The Digital Operational Resilience Act (DORA) is the EU’s response to the rising cyber threats targeting the financial sector.
Over the past decade, cyberattacks on this sector have surged, with ransomware attacks increasing by 64%, nearly double the 2021 level. These attacks are fuelled by the lure of substantial financial rewards and access to valuable customer data.
To protect sensitive data and maintain financial stability, DORA aims to strengthen the sector against these threats by imposing strict cybersecurity standards.
But what does the regulation mean for your business? In this guide, we’ll explore what DORA entails, how it will impact your business, and what steps you need to take to achieve compliance.
What is DORA?
The Digital Operational Resilience Act (DORA) is a new set of regulatory guidelines established by the European Union for the EU financial service sector. It’s designed to strengthen the IT security of financial institutions and ensure the financial sector’s resilience in case of severe operational disruptions. The regulation introduces standardised processes for managing, reporting and reacting to ICT operational risks and also applies to third parties that provide ICT-related services to the financial sector.
Why has DORA been introduced?
DORA was introduced to tackle rising cyber security risks within the EU financial sector. Even though financial risk management has come a long way since the 2008 crisis, information security has lagged behind. To close this gap, DORA sets out uniform standards and accountability measures for all financial entities operating within the EU. The legislation aims to enhance cyber resilience, reduce risks associated with interconnected systems, and manage the growing reliance on third-party service providers.
When will the DORA Regulation come into force?
The DORA Regulation will come into force on the 17th of January 2025. This means that financial institutions will need to be fully compliant with its requirements by this date.
Who does DORA apply to?
DORA applies to a wide variety of financial firms, both inside and outside of the European Union. Around 22,000 ICT service providers and financial entities will be affected. This includes:
- Banks
- Credit Institutions
- Credit Agencies
- Pension Funds
- FinTech
- Trading Venues
- Financial System Providers
- Crowdfunding Providers
- Cryptocurrency Firms
- ICT Service Providers
- Investment Firms
- Payment Providers
What are the Key requirements of DORA?
DORA’s regulatory framework is structured around five key pillars, each addressing a critical aspect of digital operational resilience. The key pillars for risk reduction include:
1. ICT Risk Management
DORA provides clear frameworks and guidelines for managing risks in the financial sector. This means identifying, assessing, and reducing potential threats to an organisation’s digital infrastructure. Financial institutions need to set up a solid risk management process that includes regular risk assessments, incident response plans, and strategies for business continuity.
2. Incident Reporting
Financial institutions need to have quick and effective processes for detecting, reporting, and investigating incidents. The information gathered from these reports not only helps lessen the impact of a breach but also gives a clearer picture of the overall threat landscape.
3. Third-Party Risk Management
As financial institutions rely more on external service providers, it’s crucial these relationships are managed effectively. DORA highlights the need to assess the ICT risks that come with third-party vendors, put solid due diligence processes in place, and keep an eye on processes over time. The aim is to make sure that third-party providers live up to the same high standards that the institution holds for itself.
4. Resilience Testing
Based on their risk assessments, organisations are expected to regularly test their ICT systems to ensure they are resilient to known and emerging threats. This includes both basic and advanced testing methodologies, such as vulnerability scanning, penetration testing, and scenario-based testing. These tests help pinpoint weaknesses so that necessary improvements can be made to keep systems secure.
5. Information Sharing
DORA encourages financial institutions and authorities to share information to boost awareness of potential cyber threats. This means exchanging threat intelligence, lessons learned from past incidents, and best practices. By pooling this knowledge, the entire industry can strengthen its defences against cyberattacks and other threats.
How can businesses stay compliant with DORA Regulations?
The following best practices can help businesses comply with DORA:
- Prioritise Risk Assessments: Regularly assess ICT risks, create action plans, and adapt to evolving threats.
- Implement Robust Monitoring and Reporting: Use real-time monitoring to detect risks and establish swift incident reporting procedures.
- Routine & Advanced Testing: Conduct frequent and diverse resilience tests that go beyond one-off annual testing.
- Create a Cyber Secure Culture: Provide regular cybersecurity training for all staff.
- Dedicated Compliance Team: Create a team to oversee DORA compliance and enforce regulations.
- Industry Insights: Share intelligence with industry peers to proactively mitigate risks.
- Leverage Automation: Use software that can automate compliance checks and track regulatory changes.
- Document Compliance Efforts: Document and review all compliance activities for continuous improvement.
- Supply Chain Compliance: Verify third-party vendor security alignment to DORA.
- Protect Data with DLP: Implement data loss prevention solutions to safeguard sensitive information.
What are the challenges associated with complying with DORA?
DORA covers a lot of ground, which can make it tough for businesses to fully get on board. Its complexity might leave companies underprepared, leading to patchy implementation and a mistaken belief that they’re fully compliant when they’re not. Working closely with reliable partners to stay on track will be essential.
What are the consequences if a business doesn’t comply with DORA?
Failure to comply with DORA can result in severe penalties for financial institutions. Businesses could face hefty fines of up to 1% of their annual revenue, which will keep piling up until compliance is achieved. The exact penalty depends on how severe the violation is and how cooperative the business is with authorities. Beyond fines, there’s the risk of reputational damage, losing clients, and even facing restrictions on operations.
How can DORA benefit your business?
Complying with DORA provides several benefits for your business. By following its standards, you can enhance customer trust through improved cybersecurity, differentiate your institution from competitors, and contribute to the overall stability of the financial system.
How can Ortus help your business comply with DORA?
Ortus simplifies DORA compliance for your business. With our expert knowledge of IT systems and regulations, we offer tailored solutions that align your operations with DORA’s requirements. Our specialised Alignment process not only ensures you meet the standards but also boosts your overall digital resilience. Partnering with Ortus means protecting your business from potential risks and building a more secure and compliant IT infrastructure. Get in touch today to learn how Ortus can help your financial business achieve full compliance with DORA.