Business
South Africa’s New IT Standard: What It Means for Financial Institutions
South Africa’s New IT Standard: What It Means for Financial Institutions
South Africa’s Financial Sector Conduct Authority (FSCA) and Prudential Authority (PA) are enforcing a new Joint Standard for IT Governance and Risk Management, effective November 15, 2024. This regulation aims to strengthen IT resilience and operational continuity in financial institutions, aligning the sector with global best practices.
Key Compliance Mandates
Under the new standard, financial institutions—banks, asset managers, and insurers—must:
- Enhance IT governance frameworks.
- Mitigate third-party software risks.
- Ensure accessibility to critical systems during provider disruptions.
The Role of Software Escrow
One of the key tools for compliance is software escrow. This involves depositing source codes with a trusted third party, ensuring institutions can access essential applications even if their software vendor fails.
- Global precedence: Countries like Singapore and India have already mandated software escrow in their IT regulations.
- Local adoption: South African financial institutions are now leveraging software escrow as a proactive compliance solution, ensuring operational continuity amid heightened scrutiny.
Guy Krige, executive risk consultant at ESCROWSURE, emphasized the importance of escrow agreements, calling them “a strategic, cost-effective measure that bolsters operational resilience and protects critical IT assets.”
Preparing for Future Cybersecurity Challenges
The new Joint Standard is only the beginning. South Africa’s financial sector is also gearing up for the Joint Standard on Cybersecurity and Cyber Resilience, set to take effect in June 2025.
Key focus areas will include:
- Cyber threat mitigation
- Enhanced third-party risk management
- Expanded role of escrow agreements in safeguarding critical IT systems
Krige noted, “Investing in escrow agreements ensures compliance with today’s standards and prepares institutions for the cybersecurity challenges of 2025.”
Compliance Consequences
Non-compliance with the Joint Standard could result in severe penalties, including:
- Financial fines
- Suspension of operating licences
Institutions have 12 months to align with the requirements, making it imperative to act swiftly.
A Comprehensive Approach
The Joint Standard emphasizes a holistic approach to IT governance, focusing on:
- Inventorying third-party service providers
- Implementing robust business continuity plans
- Addressing supply chain vulnerabilities
Final Thoughts
The enforcement of South Africa’s Joint Standard marks a transformative shift in the financial sector’s approach to IT risk management. By adopting software escrow agreements and preparing for future cybersecurity mandates, institutions can ensure compliance, operational resilience, and readiness for an increasingly complex regulatory landscape.
Pro Tip: Start implementing compliance measures now to avoid operational disruptions or penalties down the line.
