DORA: What is the Digital Operational Resilience Act?
The Digital Operational Resilience Act (DORA) is a regulation designed to transform digital risk management in the European Union’s (EU) financial industry. Essentially, DORA establishes a set of requirements for EU financial institutions to protect their key business processes from technology risks and to reshape how they approach digital risk management, incident response, and third-party relationships.
DORA specifically aims to strengthen the IT security of banks, insurance companies, investment firms, and other financial sector organizations. If you want to learn more about DORA, register for our next webinar with HYCU on January 16th. Until then, keep reading!
For EU financial companies, IT Directors and C-suite executives are in the spotlight to understand and prepare for DORA—not just as a regulatory requirement but as a strategic imperative. This urgency is underscored by the severe consequences of non-compliance:
- Financial Penalties: Fines of up to €10 million. For severe or repeated violations, these fines can be doubled.
- Damage to Consumer Trust: Non-compliance can lead to increased vulnerability to cyber incidents, potentially resulting in data breaches or service disruptions. These events can damage an organization’s reputation, erode consumer confidence, and result in customer churn and reduced market share.
- Personal Criminal Liability: In cases of severe negligence or willful misconduct, senior management and board members may face personal criminal liability. This could include individual fines, professional disqualification, and even imprisonment in extreme cases. This personal risk highlights the need for top-level engagement in ensuring DORA compliance.
Given these high stakes, IT Directors and C-suite executives must address DORA as not just a regulatory obligation but a strategic necessity.
Background and history
ICT-related incidents within financial institutions have the potential to cause significant disruptions, financial losses, and reputational damage.
DORA is a key component of the European Commission’s broader digital finance strategy. Its objectives include:
- Consolidating and upgrading ICT risk management requirements within the financial sector.
- Establishing a framework for ICT providers, including cloud platforms.
- Creating a mechanism for incident reporting to raise awareness of cyber threats.
- Strengthening digital operational resilience testing.
By creating consistency in these requirements across the EU, DORA aims to enhance the overall stability and integrity of financial systems.
Why DORA is important?
DORA represents a significant shift towards a uniform approach to ICT risk management across the EU financial sector. It addresses growing concerns about cyber threats and technological vulnerabilities that could disrupt the financial industry.
Key aspects of DORA:
- Comprehensive Scope: DORA applies to a wide range of financial entities, including banks, insurance companies, investment firms, and financial service providers.
- Harmonization: It establishes consistent ICT risk management requirements across the EU, replacing the current patchwork of national regulations.
- Third-Party Oversight: DORA introduces a framework for overseeing critical ICT third-party service providers, including cloud services.
- Incident Reporting: It mandates standardized reporting mechanisms for major ICT-related incidents.
- Resilience Testing: DORA requires regular testing of digital operational resilience.
Deadlines and compliance
DORA came into force on January 16, 2023. However, financial entities have until January 17, 2025, to achieve full compliance. This two-year window is crucial for organizations to assess their current systems, implement necessary changes, and prepare for the new regulatory environment.
Don’t panic—you still have time! Register for our next webinar with HYCU and take action now. See you on January 16th!
In the next article, we’ll tell you more about the key areas of DORA. Stay tuned!
