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Financial Services

AI and cyber risk in a regulated environment.

​Financial services organisations are adopting AI to improve speed, scale and decision making across lending, fraud, claims and customer service. At the same time, APRA and ASIC expectations are tightening. The result is a growing gap between innovation and defensible governance.

AI, cyber risk and accountability under APRA and ASIC scrutiny

Financial services organisations are adopting AI across lending, fraud, claims, advice and customer engagement. At the same time, regulatory expectations are increasing. APRA is focused on operational resilience and risk management. ASIC is focused on conduct, consumer harm, fairness and accountability. Together, they require institutions to demonstrate control, not just capability.

AI is a conduct and governance issue

From an ASIC perspective, AI does not change legal responsibility. Decisions that affect customers must be lawful, fair, explainable and consistent with licence obligations, regardless of whether a human or a system makes them. Poorly governed AI creates conduct risk through bias, errors, misleading outcomes or inadequate disclosure.

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APRA expects AI‑related risks to be managed within broader operational risk and information security frameworks, including CPS 230 and CPS 234. In practice, this means boards must understand how AI supports decisions, how risks are controlled and how failures would be detected and escalated.

Cyber incidents create both prudential and conduct risk

Cyber security is no longer just a technical issue. A cyber incident can disrupt critical services, expose customer data and trigger breach reporting, remediation and enforcement action. APRA focuses on resilience, recovery and third‑party dependencies. ASIC focuses on customer impact, breach response, disclosure and whether reasonable steps were taken to prevent harm.
 

Firms are increasingly assessed on how prepared they are before an incident occurs, not how they explain themselves afterwards.

Third parties and AI vendors extend accountability

Cloud providers and AI vendors accelerate innovation but do not absorb regulatory responsibility. Under APRA expectations, institutions must manage service provider risk and maintain continuity of critical operations. Under ASIC expectations, institutions remain accountable for consumer outcomes, even where failures originate with a third party or embedded technology.
 

A lack of visibility into vendor AI, data handling or security practices is no longer defensible.

Five Key Questions Boards Should Ask

1. Can we explain and defend AI‑assisted decisions to both regulators and affected customers

2. Do we know where AI and automation are actually being used across the business today

3. Would a cyber incident expose not only systems but also conduct and disclosure failures

4. Do we actively oversee AI and technology vendors that affect customer outcomes

5. Is our governance keeping pace with innovation, or increasing regulatory exposure over time

How we help financial institutions

We help boards and executives align AI adoption and cyber security with APRA and ASIC expectations.

  • Identify where AI is actually being used across the organisation

  • Assess AI, cyber and third‑party risk against CPS 230 and CPS 234

  • Strengthen governance, accountability and board reporting

  • Improve cyber resilience, incident response and recovery readiness

  • Support defensible decision making before regulatory scrutiny occurs

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Our approach is pragmatic and regulator‑aware, helping institutions move faster while remaining accountable, defensible and resilient under scrutiny.

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