Digital Operational Resilience Act (DORA)

Published On: March 13, 2025

What is the Digital Operational Resilience Act?

The Digital Operational Resilience Act (DORA) is an EU regulation designed to strengthen the digital resilience of financial entities. As the financial sector becomes increasingly reliant on technology, it also faces growing threats from cybercriminals. DORA addresses these challenges by requiring financial institutions to follow strict guidelines for safeguarding against Information and Communication Technology (ICT)-related incidents, covering protection, detection, containment, recovery, and repair.

DORA establishes clear rules for ICT risk management, incident reporting, operational resilience testing, and oversight of ICT third-party risks. This regulation aligns with the EU’s broader objective of enhancing financial stability and ensuring that financial entities can withstand and recover from digital disruptions, thereby protecting both institutions and consumers in an increasingly digitalized economy.

Key Provisions of the Digital Operational Resilience Act

Governance & Risk Management

Governance is essential for strengthening ICT security within financial firms. It provides a clear structure that defines roles and responsibilities, ensuring everyone knows their part in maintaining security and that proper care is taken with all ICT resources. This clarity helps in making quick decisions and holding people accountable. With senior management involved, there’s strategic oversight to align security efforts with the organization’s goals.

Effective governance also includes robust risk management processes that identify, assess, and mitigate ICT risks. This proactive approach helps in anticipating and addressing potential threats before they can cause significant damage. Under DORA, financial entities are required to establish comprehensive ICT risk management frameworks that include detailed strategies, policies, and procedures. These frameworks must cover all aspects of ICT risk, from identifying vulnerabilities to implementing controls that protect information and ICT assets.

Incident Reporting & Digital Resilience Testing

Financial institutions are required to report ICT-related incidents quickly and to regularly test their systems to ensure they can handle disruptions. The goal is to strengthen the financial sector’s ability to withstand cyber threats and operational failures.

Under DORA, financial entities must report major ICT incidents to regulators as soon as possible. They need to assess the severity of an incident and follow a structured reporting process. This includes an initial notification, updates if the situation changes, and a final report detailing the cause of the problem (root cause analysis), its impact, and the steps taken to fix it. If an issue involves a third-party service provider, such as a cloud or software provider, that must be reported as well. In some cases, if the impact is significant, companies may also need to inform their customers.

Beyond reporting incidents, DORA also mandates regular resilience testing to ensure financial institutions can continue operating even in the face of cyberattacks or system failures. The type and intensity of these tests depend on the level of risk an organization faces. Basic tests include vulnerability assessments and simulated attack scenarios, while larger institutions must conduct advanced tests like threat-led penetration testing. These tests should be carried out by independent experts to ensure an objective assessment. If any vulnerabilities are found, companies must take action to address them and report their findings to regulators.

Third-Party Risk Management

Since many financial entities depend on external service providers for critical operations, any failure or cyber incident involving these third parties could pose a major risk to the entire financial sector. To address this, DORA introduces stricter rules for how financial institutions manage their relationships with third-party providers. Companies must carefully assess the risks associated with outsourcing IT services and ensure that their vendors meet high security and resilience standards. This includes conducting due diligence before signing contracts, continuously monitoring performance, and having clear agreements in place about how incidents will be handled.

Regulators will also have greater oversight of key third-party providers, particularly those offering essential cloud and software services. DORA establishes a framework for identifying critical providers, who will be subject to direct supervision by EU authorities. These providers will need to meet strict operational resilience requirements, undergo regular audits, and demonstrate that they can handle cyber threats without disrupting the financial institutions they serve.

Challenges & Steps to Compliance with the Digital Operational Resilience Act

The complex regulatory environment adds further difficulty, as institutions must navigate harmonized rules across the EU and stay updated with the latest requirements. Cybersecurity threats are another concern, with DORA mandating advanced measures such as regular assessments and incident response plans. Additionally, DORA requires regular operational resilience testing to ensure institutions can handle ICT-related disruptions, which can be resource-intensive.
To address these challenges and ensure compliance, financial institutions can take several practical steps. Upgrading cybersecurity systems is crucial, involving investments in advanced tools for encryption, regular security checks, and continuous monitoring. Regular operational resilience testing, using scenario-based simulations, helps identify areas for improvement and ensures recovery from ICT incidents. Establishing strong vendor management protocols involves thorough checks on vendors and setting clear expectations for data security. Technology-driven solutions can simplify compliance processes by automating tasks and providing valuable insights. Training programs are vital for educating employees about DORA’s requirements, fostering a culture of compliance. Regular audits and continuous monitoring ensure ongoing compliance, helping identify and address potential issues early.

Conclusion & Next Steps

DORA plays a crucial role in strengthening digital resilience within the financial sector. Introducing uniform, harmonized governing principles for managing cyber risks, DORA ensures financial institutions can better withstand and recover from ICT-related disruptions. This regulation is essential for maintaining the stability and security of the financial system in the face of evolving cyber threats.

To prepare for DORA compliance and future regulatory challenges, firms should take proactive steps. Investing in advanced cybersecurity measures, conducting regular resilience testing, and establishing robust vendor management protocols are key actions. Employee training and awareness programs are also vital for fostering a culture of compliance and ensuring all staff understand their roles in maintaining digital resilience.

RiskSight’s Cyber Awareness Trainings and Strategic Cybersecurity Exercises offer comprehensive solutions to help financial institutions meet DORA’s requirements. These programs provide practical insights and hands-on experience to enhance cybersecurity preparedness and operational resilience.