DORA Regulation

The Digital Operational Resilience Act (DORA) is a European Union (EU) regulation that sets out a comprehensive framework for managing ICT risks in the financial sector. It applies to all financial institutions and critical third-party ICT service providers in the EU.

The key areas of DORA regulation are:

• ICT Risk Management: DORA requires financial institutions to implement a robust ICT risk management framework that covers all aspects of ICT risk, including identification, assessment, mitigation, and monitoring.
• Incident Reporting: DORA requires financial institutions to report significant ICT-related incidents to the relevant authorities.
• Operational Resilience Testing: DORA requires financial institutions to conduct regular operational resilience testing to identify and address any vulnerabilities in their systems and processes.
• ICT Third-Party Risk Monitoring: DORA requires financial institutions to have adequate measures in place to manage the risks associated with outsourcing critical functions or services to third-party ICT service providers.

DORA also includes a number of other requirements, such as requirements for data management, security, and governance.

Here is a summary of the key requirements in each area:

ICT Risk Management

• Establish a comprehensive ICT risk management framework.
• Identify and assess all ICT risks.
• Implement appropriate mitigation measures to reduce ICT risks to an acceptable level.
• Monitor ICT risks on an ongoing basis and make adjustments to the risk management framework as needed.

Incident Reporting

• Report significant ICT-related incidents to the relevant authorities within a specified timeframe.
• Provide the authorities with all relevant information about the incident, including its impact on financial services, the steps taken to mitigate the impact, and the steps taken to prevent similar incidents from happening in the future.

Operational Resilience Testing

• Conduct regular operational resilience testing to identify and address any vulnerabilities in systems and processes.
• Test all critical business services, processes, and IT systems.
• Engage in scenario-based testing to assess the ability to respond to a variety of disruptions.
• Review and update operational resilience testing plans on an ongoing basis.

ICT Third-Party Risk Monitoring

• Identify and assess the risks associated with outsourcing critical functions or services to third-party ICT service providers.
• Implement appropriate measures to mitigate these risks, such as due diligence, contractual arrangements, and ongoing monitoring.
• Have a plan in place to manage the disruption of critical services or functions provided by third-party ICT service providers.

DORA is a significant piece of legislation that aims to strengthen the operational resilience of the EU financial sector. It is important for financial institutions to start preparing for compliance with DORA as soon as possible.

The following organizations must comply with DORA:

• Financial institutions: All financial institutions in the EU, including banks, investment firms, insurance companies, and crypto-asset service providers.
• Critical third-party ICT service providers: ICT service providers that provide critical services to financial institutions, such as cloud service providers, software vendors, and managed service providers.

Critical third-party ICT service providers are defined as providers that:

• Provide a critical service to a financial institution.
• Have a significant impact on the financial institution's ability to provide its services.
• Are exposed to a high risk of disruption or failure.

The European Supervisory Authorities (ESAs) will be responsible for determining which third-party ICT service providers are considered critical.

Financial institutions and critical third-party ICT service providers have until January 17, 2025 to comply with DORA.

To comply with DORA regulation, financial institutions and critical third-party ICT service providers should take the following steps:

1. Assess their ICT risks. This includes identifying all of the ICT risks that the organization faces, as well as assessing the likelihood and impact of each risk.
2. Implement a risk management framework. This framework should include policies, procedures, and controls to mitigate the identified risks.
3. Develop a business continuity plan. This plan should outline how the organization will respond to and recover from ICT-related disruptions.
4. Conduct regular operational resilience testing. This testing should assess the ability of the organization's systems and processes to withstand and recover from ICT-related disruptions.

Monitor third-party ICT service providers. This includes assessing the risks associated with outsourcing critical functions or services to third-party ICT service providers, and implementing appropriate mitigation measures.

The Digital Operational Resilience Act (DORA) was created to strengthen the operational resilience of the EU financial sector. It aims to do this by:

• Requiring financial institutions and critical third-party ICT service providers to implement a comprehensive ICT risk management framework.
• Requiring financial institutions to report significant ICT-related incidents to the relevant authorities.
• Requiring financial institutions to conduct regular operational resilience testing.
• Requiring financial institutions to have adequate measures in place to manage the risks associated with outsourcing critical functions or services to third-party ICT service providers.

DORA was created in response to a number of factors, including:

• The increasing reliance of the financial sector on ICT.
• The growing sophistication and frequency of cyber attacks.
• The increasing interconnectedness of the financial system.

DORA is a significant piece of legislation that aims to address these challenges and protect the EU financial system from ICT-related risks.