Key Points:

• DORA is a crucial regulation for EU financial institutions, mandating a comprehensive approach to digital resilience. It aims to protect the stability of the financial system by requiring organisations to enhance their cybersecurity, develop incident response plans, and test their resilience.
• The deadline for institutions to comply with all DORA requirements is January 17, 2025. Organisations can face significant penalties for non-compliance, aimed at ensuring that financial institutions take their digital resilience obligations seriously.
• It applies to a wide range of financial institutions, including banks, tech companies handling financial data, large enterprises, and small and medium-sized businesses in the financial sector.‍‍
• DORA is built on five pillars: risk management, incident reporting, digital operational resilience testing, ICT third-party risk, and information and intelligence sharing. These pillars provide a structured framework for organisations to follow to ensure compliance. ‍
• Download our guide to find out how Metomic can support DORA compliance and safeguard your business's future.

Do you know how the Digital Operational Resilience Act (DORA) is changing the game for the cybersecurity landscape in the EU? To learn more about how we can help you comply, get in touch.

What is the Digital Operational Resilience Act and its purpose?

The Digital Operational Resilience Act (DORA), enacted as Regulation (EU) 2022/2554, represents a significant evolution in EU financial regulation, targeting the way in which financial institutions manage digital and technological risks.

Unlike previous approaches that primarily focused on managing financial risks through capital reserves, DORA mandates a comprehensive strategy for digital resilience. These institutions must actively enhance their defenses against cyber threats and develop plans to identify, manage, and recover from disruptions in their information and communication technology (ICT) systems.

DORA specifically addresses ICT risks, setting strict guidelines for risk management, incident reporting, resilience testing, and monitoring risks associated with external IT services. This shift recognises the vital role of technology in the financial sector and the potential systemic risks posed by ICT failures.

DORA's holistic approach prepares financial institutions, equipping them operationally to navigate and adapt to the increasingly complex landscape of digital threats, thereby safeguarding the stability of the broader financial system.

Why is DORA Compliance Important?

The importance of DORA lies in its practical impact on organisations. DORA directly addresses the challenges and risks of operating in a digital environment.

Here are some key applications:

• Stronger Security Protocols: DORA compels organisations to upgrade their cybersecurity measures, reducing the likelihood of data breaches and cyberattacks.
• Business Continuity: It requires organisations to have solid plans for continuing operations during digital disruptions, ensuring stability and reliability.
• Building Customer Trust: By complying with DORA, companies show their commitment to protecting customer data, which can lead to increased trust and loyalty.
• Financial Risk Mitigation: Non-compliance can incur fines of up to one percent of daily global turnover for financial institutions. This penalty can accumulate daily until compliance is achieved, alongside risks of reputational damage, customer loss, regulatory scrutiny, and potential criminal charges.
• Reputation Protection: Following DORA's guidelines helps in safeguarding a company's public image against the fallout from potential digital crises.

The Roadmap to DORA Compliance

The Digital Operational Resilience Act (DORA) went into effect on January 16, 2023. Affected organisations were given a 24-month implementation period.

Key Compliance Deadlines:

• January 17, 2024: The European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA) finalised Regulatory Technical Standards (RTS) for ICT risk management under DORA.  
• January 17, 2025: This is the deadline for institutions to comply with all DORA requirements.

ECB's Digital Operational Resilience Testing:

• The European Central Bank (ECB) began conducting digital operational resilience testing on January 3, 2024. This involved assessing the resilience of 109 banks across the EU.

To ensure ongoing compliance, organisations should stay updated on any potential changes or clarifications to DORA regulations.

What are the Penalties for DORA Non-Compliance?

The Digital Operational Resilience Act (DORA) imposes significant penalties for non-compliance, aimed at ensuring that financial institutions take their digital resilience obligations seriously.

These penalties can include:

Administrative Fines:

• Up to 1% of daily global turnover: Financial institutions that fail to comply with DORA can be fined up to 1% of their daily global turnover.
• Daily accumulation: The fines can accumulate on a daily basis until compliance is achieved, potentially resulting in substantial financial penalties.

Reputational Damage:

• Loss of trust: Non-compliance can damage an institution's reputation, leading to a loss of trust from customers, investors, and other stakeholders.
• Regulatory scrutiny: Non-compliant institutions may face increased regulatory scrutiny, which can further damage their reputation and lead to additional penalties.

Operational Disruptions:

• Cyberattacks and data breaches: Non-compliance can increase the risk of cyberattacks and data breaches, which can disrupt operations, lead to financial losses, and damage customer relationships.
• Service disruptions: Failure to comply with DORA can also result in service disruptions, which can negatively impact customers and harm the institution's reputation.

Criminal Charges:

• In extreme cases: In the most severe cases of non-compliance, individuals within the institution may face criminal charges.

It is important to note that these penalties are not mutually exclusive. A financial institution that fails to comply with DORA may face multiple penalties, including fines, reputational damage, operational disruptions, and potentially criminal charges.

To avoid these penalties, financial institutions must take proactive steps to ensure their compliance with DORA. This includes conducting regular risk assessments, developing incident response plans, testing their resilience, and managing third-party risks.

Who Needs to Comply?

DORA impacts a broad range of sectors within the EU's financial landscape. Its requirements stretch across various business types, each integral to the financial ecosystem's digital operations, and have implications for entities outside the EU that offer services within its market.

The impacted sectors include:

• Financial Institutions and Banks: Entities engaged in handling deposits, loans, investments, and currency exchange.
• Tech Companies Handling Financial Data: Firms that process or store financial information, including payment processors and fintech start-ups.
• Large Enterprises Subject to EU Regulations: Major corporations operating in the EU must comply with a wide range of financial and data protection laws, including DORA
• Small and Medium-Sized Businesses in the Financial Sector: Smaller scale firms providing financial services or products, which are subject to the same regulatory standards as larger institutions.

What are the 5 Pillars of DORA Regulation?

The 5 Pillars of DORA Regulation offer a structured approach to improving business operations. Each pillar represents a critical focus area, working collectively to ensure system stability and effectiveness.

This framework simplifies complex topics into manageable segments, ensuring thorough coverage and successful outcomes.

1. Risk Management

The Risk Management pillar within DORA calls for organisations, especially those in the financial sector, to establish and maintain a comprehensive framework for managing all information and communication technology (ICT) risks. This framework should cover the entire lifecycle of ICT systems, including their design, development, deployment, and decommissioning.

The aim is to ensure that the business can continue to operate effectively in the face of ICT disruptions and has resilient disaster recovery and business continuity plans.

2. Incident Reporting

Incident Reporting mandates that organisations have solid cybersecurity incident detection and reporting mechanisms. It ensures that ICT-related incidents are reported promptly and comprehensively, enabling rapid response and mitigation to minimise impact. Organisations must keep a detailed log of incidents and be prepared to share this information with regulatory bodies when necessary.

3. Digital Operational Resilience Testing

Under this pillar, organisations are expected to regularly test their ICT systems to ensure they are resilient to known and emerging threats. This testing should be proportionate to the business's risks and can include a range of methodologies, from basic assessments to advanced threat-led penetration tests. The results should inform the ongoing development of the ICT risk management framework.

4. ICT Third-Party Risk

The ICT Third-Party Risk pillar requires organisations to manage and monitor the DORA compliance risks associated with third-party ICT service providers, including cloud services. Organisations must ensure these third parties can maintain the same level of ICT resilience as they are required to and must take responsibility for overseeing these third-party relationships.

5. Information and Intelligence Sharing

Information and Intelligence Sharing encourages organisations to participate in sharing information about ICT risks and incidents. This pillar aims to create an environment of collaboration between organisations, allowing them to benefit from shared experiences and responses to ICT threats, thus enhancing the overall resilience of the financial sector.

These pillars collectively aim to create a resilient financial ecosystem that is well-prepared, withstanding, and responding to a range of ICT risks, thereby safeguarding the stability and integrity of financial markets.

DORA Requirement Checklist: How to become and remain compliant with DORA regulations

Staying compliant with the Digital Operational Resilience Act requires a proactive approach to integrating best practices into everyday operations.

These following best practices can help ensure that your organisation remains compliant with DORA:

1. Conduct Regular and Comprehensive ICT Risk Assessments

‍Update your risk assessments frequently to account for evolving threats, ensuring each assessment culminates in actionable insights and specific remediation plans.

2. Establish Real-time Monitoring and Prompt Incident Reporting Systems:

Deploy advanced monitoring systems that can detect potential ICT risks as they emerge. Develop clear protocols that dictate swift internal and external incident reporting procedures.

3. Schedule Routine and Advanced Resilience Testing

‍Go beyond annual testing—schedule semi-annual or quarterly testing that simulates various attack scenarios to test the resilience of your ICT system.

4. Mandate Regular Cybersecurity Training for All Employees

‍Create an ongoing training program that includes regular updates on new security protocols, emerging threats, and compliance requirements to ensure staff remain informed and vigilant.

5. Create a Dedicated Compliance Task Force

‍Assign a team specifically to monitor compliance with DORA, equipped with the authority and tools necessary to implement changes and enforce regulations across all departments.

6. Leverage Compliance Automation Tools

‍Utilise software that can automate compliance checks, track regulation changes, and assist in maintaining an updated compliance status across all areas affected by DORA.

7. Engage in Industry Collaboration for Intelligence Sharing

‍Actively participate in industry groups and forums to share and receive updates on cyber threats, leveraging collective intelligence to protect against potential ICT risks pre-emptively.

8. Document and Review All Compliance Efforts

‍Keep meticulous records of all compliance activities, including risk assessments, training sessions, testing results, and incident responses, and regularly review these records to identify areas for improvement.

9. Ensure Third-Party Vendor Compliance

‍Conduct thorough due diligence on all third-party vendors to verify that their security practices align with DORA standards and establish strict contractual agreements that bind them to them.

10. Implement Effective Data Loss Prevention (DLP) Mechanisms

‍Integrate DLP solutions that automatically monitor and control data transfer across your network, preventing unauthorised data breaches and ensuring DORA guidelines handle sensitive information.

How Metomic supports DORA compliance

Metomic aligns well with DORA's pillars, offering you the essential tools for your organisation to maintain compliance.

Here's how Metomic can help you comply with DORA:

• Automated Detection of Sensitive Data: Metomic swiftly locates personal and confidential data within SaaS applications, addressing DORA's mandate for effective risk management by preventing data breaches before they occur.
• Customisable Classifiers: By allowing organisations to define sensitive data, Metomic supports DORA’s requirement for tailored risk management strategies, ensuring that all relevant data types are under surveillance.
• Risk Assessment with AI: Metomic’s AI-driven risk scoring aligns with DORA's call for intelligent and prioritised risk assessments, ensuring that the most significant risks are identified and managed first.
• Policy Automation Across Apps: Automating policy enforcement is key to DORA's incident response and management directives, and Metomic's capabilities ensure that compliance measures are consistently applied across all applications.
• Real-Time Alerts and Employee Empowerment: Immediate notifications to employees about policy breaches are crucial for DORA’s focus on swift incident reporting and management, fostering a culture of compliance and self-remediation within the team.
• Easy Integration with SaaS Applications: Seamless integration with commonly used SaaS tools ensures that DORA’s operational resilience measures are upheld without disrupting business workflows.

To see how Metomic can streamline your path to DORA compliance, get in touch with our team directly or download our guide below.