Embracing the Opportunities and Challenges of the Digital Operational Resilience Act (DORA)

As the financial sector becomes increasingly digitalised, the importance of robust cybersecurity and operational resilience cannot be overstated. The European Union's Digital Operational Resilience Act (DORA) aims to ensure that financial institutions in the EU can withstand, respond to, and recover from all types of ICT-related disruptions and threats.

While DORA’s objectives are clear and necessary, the implementation of this Regulation presents both opportunities and challenges for the industry.?

DORA , which is set to become fully applicable on 17th January 2025, establishes a comprehensive regulatory framework for digital operational resilience for financial entities. The Act requires firms to implement measures to ensure ICT risk management, incident reporting, operational resilience testing, and oversight of third-party service providers.?

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Key Opportunities and Challenges surrounding DORA

• Enhancing Compliance Standards?

Financial institutions have the opportunity to align their existing ICT frameworks with DORA’s comprehensive standards. Although this may require significant overhauls and investments in new technologies, the result is a more robust and secure operational environment.?

• ?Strengthening Third-Party Risk Management?

DORA emphasises the importance of managing risks posed by third-party ICT service providers. Financial institutions can leverage this focus to implement rigorous vetting processes and continuous monitoring, thereby enhancing the overall security posture of their third-party relationships.?

• Strengthening Third-Party Risk Management?

The Act’s mandate for detailed reporting of significant ICT-related incidents to regulatory authorities encourages the development of efficient incident detection and response mechanisms. This not only ensures compliance but also fosters a culture of proactive risk management.??

• Advancing Operational Resilience Testing?

Regular and comprehensive testing of operational resilience is a cornerstone of DORA. Financial institutions can use this requirement to build advanced testing scenarios, including threat-led penetration testing (TLPT), which enhances their resilience capabilities.?

• ?Balancing Data Protection and Privacy?

While DORA necessitates extensive data collection and monitoring, it also provides an opportunity to streamline compliance with other data protection regulations like GDPR. Firms must carefully navigate these overlapping regulatory landscapes to maintain both security and privacy standards.?

• Regulatory Coordination?

DORA requires close coordination between various national and EU-level supervisory authorities. This fosters a harmonized approach to digital operational resilience, ultimately leading to a more stable and secure financial system across the EU.?

How to maximise the Benefits under the Digital Operational Resilience Act (DORA)?

To maximise the benefits of DORA while addressing its challenges, in-scope entities can adopt several strategies such as:?

• Investing in Technology: Upgrading legacy systems and investing in advanced cybersecurity technologies can help firms meet DORA's requirements more efficiently.?

• Enhanced Vendor Management: Implementing robust third-party risk management frameworks and conducting regular audits of service providers can mitigate risks associated with outsourcing.?

• Incident Response Planning: Developing comprehensive incident response plans and conducting regular drills can improve preparedness and ensure timely reporting.?

• Skills Development: Investing in the training and development of cybersecurity professionals can enhance internal capabilities for resilience testing and threat management.?

• Regulatory Liaison: Engaging proactively with regulators and participating in industry forums can help firms stay abreast of regulatory expectations and ensure smoother compliance processes.?

The Digital Operational Resilience Act presents a unique opportunity for financial institutions to strengthen their defenses against ICT-related risks. By understanding and addressing the key challenges associated with DORA, firms can enhance their operational resilience, protect their customers, and contribute to the stability of the financial system.?

As the January 2025 deadline approaches, it is crucial for financial institutions to prioritise their compliance efforts and adopt a proactive approach to managing digital operational resilience. The insights gained from this process will not only ensure regulatory compliance but also pave the way for a more secure and resilient financial ecosystem.?

BDO Malta is here to support your journey towards DORA compliance , providing the expertise and solutions needed to turn regulatory challenges into opportunities for growth and enhanced security. The insights gained from this process will not only ensure regulatory compliance but also pave the way for a more secure and resilient financial ecosystem.?

For further advice or support on preparing for DORA, reach out to our team at [email protected] , and we’ll help guide you through the process to ensure your compliance by the deadline.