The EU Digital Operational Resilience Act (DORA) was entered into force on January 16, 2023 and will apply to companies starting January 17, 2025. This act reshapes how financial entities approach operational resilience.
Understanding these crucial requirements and developing a plan to achieve DORA compliance is critical to ensure your organization remains secure, resilient and compliant in an increasingly regulated digital landscape.
The Digital Operational Resilience Act (DORA) is an EU legislation to ensure financial entities can withstand and recover from Information and Communications Technology (ICT)-related disruptions and threats.
DORA requires financial institutions and ICT service providers to identify, monitor and mitigate ICT risks that could impact their operations and supply chains. The regulation ensures continuity and resilience even in adverse conditions.
The scope covers a wide range of financial entities and their ICT providers, mandating the development of risk management frameworks to prevent, detect and respond to incidents. Critical ICT service providers are also subject to oversight, ensuring compliance with operational resilience standards across financial operations.
Navigating the compliance landscape for the EU Digital Operational Resilience Act raises many important questions. Ask yourself
What are the 5 pillars of DORA regulation, and what do they entail?
The Digital Operational Resilience Act (DORA) is a regulatory framework that ensures EU financial institutions can withstand and respond to ICT-related disruptions. DORA outlines five key pillars to strengthen the operational resilience of firms.
Implementing effective ICT risk management
Financial entities must adopt sound ICT risk management frameworks to mitigate and prevent threats that can harm operational resilience.
Ensuring timely cyber incident reporting and response
Organizations are required to report significant ICT-related incidents within strict time frames to competent authorities.
Conducting operational resilience testing
Institutions must regularly test their ICT systems to ensure they are resilient to cyber threats and can recover from potential disruptions.
Managing risks from third-party service providers
Financial institutions must evaluate the ICT risks posed by external vendors, ensuring their own resilience is not compromised by third-party services.
Facilitating cross-sectoral information sharing
DORA encourages entities to exchange information about cyber threats and ICT incidents to bolster collective resilience.
12 Nov 2024 Jan Stappers LLM
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How to meet DORA compliance requirements within your organization
DORA aims to ensure financial institutions in the EU can withstand all types of disruptions and threats to their digital systems. To achieve DORA compliance, your organization should follow these steps:
Educate employees and stakeholders on DORA compliance
Begin by informing all relevant parties about the provisions and implications of the Digital Operational Resilience Act. Implement training programs covering the regulatory framework, emphasizing the significance of digital resilience and the potential consequences of non-compliance with DORA.
Develop comprehensive digital resilience policies
Establish robust and well-documented digital operational resilience policies aligning with DORA’s principles. These policies should address the entire lifecycle of digital practices, including risk management, incident response and recovery strategies. Clear cybersecurity, operational risk and IT governance guidelines must be defined.
Additionally, organizations must publish annual reports to ensure transparency regarding the progress of their digital resilience initiatives.
Regularly assess and monitor digital resilience initiatives
DORA outlines compliance assessments to confirm your organization’s digital operational resilience meets the specified criteria. Regular assessments of your digital resilience initiatives should be conducted every 12 months and evaluations of third-party service providers should be undertaken to ensure compliance with DORA.
Conduct regular audits, risk assessments and incident response evaluations to identify and mitigate potential risks or non-compliance issues in your digital operations. In addition, organizations must develop plans for improving resilience against cyber threats and ensure their business model aligns with evolving digital demands.
Implement a digital operational resilience framework
Deploy a comprehensive digital operational resilience framework integrating compliance processes, risk management strategies and monitoring mechanisms. This framework should promote transparency, accountability and ethical decision-making throughout your digital operations, supporting responsible digital practices and sustainable growth.
Establish an incident reporting procedure
Organizations must create and enforce an easily accessible incident reporting system to acknowledge and address issues raised by stakeholders, including employees, clients and affected communities. This system should facilitate the swift resolution of digital incidents and ensure lessons learned are incorporated into future resilience strategies.
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DORA, or the Digital Operational Resilience Act, is a new regulation from the European Union targeting the financial services sector. Its focus is to ensure financial institutions in the EU can withstand, respond to and recover from all types of Information and Communication Technology (ICT) risks, particularly cybersecurity risks.
DORA applies to all financial entities operating within the European Union, including banks, insurance companies, investment firms, payment institutions and other relevant entities. This extends to third-party ICT service providers who work with these financial institutions.
Compliance requirements for DORA will take effect on January 17, 2025, giving financial institutions time to adjust their internal processes and systems to ensure compliance with the regulation.
DORA’s requirements are organized into five key pillars:
The five pillars represent a comprehensive approach to ensuring financial institutions remain resilient in the face of digital risks. The rationale behind these pillars is to:
DORA is critical because the financial sector increasingly relies on digital infrastructure, making it vulnerable to cyberattacks and ICT failures. The regulation ensures financial stability by enforcing robust cybersecurity practices across the industry.
Noncompliance with DORA can result in severe penalties, including fines and reputational damage. Competent national authorities within EU member states are responsible for enforcing these penalties, which can vary depending on the violation.