Key takeaways from Better Debt: Setting your collections up for success with CPS230

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How are you preparing for APRA’s updated CPS230 standards?

In this Better Debt episode, InDebted’s CEO & Founder Josh Foreman unpacked the new standards with experts David Malcom, Risk Management Specialist - PwC Australia, and Industry SME, Poli Konstantinidis - previously Experian & Latitude. They discussed:

  • The six key themes of CPS230 and best practices for approaching them
  • Aligning your collections to CPS230 and using technology to prepare for the new standards
  • The business and customer experience implications of overlooking scalability

Regardless of whether your organisation is APRA regulated, scaling with resilience is essential for operational longevity. Let’s break down the top takeaways from the session, and how they apply to your collections.

1. CPS230 is strengthening the overall financial services ecosystem

APRA is introducing CPS230 to refine requirements, and better align with global practices. The new regulations are underpinning CPS220, while also replacing several existing standards. Its main objective? For organisations to have a continued focus on operational resilience.

This means robust risk frameworks, that cover:

  1. Effective processes to prepare for risk events, supporting the management and responses to disruptions.
  2. Providing services and operating during risk events, especially critical customer services.
  3. Protecting the financial services ecosystem and minimising disruption to within acceptable thresholds.

Looking at the above, it’s clear to see how these standards can be applied to organisations outside of APRA’s remit. Especially given disruptions over the last 20 years ranging from the GCF and COVID to major server outages - ensuring resilience and ongoing service delivery is a must for all organisations.

2. Scalability & resilience go hand-in-hand

Especially in a changing macro environment, scaling and operational resilience are intrinsically linked. Think back to COVID for example, where we saw volumes of hardship increasing overnight to unmanageable levels. Most collections providers were experiencing significant disruptions, impacting their ability to support financial services.

Scaling with resilience is all about shifting your focus from managing disruption, to instead increasing your operational resilience to prevent disruption. So where do you start? Our panel suggested running overnight disruption scenarios, as well as considering:

  • How are we currently handling increasing volumes? Are customer outcomes affected when volumes increase?
  • Can our current systems and technology manage a sudden influx of volume?
  • Are we maintaining targets and staying under thresholds with increasing volumes? What protocols are in place to ensure this?

When it comes down to it, separating scalability from operational resilience is impossible - even in the absence of risk.

3. Collections is a critical operation for all organisations

There are six key components of CPS230; your operating model, critical operations, material service providers, business continuity, incident management and controls management.

Collections is undoubtedly a critical operation, falling straight into the second and third category (third if you work with an external recoveries partner). So when it comes to collections and CPS230, understanding how rapid volume increases would impact your operation is critical.

This differs between in-house and external collections, but the principles remain the same. You should be confident that in a crisis, your operations could support an unprecedented number of customers. If you have a collections partner, this means understanding their ability to scale and their previous crisis handling to determine if you’re comfortable with their processes. These factors are the tip of the iceberg to begin unearthing how your existing collections operation matches up to the new standards.

4. Using technology to prepare for the new standards

Especially for collections, robust technology is central to achieving operational resilience. Take the Global Financial Crisis for example, where collections departments struggled to cope with extreme volumes due to an overreliance on traditional methods (such as outbound calls). To make it even tougher, the added layer of recruiting and training new agents made scaling on demand near impossible.

Consumer expectations for true end-to-end digital experiences are increasing, which is also hitting the mark when it comes to scalability. How exactly? Well, organisations who use sophisticated collections technology are:

  • Reducing outcome times for customers, enabling more to be supported over a given period.
  • Minimising manual overhead, maintaining operational expenditure.
  • Leveraging more data to extract better insights and inform risk strategies.

Where collections systems may have been overlooked or other initiatives have taken priority, our experts recommend that now is the time to invest in advanced, scalable technology. After all, prevention is better than cure!

5. It’s all about improving customer outcomes

The main takeaway? Resilient processes are better for customers.

In a crisis, customers remember how they’re treated. From the channel you use to communicate with them, through to service interruptions - the details matter. Taking the time to ensure your processes are well considered and prepared for any given crisis will go a long way for the people you support. Finding cost savings and efficiencies is great, but the driving force behind preparing for the standards should always be your customers.

That’s the ultimate benefit that APRA are advocating for with CPS230 - it’s about giving customers the services they need, in every scenario.

Click the button below to catch up on the full episode and unpack everything you need to know about CPS230.

Watch the recording