The Digital Operational Resilience Act (DORA) is a European Union (EU) regulatory framework aimed at enhancing the resilience of financial institutions. Effective from January 2023, with compliance required by 17 January 2025, DORA mandates stringent regulatory requirements including ICT risk management, cyber incident reporting, and digital operational resilience measures. Part of the EU’s Digital Finance Package, DORA enforces consistent standards across the financial sector, ensuring robust practices among market participants and their ICT providers to safeguard against disruptions to cybersecurity. Given the tightening of the regulatory landscape through DORA and other UK regulation, automated Governance, Risk and Compliance solutions are becoming invaluable.

Although the UK is no longer part of the EU, DORA still holds significant implications for UK based financial services firms and financial market infrastructures that fall in scope. However, it is down to each firm to ascertain whether or not they fall under the scope of DORA. Many firms that operate cross-border or interact with EU-based entities will need to comply with emerging UK equivalent regulation as well as DORA. This includes adhering to stringent new protocols, requirements and testing. Even those firms not directly under DORA’s jurisdiction may need to implement equivalent measures to maintain competitiveness and ensure continued access to EU based institutions, given the interconnected nature of financial markets.

The Five Key Pillars of DORA:

ICT Risk Management: Firms must establish a comprehensive framework to identify, assess and mitigate risks associated with ICT. Establishing resilient ICT systems and protocols enables proactive management.

Cyber Incident Reporting and Response: The mandatory process of promptly identifying, reporting and managing ICT disruptions.

Operational Resilience Testing: Regularly assessing a firm’s ability to withstand and recover from ICT disruptions through advanced techniques like penetration testing and scenario-based evaluations.

ICT Third-party Risk Management: Assessing, monitoring and mitigating risks associated with external service providers. Revising contracts and enhancing oversight mechanisms will enhance the expected stringent incident reporting and periodic operational resilience testing.

Information Sharing Agreements: the secure exchange of cyber threat intelligence and insights among Firm’s and relevant authorities.

Seven Challenges Firms’ Face

Resource constraints: Meeting new requirements can be resource-intensive and demanding, resulting in the need for additional personnel, upgraded technology and ongoing training.

Integration with existing frameworks: Integrating DORA’s requirements into existing Governance, Risk and Compliance frameworks is complex, requiring seamless alignment without disruption business operations.

Complexity of ICT Risk Management: Developing robust ICT management frameworks under DORA could be challenging due to the ever-changing threat landscape, necessitating continuous monitoring and adaption.

Comprehensive Incident Reporting: The mandate for ICT incident reporting under DORA involves managing large volumes of complex data and ensuring timely, accurate and complete reports.

Resilience Testing: Regular testing of digital operational resilience through scenario-based tests requires significant time, expertise and the ability to identify and address vulnerabilities.

Information and Intelligence Sharing: Establishing secure, efficient information sharing channels among financial institutions, while ensuring data privacy and regulatory compliance, a substantial task under DORA.

Third-Party Risk Management: Assessing and monitoring the resilience of third-party service providers involves navigating complex supply chains and varying third-party risk management practices, critical for DORA compliance.

Automated GRC solutions are critical for managing ICT risks and can help with DORA compliance:

ICT Risk Management: Through automated risk assessments, identification and mitigation of ICT risks and ensuring compliance through advanced reporting capabilities.

Incident Reporting: Centralising information and automating incident data and notifications, ensuring timely stakeholder communication and detailed incident logs.

Operational Resilience Testing: Supporting the scheduling, executing and documenting of resilience tests, helping institutions identify weaknesses and implement improvements.

Information sharing: Facilitating efficient information sharing, maintaining data integrity and enhancing sector-wide security.

Third-Party Risk Management: By automating the assessment and management of third-party risks and centralising data to proactively address vulnerabilities and show compliance.

Resource constraints: By automating compliance and risk management processes, manual oversight is reduced, and additional regulatory demands are met without the need for additional staffing.

Integration with existing frameworks: Flexible, scalable platforms that incorporate DORA-specific processes into existing frameworks, ensuring seamless integration and operational continuity.

DORA presents significant challenges for financial services businesses. However, automated Governance, Risk and Compliance solutions offer a robust framework to address these challenges effectively, ensuring compliance with DORA and other new regulatory requirements, enhancing digital operational resilience.

As the early 2025 compliance deadline approaches, leveraging GRC technologies will be crucial for both UK and EU based financial services firms to overcome challenges, maintain competitiveness and ensure ongoing compliance with both DORA and evolving UK regulation, guaranteeing robust and secure operations in an increasingly regulated world. Axiol is a comprehensive solution to these challenges, providing unlimited scalability, automated enterprise-wide risk management and tailored workflows through a centralised hub. Our team also provides expert advisory services. Discover the full capabilities of Axiol by booking a demo today. For more information, please visit www.axiol.com or contact us via email at info@axiol.com.