As we approach 2025, financial institutions across the EU face the challenge of complying with the Digital Operational Resilience Act (DORA), which is set to take effect on the 17th of January. DORA aims to strengthen cybersecurity and operational resilience across financial ecosystems, with the consequences for non-compliance ranging from regulatory fines to reputational damage and an increased risk of cyberattacks. Ensuring compliance will require financial institutions to go beyond internal systems and address risks across their third-party vendors and ecosystems while balancing budgets and tight deadlines.
One of the central tenets of DORA is to harmonize security standards across the financial sector to mitigate the risk of third-party breaches. This regulation aims to ensure businesses can plan and be prepared for such events, enhancing resiliency in everyday operations and reducing the risk of single points of failure. These requirements will extend beyond EU borders, affecting all organizations that provide services to EU-based entities. To help financial institutions navigate the path to compliance, we have outlined six crucial steps that can simplify the process and open up new business opportunities.
1. Perform a Gap Assessment
A thorough gap assessment is the first critical step in aligning with DORA requirements. Financial institutions need to conduct a detailed analysis to evaluate whether their existing systems, processes, and risk management measures are in line with DORA’s standards. This assessment will identify any discrepancies between the current state and the desired state as per DORA guidelines. By using data protection tools, organizations can systematically review their practices, ensuring that all potential vulnerabilities are uncovered.
In addition to identifying gaps, institutions must document their findings comprehensively. This documentation will serve as the basis for developing an action strategy. It’s also essential to consider third-party vendors during the assessment since DORA places significant emphasis on addressing third-party risks. Historically, third-party vendors have not faced as much regulatory pressure, often shifting the burden of breaches back onto the institutions they serve. However, under DORA, these vendors will need to align with stringent cybersecurity measures to avoid being the weak link in the financial ecosystem.
2. Create an Action Strategy
Creating a detailed action strategy is the next step once the gaps have been identified. This strategy should outline specific steps the organization will take to meet DORA’s standards, set realistic deadlines, and allocate responsibilities. The action plan must be comprehensive, covering all aspects of data security and resiliency required by DORA. It should also establish timelines for implementing changes and assign duties to relevant teams within the organization.
A well-defined action strategy not only provides a roadmap for achieving compliance but also helps streamline efforts and ensures that all stakeholders are on the same page. It’s essential to be strategic about prioritizing tasks since some changes might require more time and resources than others. For example, upgrading technology or integrating new cybersecurity tools may take longer than revising policies or conducting training sessions. By setting clear milestones and tracking progress regularly, organizations can stay on course and avoid last-minute rushes as the January 2025 deadline approaches.
3. Allocate Resources Wisely
Resource allocation is a critical factor in the journey toward DORA compliance. Financial institutions need to allocate an appropriate budget for upgrading technology, bringing in expert assistance, and providing necessary training for teams responsible for implementing new measures. Ensuring that sufficient resources are available will help avoid delays and ensure that all aspects of the compliance plan are executed efficiently.
In addition to financial resources, institutions must consider the human resources required for achieving compliance. This includes identifying team members with the requisite skills and knowledge and possibly recruiting external experts to provide specialized insights. Training existing staff is also crucial, as everyone involved needs to be familiar with DORA’s requirements and their specific roles in the compliance process. Collaborative efforts across departments will be necessary to ensure that all compliance measures are integrated seamlessly into daily operations without causing disruption.
4. Involve All Stakeholders
Effective DORA compliance requires collaboration and coordination across the entire organization. It’s not just the IT or compliance departments that need to be involved; senior management, risk teams, and third-party vendors also play crucial roles. Ensuring that all stakeholders fully understand their responsibilities is vital for a coherent and unified approach to compliance. Organizations should hold regular meetings and workshops to communicate the compliance strategy and gather input from various departments to cover all necessary bases.
Senior management needs to champion the compliance efforts, providing the necessary support and resources. This top-down commitment signals the importance of DORA compliance to the entire organization. Collaboration with third-party vendors is also essential since any weak links in the supply chain can jeopardize compliance. Financial institutions should work closely with their vendors to ensure they understand and adhere to DORA’s cybersecurity and operational resilience standards. This might involve revising contracts or setting up new monitoring mechanisms to keep track of vendors’ compliance status.
5. Test, Validate, and Document
Regular testing and validation are crucial components of the compliance process. Financial institutions need to conduct various forms of assessments, such as penetration testing and simulated cyberattacks, to identify and address any weaknesses before they turn into real issues. Through these tests, organizations can enhance resiliency in everyday operations, mitigating the risks of unexpected denial of service attacks, business periods stress, and natural disasters.
Documenting the results of these tests is equally important, as it demonstrates compliance with DORA and provides a record that can be used to improve defenses continually. Regularly updating these documents ensures that organizations stay ahead of potential vulnerabilities and remain compliant. The filing should be detailed and include the methodologies used for testing and the remedial actions taken. This level of transparency will be beneficial in case of regulatory scrutiny and can also serve as a reference point for future security measures.
6. Maintain Continuous Monitoring
Compliance is not a one-time effort but an ongoing process. Financial institutions must establish continuous monitoring mechanisms to keep up with evolving threats and any changes in the regulation. Continuous monitoring involves not just keeping an eye on internal systems but also maintaining vigilance over third-party vendors. Automation can play a significant role in enhancing the efficiency of monitoring activities over the long term.
By automating parts of the monitoring process, organizations can ensure consistent and real-time tracking of compliance status. This reduces the likelihood of human error and allows for quicker responses to any issues that arise. Continuous monitoring also means regularly revisiting and updating the compliance strategy to incorporate new threats or regulatory changes. Organizations should set up a dedicated team or use cybersecurity tools to oversee this aspect, ensuring that compliance remains a top priority even as the regulatory landscape evolves.
Unlocking Opportunities with DORA
Complying with DORA is not just about meeting regulatory requirements; it can also unlock new business opportunities. According to the World Economic Forum, businesses that focus on digital resilience and operational efficiency are likely to be more agile, profitable, and forward-thinking in the future. By aligning with DORA, financial institutions can explore cutting-edge processes and integrate emerging technologies more responsibly.
For instance, implementing privacy-enhancing technologies can open up new avenues like fine-grained marketing and fraud analytics, which require a secure environment for sensitive customer data. Organizations that achieve DORA compliance can leverage this status to build trust with clients, demonstrate their commitment to safeguarding assets, and enhance their reputation in the market. This can lead to stronger customer relationships and potentially new partnerships, further driving growth and innovation.
Conclusion
As 2025 approaches, financial institutions across the EU are gearing up to comply with the Digital Operational Resilience Act (DORA), effective from January 17. DORA is designed to enhance cybersecurity and operational resilience within financial ecosystems, imposing significant penalties for non-compliance, including regulatory fines, reputational harm, and increased cyberattack risks. To comply, institutions must address risks not only within their internal operations but also across their third-party vendors and ecosystems, all while managing budgets and deadlines.
A key aspect of DORA is to align security standards across the financial sector, reducing the risk of breaches from third parties. This regulation aims to ensure businesses are prepared for such incidents, improving daily resilience and minimizing single points of failure. These requirements reach beyond the EU, impacting organizations that serve EU-based entities. To assist financial institutions in achieving compliance, we have identified six essential steps that can simplify the journey and unlock new business opportunities.
