CPS 230 Demystified: What It Means for AI and Automation

ValiDATA AI
Aug 23
3 min read

If you’re working in a regulated industry in Australia, you’ve probably heard of CPS 230 — the Australian Prudential Regulation Authority’s (APRA) standard on operational risk management. But what does CPS 230 actually mean for businesses leaning into AI and automation? At ValiDATA AI, we help mid-sized organisations cut through the noise, so here’s a plain-English breakdown of how CPS 230 applies to your digital transformation journey — and why it matters.

What is CPS 230?

CPS 230 is APRA’s operational risk management standard. It requires regulated entities — banks, insurers, super funds — to strengthen governance, resilience, and accountability when it comes to critical operations.

In practice, it’s about three things:

Risk Management Frameworks – Clear structures for identifying and managing risks.
Operational Resilience – Ensuring your core services keep running even in a disruption.
Third-Party Arrangements – Strong oversight of service providers, including cloud and AI vendors.

Why CPS 230 Matters for AI and Automation

AI and automation are no longer “nice to have” — they’re embedded in financial services, health, and professional sectors. From underwriting decisions to automated claims processing, these tools can make or break customer trust.

CPS 230 doesn’t ban automation. Instead, it demands:

Transparency in how automated decisions are made.
Resilience in AI systems, ensuring they don’t fail during critical operations.
Accountability — boards and executives can’t outsource responsibility to “the algorithm.”

CPS 230 and AI Governance

AI governance is the bridge between automation and compliance. CPS 230 aligns neatly with frameworks like ISO 42001 (AI Management Systems) by insisting on risk-based controls.

Key governance actions include:

Documenting how AI decisions are made.
Regularly testing automated systems for bias, errors, or resilience gaps.
Keeping human oversight in high-impact processes.

This is what we call “light-touch governance” — balancing compliance with innovation.

The Automation Compliance Checklist (CPS 230 Edition)

If your business is deploying AI and automation under CPS 230, here’s a practical starting point:

1. Risk Identification

Map where AI and automation touch customer-facing or critical processes.
Identify failure points: downtime, bias, data leaks.

2. Resilience Testing

Stress test AI workflows against cyberattacks and data outages.
Run disaster recovery simulations involving automated systems.

3. Third-Party Oversight

Ensure contracts with AI vendors include CPS 230-aligned obligations.
Keep audit trails of vendor performance and compliance.

4. Board Accountability

Make CPS 230 a standing agenda item for governance committees.
Provide decision-makers with plain-English reporting on automation risks.

CPS 230 in Practice: A Financial Services Example

Imagine a mid-tier insurer automating claims approvals using AI. Under CPS 230, they would need to:

Validate that the AI model is resilient and unbiased.
Document decision pathways in case a regulator asks, “why was this claim denied?”
Maintain fallback processes in case the AI system fails during a cyber incident.

The goal isn’t to slow innovation — it’s to ensure resilient, explainable AI that regulators and customers can trust.

How ValiDATA AI Helps

At ValiDATA AI, we specialise in CPS 230-aligned governance for AI and automation. Our approach is:

Practical – No 200-page reports, just actionable steps.
On-the-ground – We work alongside your teams, not just from boardrooms.
Future-proof – Aligning CPS 230 with ISO 42001, so compliance becomes an enabler of innovation.

Discover how ValiDATA AI helps businesses streamline AI adoption while staying resilient and compliant: Explore our services.

FAQ Section

Q: Does CPS 230 stop businesses from using AI?

No. CPS 230 doesn’t restrict automation — it ensures risks are managed and systems are resilient.

Q: How does CPS 230 relate to ISO 42001?

They complement each other. CPS 230 sets the governance mandate, while ISO 42001 provides a framework for managing AI responsibly.

Q: What industries need to worry about CPS 230?

Primarily APRA-regulated sectors like banking, insurance, and superannuation. But its principles apply to any organisation deploying critical AI systems.

Q: What is “light-touch governance” in AI?

It’s compliance without bureaucracy — applying just enough oversight to keep AI safe, transparent, and resilient without killing innovation.

Conclusion

CPS 230 isn’t a roadblock to AI adoption — it’s a blueprint for doing it responsibly. By embedding risk management, resilience testing, and strong governance, organisations can turn compliance into a competitive advantage.

At ValiDATA AI, we simplify CPS 230 and help you unlock AI’s potential without losing sleep over compliance.

👉 Contact us today to see how we can support your journey.