Introduction
As technology evolves rapidly, the imperative to safeguard and fortify our financial systems also intensifies. The Digital Operational Resilience Act (DORA), a new EU regulation, is a landmark initiative that seeks to enhance the security and reliability of the financial sector. DORA sets standards for Information and Communications Technology (ICT) risk management, incident reporting, operational resilience testing, and ICT third-party risk monitoring. In this blog, we will explore the main features of DORA, and offer practical guidance to help businesses comply with this innovative regulation.
DORA became effective on January 17th, 2023, giving organizations a 24-month period to achieve a state of compliance. This 2-year period is a short time frame for organizations to conduct a gap analysis against the regulation and also address those gaps. The final deadline is January 17th, 2025, after which the regulation will be fully enforceable.
What is the Digital Operational Resilience Act (DORA)?
DORA is a key instrument to enhance and harmonize the operational resilience of financial market participants and supervisory authorities across the EU. Based on the principles of continuity, security, and stability, this regulation overcomes boundaries and promotes cooperation in protecting essential functions. It applies to a variety of entities, such as banks, payment service providers, e-money institutions, and data reporting service providers also and non-traditional entities, like crypto-asset service providers and crowdfunding platforms.
Adopting the Features of DORA
Cybersecurity Capabilities:
DORA requires entities to enhance their cybersecurity capabilities, as the threat landscape changes constantly. By taking a preventive approach and implementing robust measures such as strong authentication methods, encryption standards, and alert monitoring systems, vital systems and priceless data can be protected from malicious actors.
Third-Party Risk Management:
DORA acknowledges the important role of third-party service providers, requiring a solid risk management strategy. Engaging with caution, entities should perform due diligence when choosing and working with third parties, with a special attention to cloud service providers. By applying necessary controls and safeguards, the risks related to such partnerships can be effectively reduced.
ICT Risk Management Framework:
DORA emphasizes the need to establish an efficient Information and Communication Technology (ICT) risk management framework. By developing comprehensive governance structures, policies, and procedures, entities can skillfully identify, assess, and mitigate ICT-related risks, thus enhancing resilience at its core.
Incident Reporting and Communication:
Prompt and clear communication are essential for DORA’s philosophy. Entities are obliged to report significant incidents to relevant supervisory authorities without delay. By creating an atmosphere of open dialogue, the financial sector can effectively respond, coordinate, and adapt to the dynamic challenges caused by potential disruptions.
Resilience Testing and Scenarios:
Under DORA’s guidance, entities are expected to conduct regular resilience testing to evaluate their operational continuity in the face of cyber and IT-related threats. By designing and executing realistic stress-testing scenarios, vulnerabilities and weaknesses are exposed, paving the way for strong and proactive measures.
Navigating the way to DORA compliance
Policies and Documentation:
Create and document comprehensive policies and procedures that embody the essence of DORA. These instruments should thoroughly cover areas such as incident reporting, third-party risk management, ICT risk management, and resilience testing. By having a clear plan, organizations can securely navigate the compliance terrain.
Risk Assessment:
Start the compliance journey by conducting a comprehensive risk assessment, revealing potential vulnerabilities and areas of non-compliance. Assess existing cybersecurity measures, incident response plans, and operational resilience capabilities against DORA’s requirements, thus clarifying the way forward.
Empowering Incident Response Plans:
Create comprehensive incident response plans that outline clear steps to be taken in the event of a cybersecurity incident or disruption. By promoting seamless communication, accurate escalation procedures, and defining roles and responsibilities, organizations can reduce risks and enable fast and effective response.
Strengthening Cybersecurity Measures:
Proactively implement advanced cybersecurity measures, such as multi-factor authentication, intrusion detection systems, and encryption protocols. Moreover, ensure regular updates and patches to software and systems, thus efficiently mitigating known vulnerabilities and improving the overall security posture.
Fortifying Resilience Testing:
Establish a rigorous testing program, featuring realistic scenarios that evaluate the operational resilience of critical functions. Regular review and adaptation of the testing program, in line with emerging threats and industry best practices, ensure that entities remain well-prepared in the face of adversity.
Use Case Scenarios
Use Case 1: Operational Resilience Testing
Scenario: A payment service provider implements a new ICT system to enhance its operational efficiency and customer satisfaction. The new system supports the payment service provider’s critical functions, such as payment initiation, payment execution, and fraud prevention.
Use Case: The payment service provider follows an ICT risk management framework that complies with DORA rules. The payment service provider identifies, assesses, and mitigates the ICT risks associated with the new system, such as compatibility, reliability, and security issues. The payment service provider also conducts operational resilience testing to evaluate the operational continuity of the new system in the face of cyber and IT-related threats. The payment service provider documents its ICT risk management policies and procedures and reports any significant changes to the supervisory authorities.
Use Case 2: Incident Reporting and Communication
Scenario: A credit rating agency experiences a cyberattack that compromises its ICT systems and data. The cyberattack affects the credit rating agency’s critical information services, such as credit rating reports, data analytics, and market insights.
Use Case: The credit rating agency follows its incident response plan and reports the incident to the relevant supervisory authorities within the DORA timeframe. The credit rating agency also communicates with its customers and other stakeholders about the incident and the measures taken to resolve it. The credit rating agency conducts a root cause analysis and implements corrective actions to prevent similar incidents in the future. The credit rating agency also reviews its cybersecurity measures and operational resilience capabilities to ensure compliance with DORA standards.
Use Case 3: ICT Risk Management Framework
Scenario: A fund management company adopts a new ICT system to improve its portfolio management and reporting capabilities. The new system supports the fund management company’s critical functions, such as asset allocation, performance measurement, and risk analysis.
Use Case: The fund management company follows an ICT risk management framework that complies with DORA rules. The fund management company identifies, assesses, and mitigates the ICT risks associated with the new system, such as compatibility, reliability, and security issues. The fund management company also documents its ICT risk management policies and procedures and reports any significant changes to the supervisory authorities.
Conclusion
The Digital Operational Resilience Act (DORA) is a groundbreaking regulation that aims to enhance the security and reliability of our financial systems. By adopting its requirements and complying proactively, financial market participants can prepare for a resilient future. Developing resilience testing, solid risk management frameworks, efficient incident response plans, and transparent communication channels ensure our capability to cope with the complex cyber environment. Let us jointly embrace the essence of DORA, strengthening our financial systems while protecting the well-being of our interlinked world.
About us:
We are Timus Consulting Services, a fast-growing, premium Governance, Risk, and compliance (GRC) consulting firm, with a specialization in the GRC implementation, customization, and support.
Our team has consolidated experience of more than 15 years working with financial majors across the globe. Our team is comprised of experienced GRC and technology professionals that have an average of 10 years of experience. Our services include:
- GRC implementation, enhancement, customization, Development / Delivery
- GRC Training
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Our team:
Our team (consultants in their previous roles) have worked on some of the major OpenPages projects for fortune 500 clients across the globe. Over the past year, we have experienced rapid growth and as of now we have a team of 15+ experienced and fully certified OpenPages consultants, OpenPages QA and OpenPages lead/architects at all experience levels.
Our key strengths:
Our expertise lies in covering the length and breadth of the IBM OpenPages GRC platform. We specialize in:
- Expert business consulting in GRC domain including use cases like Operational Risk Management, Internal Audit Management, Third party risk management, IT Governance amongst others
- OpenPages GRC platform customization and third-party integration
- Building custom business solutions on OpenPages GRC platform
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