The Digital Operational Resilience Act Explained

Introduction to DORA

The Digital Operational Resilience Act (DORA) is a critical regulation aimed at ensuring that financial institutions and their third-party service providers can withstand, respond to, and recover from digital threats and operational disruptions. With financial entities becoming increasingly reliant on digital technologies, DORA seeks to create a harmonized framework across the EU to ensure uniform standards of resilience and cybersecurity.

More than just a set of rules, DORA emphasizes continuous operational resilience, creating a regulatory environment where companies must proactively protect their systems, monitor risks, and respond swiftly to incidents. Failure to comply with DORA can lead to fines of up to 2% of annual turnover or EUR 1 million if you are an individual, reputational damage, and operational disruption. 

Why Was DORA Introduced?

DORA was introduced in response to the increasing frequency and sophistication of cyberattacks and operational failures in the financial sector. As organizations grow more reliant on third-party providers, ensuring that their entire ecosystem - both internal and external - remains secure is paramount. DORA provides a uniform framework for digital risk management and resilience across the EU, helping financial entities address critical risks such as:

Cyberattacks and Data Breaches

In the interconnected financial landscape, the impact of a single cyberattack can ripple through multiple institutions, causing severe financial and reputational harm.

Third-Party Dependencies

Many financial institutions outsource essential services to third-party providers, introducing potential vulnerabilities.

Operational disruptions

Ensuring continuity in the face of technical failures has become increasingly critical.

The Five Pillars of DORA

DORA rests on five key pillars, each representing an area critical to ensuring financial institutions remain operationally resilient in the face of digital risks:

ICT Risk Management

Financial entities are required to adopt sound risk management frameworks that identify, assess, and mitigate Information and Communication Technology (ICT) risks. This includes robust processes for maintaining and updating critical IT systems, monitoring threats, and safeguarding digital infrastructures.

Incident Reporting

DORA mandates that financial institutions report significant ICT-related incidents to regulatory authorities in a timely manner. This ensures that both regulators and institutions can respond quickly to cyber threats and digital disruptions, minimizing damage and service interruptions.

Resilience Testing

DORA introduces rigorous testing requirements, including penetration testing and vulnerability assessments. Financial institutions must regularly test their systems and processes to ensure they can handle operational stress and cyber threats. This pillar aims to proactively identify weaknesses and improve system robustness.

Third-Party Risk Management

Recognizing the risks that third-party ICT providers pose to financial operations, DORA requires financial institutions to implement stringent controls and monitoring over their third-party relationships. This includes due diligence, contractual obligations, and ongoing assessments of outsourced ICT services such as cloud providers and software vendors.

Information Sharing

To enhance collective resilience, DORA encourages financial institutions to share information related to cyber threats and operational disruptions. This collaborative approach helps institutions stay ahead of emerging risks and fosters a more resilient financial ecosystem.

Who Must Comply with DORA?

DORA’s scope is broad, covering a wide array of financial entities and their ICT providers, including:

Banks

Banks and Credit Institutions

Banks and credit institutions form the backbone of the financial system, providing essential services such as savings accounts, loans, and payment processing. These institutions range from small local banks to global giants, handling vast amounts of customer funds and processing millions of transactions daily.

Customer paying in-store

Payment Institutions and Electronic Money Institutions

Payment institutions and electronic money institutions include companies that provide payment processing services, online payment platforms, and digital wallets. These entities facilitate the movement of money between consumers, merchants, and financial institutions, playing a crucial role in the global economy’s shift toward digital transactions.

Investment Firms and Asset Managers

Investment firms and asset managers are responsible for managing portfolios of stocks, bonds, and other assets on behalf of their clients, including individuals, corporations, and institutional investors. These companies range from boutique investment advisory firms to large multinational asset managers. Their services often include financial planning, portfolio management, and trading.

Two people sitting in front of laptops

Insurance and Reinsurance Companies

Insurance companies provide risk management products to individuals and businesses, such as life insurance, property and casualty insurance, and health insurance. Reinsurance companies, on the other hand, provide insurance to other insurance companies to help them manage risk.

Credit Rating Agencies

Credit rating agencies evaluate the creditworthiness of businesses, governments, and financial instruments. Their assessments play a significant role in financial markets, influencing the interest rates that companies and governments pay to borrow money. Global credit rating agencies like Moody’s, S&P, and Fitch help investors make informed decisions by offering independent evaluations of credit risk.

Two people shaking hands

Third-Party ICT Service Providers

Companies that provide essential Information and Communication Technology (ICT) services to financial institutions. These services range from cloud computing and data hosting to software solutions and cybersecurity services. These providers play a crucial role in supporting the operational and technological infrastructure of financial entities, helping them manage data, conduct transactions, and ensure cybersecurity.

DORA Implementation Timeline

November 28, 2022:

DORA was adopted by the European Parliament.

January 17, 2025:

Full compliance required by regulated financial entities.

The Challenges of Becoming DORA Compliant

Fragmented Risk Management Processes

Many financial institutions manage risk across multiple systems and platforms, making it difficult to centralize and standardize.

Incident Reporting

Manual processes for tracking and reporting incidents often lead to missed deadlines, incomplete information, and a lack of audit trails.

Third-Party Provider Management

Keeping track of the performance and resilience of multiple third-party providers - each with different contracts and service levels - requires significant oversight.

Continuous Resilience Testing

DORA demands regular testing and audits, which are resource-intensive and often require external expertise.

DORAedge: A Solution for DORA Compliance

DORAedge is an easy-to-use tool for streamlining DORA compliance.

With features like secure, self-service organization setup, real-time health monitoring, and AI-driven automation for managing risks and incidents, it simplifies the entire compliance process.

DORAedge ensures you're always up to date with mandatory documentation, provides an easy way to manage entities and third-party providers, and keeps your ICT assets and contracts organized.

By guiding you through every critical task, DORAedge helps you stay resilient and compliant with less effort.