Digital Operational Resilience Act (DORA)

Before DORA, financial institutions primarily managed operational risks by allocating capital to cover potential losses. While some EU regulators released guidelines on ICT and security risk management, they only applied to some financial entities. These guidelines often relied on general principles rather than specific technical standards. As a result, EU member states issued their requirements. Additionally, this approach failed to encompass all aspects of operational resilience, especially for ICT.  

DORA lays down uniform requirements concerning the security of networks and information systems supporting financial entities' business processes. These requirements include risk management, reporting ICT-related incidents, digital operational resilience testing, information sharing and measures and requirements for using ICT third-party services.  

By establishing a universal framework for risk management across the EU, DORA seeks to remove the gaps, overlaps and conflicts that could arise between disparate regulations in different EU states.  

DORA applies to all financial institutions in the EU DORA. This includes:  

• Banks 

• Credit institutions 

• Payment institutions 

• Electronic money institutions 

• Investment firms 

• Crypto-asset service providers 

• Alternative investment funds 

• Crowdfunding platforms 

• Insurance managers 

DORA also applies to some entities typically excluded from financial regulations. For example, third-party service providers that supply financial firms with ICT and systems and services – like cloud service providers and data centres – must follow DORA requirements. DORA also covers firms that provide third-party information services, such as credit rating services and data analytics providers.

DORA establishes technical requirements for financial entities and ICT providers across four domains: 

• ICT risk management and governance 

• Incident response and reporting 

• Digital operational resilience testing

• Third-party risk management 

Requirements will be enforced proportionately, which means smaller entities will be held to standards different from those of major financial institutions. 

ICT risk management and governance 

Covered entities are expected to develop comprehensive ICT risk management frameworks. They must map their ICT systems, identify and classify critical assets and functions, and document dependencies between assets, systems, processes and providers. They must also conduct continuous risk assessments of their ICT systems, document and classify cyber threats, and document their steps to mitigate identified risks. 

Incident response and reporting 

Covered entities must establish systems for monitoring, managing, logging, classifying and reporting ICT-related incidents. Depending on the severity of the incident, entities may need to make reports to regulators and affected clients and partners. Entities must file three reports for critical incidents: an initial report notifying authorities, an intermediate report on progress toward resolving the incident and a final report analysing the root causes. 

Digital operational resilience training 

Entities must regularly test their ICT systems to evaluate the strength of their protections and identify ‌vulnerabilities. The relevant competent authorities will report the results of these tests and validate the plans to address any weaknesses they find. 

Third-party risk management 

Financial firms are expected to take an active role in managing ICT third-party risk. When outsourcing critical functions, financial entities must negotiate specific contractual arrangements regarding exit strategies, audits and performance targets for accessibility, integrity and security, among other things. Entities must meet these requirements to contract with ICT providers. The competent authorities are empowered to suspend or terminate contracts that don't comply.

As the industry embraces digital transformation, understanding and implementing DORA is essential for maintaining trust, compliance and stability in the financial ecosystem. 

Here are some of the main benefits:  

• Strengthened cybersecurity: Entities must implement advanced cybersecurity measures that reduce vulnerabilities and safeguard sensitive financial data. This ensures organisations remain vigilant against emerging threats. 

• Improved operational resilience: DORA mandates stress testing and continuity plans to ensure operations remain uninterrupted during cyberattacks, outages or other disruptions. As a result, financial entities are better equipped to detect, manage and recover from incidents promptly, minimising downtime and impact. 

• Regulatory uniformity: DORA harmonises operational resilience regulations across all EU member states, simplifying compliance for multinational organisations. This creates uniform expectations for all financial institutions, from traditional banks to fintechs, ensuring fair competition and transparency.
   

• Enhanced customer trust: Customers benefit from safer banking and financial services due to enhanced cybersecurity protocols, ensuring institutions effectively address risks. 

• Reduced systemic risk: By focusing on digital resilience, DORA helps prevent localised incidents from escalating into systemic crises that could impact the entire financial sector. It encourages stronger collaboration and information sharing among financial institutions to combat industry-wide risks. 

• Third-party risk management: DORA enforces strict guidelines for monitoring and managing risks from critical third-party providers, such as cloud service vendors. This ensures that external partners comply with resilience standards and protect institutions from indirect vulnerabilities. 

DORA represents a pivotal step toward creating a more resilient and secure financial services industry. Adopting finance and banking solutions ensures compliance and strengthens a financial organisation’s ability to protect its operations, customers and reputation from evolving digital threats.