DORA: Strengthening Digital Resilience in the Financial Sector

In an era of rapid digitalization, the financial industry faces new complex challenges. The increased use of cloud-based business solutions and the interconnectedness of data, systems, and business processes offer tremendous opportunities but also pose significant risks, such as cyber threats. These threats can result in the loss of highly sensitive customer data, trigger system outages, cause substantial financial losses, disrupt operations, and ultimately jeopardize the stability of entire financial systems.

To address these issues, the new EU regulation DORA (Digital Operational Resilience Act) will come into effect in early 2025. This regulation requires financial institutions to enhance their digital operational resilience by comprehensively managing Information and Communication Technology (ICT) risks to counter the growing threats.

To help you stay ahead of these changes, this blog outlines everything you need to know about DORA, from its fundamental principles to actionable guidance for integrating the regulation into your cybersecurity strategy.

DORA (Digital Operational Resilience Act) is a new EU regulation, effective from January 2025, aimed at improving cyber resilience and ICT security standards in the financial sector. This regulation encompasses protection against ICT disruptions and cyber threats. It ensures that affected organizations implement robust ICT risk management systems, including considerations for third-party providers, report cyber-related incidents, and conduct regular resilience tests to withstand even the most sophisticated cyber threats. These measures are focused on achieving DORA’s core objectives: ensuring continuity and trust in financial services.

In an increasingly digital and interconnected financial world, the risk of cyberattacks and IT failures is rising significantly, potentially jeopardizing the stability of the entire financial system. As a result, there is a need for enhanced security, which is precisely where DORA comes into play.

The regulation aims to create a unified framework for digital resilience in the financial sector, optimizing prevention, detection, response, and recovery in case of disruptions and threats. This systematic approach can significantly reduce systemic risk and strengthen the stability of financial markets within the European Union.

Supervisory authorities will play a crucial role in ensuring compliance with DORA. They are empowered to conduct inspections, request information, and impose fines or other corrective measures on financial institutions that do not meet the established standards.

DORA is structured around five key pillars, each aimed at enhancing cybersecurity, minimizing risks, and promoting a unified approach across the EU:

1. Operational Resilience and Risk Management:
   Development and implementation of a robust ICT risk management system, integrating governance and ensuring board-level oversight.
2. ICT Incident Management and Cybersecurity:
   Creation of early warning indicators to classify, report, and respond to incidents, ensuring timely follow-up actions.
3. Testing Digital Operational Resilience:
   Design of contingency plans, regular resilience tests, including threat-led-penetration testing (TLPT), staff training and evaluation of outcomes.
4. Third-Party Governance and Management:
   Monitoring and assessment of ICT dependencies on third-party service providers, including contractual agreements and oversight of critical service providers.
5. Information and Intelligence Sharing:
   Facilitation of structured exchanges for sharing cyber threat intelligence and incidents, ensuring compliance with security, confidentiality, and competition regulations.

DORA has wide-ranging implications for a broad spectrum of the financial and digital sector, including:

• Banks and credit institutions
• Insurance and reinsurance companies
• Payment service providers and e-money institutions
• Investment firms and stock exchanges

This broad scope ensures that the entire financial ecosystem adheres to uniform resilience standards.

The EU regulation, which was introduced on 16th of January 2023, grants financial companies a two-year period for full implementation. By January 2025, all requirements must be met to ensure digital resilience and security.

In the first half of 2024, guidelines for the ICT risk management framework, operational security, incident classification, and ICT third-party risk management were published. In the second half of 2024, additional Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) will be released, covering reporting obligations for ICT incidents, criteria and methodologies for testing digital operational resilience, and guidelines for sub-outsourcing arrangements.

Leveraging the right tools is essential for enhancing cybersecurity and achieving compliance with regulations like DORA. Some of the key areas of focus for tool support include:

• Seamless Implementation: Smooth integration of all DORA requirements.
• Unified Assessment Methodology: Provision of risk assessment templates.
• Transparent Risk Portfolios: Identification and management of risks.
• Immediate Action Catalogues: Provision of immediately actionable risk mitigation measures.
• Specific Functionalities: Automated risk assessments, real-time monitoring, and incident response workflows align with DORA’s core pillars, ensuring prompt compliance with reporting requirements.

ADOGRC offers several key benefits to streamline DORA compliance and improve cybersecurity:

• Increased Efficiency: Automation of processes and reduction of manual errors.
• Transparency: Clear presentation of all risks and measures.
• Compliance: Ensuring compliance with DORA and other relevant regulations.
• Scalability: Flexible adaptation to the growing needs of your company.

In response to the continuous rise in cyberattacks and IT disruptions, the DORA regulation sets a significant milestone in improving cyber resilience in the European financial sector. As we approach the implementation deadline, it is crucial for financial institutions to integrate these measures and adopt the necessary tools to ensure compliance and fortify their defences. With ADOGRC, you can confidently meet regulatory demands and protect your organization against the evolving landscape of cyber threats, securing a more resilient future for your business.