The Digital Operational Resilience Act Explained
What is the Digital Operational Resilience Act?
The Digital Operational Resilience Act (DORA) is a regulation introduced by the European Union to bolster the financial sector’s ability to withstand and recover from digital disruptions. DORA addresses the increasing reliance on digital technologies in finance and sets clear guidelines to manage cybersecurity risks, ensure operational resilience, and protect the stability of the financial system.
The Five Pillars of DORA
DORA is built upon five core pillars that together form a comprehensive framework for digital operational resilience in the financial sector.
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.
Digital Operational 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 various types of 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 Does DORA Apply to?
DORA applies to a wide range of financial entities, including:
Banks
Payment service providers
Investment firms
Insurance companies
Crypto-asset service providers
ICT third-party service providers
Why Is DORA Important?
As financial services become more digitized, institutions face increasing risks from cyberattacks, system failures, and other digital threats. DORA is essential because it establishes a regulatory framework that promotes preparedness, risk management, and resilience across the sector. Complying with DORA helps financial institutions safeguard their operations, protect customers, and maintain trust.
Implementation Timeline
November 28, 2022:
DORA was adopted by the European Parliament.
January 17, 2025:
Full compliance is required by all regulated financial entities.