Preparing for DORA: How Financial Firms Can Build Resilience Ahead of the 2025 Compliance Deadline

As businesses in the financial sector prepare for the looming compliance deadlines, the Digital Operational Resilience Act (DORA) is emerging as a key regulatory framework designed to strengthen the operational resilience of the European Union's financial services industry. In this post, we'll explore what the DORA regulation entails, why it was created, the timeline for its enforcement, and how RiskXchange can help businesses achieve DORA compliance efficiently.

What is the DORA Regulation?

The Digital Operational Resilience Act (DORA) is a comprehensive regulation introduced by the European Union to ensure that financial institutions can withstand, respond to, and recover from all types of Information and Communication Technology (ICT)-related disruptions, including cyberattacks. The regulation, which came into force on January 16, 2023, will be fully enforceable by January 17, 2025. This act targets the ICT frameworks of all financial firms under the remit of the European Supervisory Authorities (ESAs), aiming to create a uniform set of digital operational resilience standards across the EU financial sector.

Unlike other cybersecurity frameworks that treat operational security as a secondary concern, DORA prioritises digital resilience, ensuring the financial system remains robust against growing digital risks. It applies to 21 different types of financial entities, including banks, investment firms, crypto-asset service providers, and their third-party ICT service providers.

Why Was the DORA Regulation Created?

DORA was crafted in response to the increasing interconnection and reliance on digital technologies within the financial industry. As more financial services move online and data volumes soar, system vulnerabilities have multiplied. Cyberattacks like ransomware, phishing, and data breaches have exposed the fragility of ICT systems, sometimes resulting in catastrophic outcomes such as operational downtime and compromised financial data.

One of the major motivations behind DORA is harmonisation. Different EU member states have had varying ICT risk management regulations, which hindered collaboration and resilience efforts. By establishing a standardised set of ICT risk management frameworks, DORA aims to eliminate these disparities, enabling a more unified approach to digital resilience across the European financial ecosystem.

Financial services are prime targets for cyber threats. The risks are not confined to borders; a significant ICT incident in one member state can easily spread, creating systemic risk for the entire European financial system. DORA’s philosophy is based on recognising this interconnected risk: a secure financial system requires both individual resilience and cross-border collaboration.

The Current Status and Timeline

Currently, financial institutions and third-party ICT providers are in a crucial phase of preparation. While DORA came into force in January 2023, its provisions will be fully enforced by January 17, 2025. This two-year window offers entities time to assess, plan, and implement the necessary changes to ensure full compliance.

However, not all entities are progressing at the same rate. A Deloitte study found that by mid-2023, only 29% of financial institutions had developed a DORA compliance roadmap. Many firms are expected to accelerate their efforts throughout 2024 as the deadline approaches.

How RiskXchange Can Help Achieve DORA Compliance

RiskXchange offers tailored solutions to help financial firms meet DORA requirements through its managed risk and compliance services. Here’s how we assist organisations in aligning with DORA’s core pillars:

1. ICT Risk Management

RiskXchange helps financial institutions build resilient ICT risk management frameworks by providing continuous monitoring and risk assessments. Our platform identifies vulnerabilities in real-time and provides recommendations on risk mitigation, ensuring that firms maintain a robust defence against ICT-related threats.

2. Incident Reporting

DORA mandates stringent incident reporting protocols. RiskXchange facilitates real-time reporting of incidents, automating the notification process for regulators and ensuring that financial firms meet the necessary requirements without delays. Our platform is designed to streamline communication, both internally and externally, during and after incidents.

3. Operational Resilience Testing

RiskXchange offers regular testing and simulations of ICT systems to ensure resilience. Our services include stress testing ICT infrastructures to validate their ability to withstand disruptions, as required under DORA. This ensures that firms are prepared for worst-case scenarios and can recover quickly.

4. Third-Party Risk Management

RiskXchange’s third-party risk management capabilities are built to align with DORA’s rigorous requirements. We provide vendor assessments, continuous monitoring, and automated reports to ensure that third-party ICT providers comply with DORA. Our solution simplifies contract renegotiations and auditing, allowing businesses to manage their supply chain with confidence.

5. Information Sharing

Our platform encourages the sharing of cybersecurity threat intelligence across the financial sector. This collaboration is key to DORA’s vision of a secure financial ecosystem, and RiskXchange facilitates secure, compliant information sharing between entities, helping firms improve their collective resilience.

6. Regulatory Oversight and Reporting

RiskXchange supports financial institutions by keeping them updated on regulatory changes and ensuring adherence to oversight protocols. Our platform delivers comprehensive reports that align with DORA standards, providing transparency to regulators and allowing firms to demonstrate their compliance effectively.

Preparing for DORA Regulation: 8 Key Steps with RiskXchange

To prepare your organisation for the DORA regulation, here are eight essential steps, with RiskXchange’s services enhancing each stage:

1. Conduct a Gap Analysis: RiskXchange performs detailed gap analyses to assess your current ICT risk management processes against DORA’s requirements.
2. Enhance Third-Party Risk Management: We streamline third-party risk management by providing continuous vendor assessments and due diligence.
3. Invest in Cybersecurity Training: RiskXchange offers training modules to build a cyber-aware workforce aligned with DORA standards.
4. Develop Robust Incident Response Plans: Our incident response solutions provide clear, actionable protocols, ensuring compliance with reporting standards.
5. Foster Collaboration: Leverage RiskXchange’s information-sharing platform to participate in industry-wide cybersecurity collaboration.
6. Review IT Infrastructure: RiskXchange identifies vulnerabilities in ICT systems and offers tailored recommendations for upgrades or patching.
7. Engage Regulators: Our platform simplifies communication with regulators, ensuring that you stay informed about new developments related to DORA.
8. Allocate Resources: We provide cost-efficient solutions, ensuring your organisation has the tools and personnel needed to achieve DORA compliance.

Final Thoughts

DORA represents a significant shift in how financial firms in the EU approach digital resilience. By prioritising harmonised ICT risk management standards, DORA reflects the global nature of today’s financial systems and the shared risks they face. With the January 2025 deadline fast approaching, partnering with RiskXchange can help you accelerate your compliance journey, ensuring your organisation is ready to meet the challenges of this new regulatory landscape and build a resilient digital future.