
Version: federal_register_of_legislation:F2012L02223
Segment Type: other
Provision Reference: 
Character Range: 5712–8937

problems with the service provider;

       (e)          potential losses to beneficiaries and other affected parties in the event of a service provider failure; and

       (f)           affiliation or other relationship between the RSE licensee and the service provider.

    10.         For the purposes of this Prudential Standard, the internal audit function is a material business activity.

The role of the Board and senior management
    11.         An RSE licensee must identify, assess, manage, mitigate and report on risks associated with outsourcing to meet its obligations to beneficiaries and protect the financial position of the RSE licensee, any of its RSEs or its connected entities.

    12.         An RSE licensee must have procedures to ensure that all its relevant business units are made aware of, and have processes and controls for monitoring compliance with, the outsourcing policy.

    13.         The Board is ultimately responsible for any outsourcing of a material business activity undertaken by an RSE licensee. Although outsourcing may result in the service provider having day-to-day managerial responsibility for a business activity, the RSE licensee is responsible for complying with all prudential requirements[7] and all other non-delegable legal obligations that relate to the outsourced business activity.

    14.         The Board must ensure that the RSE licensee's outsourcing risks and controls are taken into account as part of its overall risk management framework and when completing a risk management declaration required to be provided to APRA.[8]

Outsourcing policy
    15.         The Board must approve the RSE licensee's outsourcing policy, which must set out its approach to outsourcing of material business activities, including a detailed framework for managing all such outsourcing arrangements.

    16.         An RSE licensee's outsourcing policy must set out specific requirements in relation to outsourcing to associated entities.[9] The RSE licensee must also identify and address the risks arising from the arrangement and be able to demonstrate that the arrangement is conducted on an arm's length basis and in the best interests of beneficiaries.

    17.         An RSE licensee's outsourcing policy must set out the RSE licensee's approach to conflicts that may arise through outsourcing, including how all risks arising from such a conflict will be identified, monitored, managed and mitigated.[10]

    18.         An RSE licensee's outsourcing policy must set out specific requirements in relation to outsourcing to service providers conducting the material business activity outside Australia.

Assessment of outsourcing options
    19.         An RSE licensee must be able to demonstrate to APRA that, in assessing the options for outsourcing a material business activity and entering into an outsourcing agreement, it has:

       (a)          prepared a business case for outsourcing the material business activity;

       (b)          undertaken a tender or other selection process for selecting the service provider;

       (c)          undertaken a due diligence review of the chosen service provider, including the ability of