What is DORA Compliance? Purpose, Requirements and Checklist

What is DORA Compliance

The Digital Operational Resilience Act (DORA) focuses on enhancing operational resilience in financial institutions by addressing risks associated with information and communication technologies (ICT).

It mandates financial entities to effectively manage and maintain resilience against cyber-risks. DORA establishes stringent requirements for incident prevention, detection, containment, and recovery to minimize the impact of ICT disruptions. Financial institutions must implement robust risk management protocols, promptly report incidents, and conduct operational resilience testing.

DORA emphasizes the need to monitor third-party risks, recognizing the potential systemic consequences of security incidents and inadequate operational resilience on the financial system’s stability.

What Is the Purpose of DORA?

DORA aims to comprehensively address ICT risk management within the financial services sector across the European Union. Prior to its enactment, ICT risk management varied significantly due to inconsistent and non-binding guidelines from EU regulators. This led to disparities in capital reserve requirements and posed challenges for financial entities navigating the complex regulatory landscape. DORA establishes a harmonized framework that eliminates compliance issues and ensures consistent risk management practices throughout the EU. By standardizing rules, DORA enhances the resilience of the EU financial system and promotes a more unified approach to managing ICT risks.

What Is the Scope of DORA?

DORA has a wide-reaching scope, covering all financial institutions within the European Union. This includes both traditional entities such as banks, investment firms, and credit institutions, as well as non-traditional entities like crypto-asset service providers and crowdfunding platforms. Additionally, DORA extends its purview to entities that are often exempt from financial regulations. These include third-party service providers that furnish ICT systems and services, such as cloud providers and data centers, as well as firms that offer critical third-party information services, such as credit rating agencies and data analytics providers.

How is DORA Enforced?

DORA assigns enforcement responsibilities to competent authorities within each EU member state. These authorities possess the power to request specific security measures, mandate vulnerability remediation, and impose administrative or criminal penalties on non-compliant entities.

The penalties and enforcement mechanisms can vary from one member state to another. DORA also establishes a supervisory framework for critical ICT providers, with lead overseers from the European Supervisory Authorities (ESAs) holding oversight responsibilities.

Lead overseers can request security measures and remediation and impose penalties on ICT providers that fail to comply with DORA’s requirements. Additionally, ESAs may impose fines of up to 1% of the average daily worldwide turnover of non-compliant entities, with a maximum duration of six months. This enforcement framework aims to ensure the resilience and security of critical ICT services within the European Union.

How Does DORA Affect Your Organization?

DORA has significant implications for financial institutions. Firstly, DORA mandates annual independent testing to assess system resilience and vulnerability, which includes regular penetration testing driven by threat intelligence.

Organizations must implement risk-based protection measures, manage networks and infrastructure with a risk-based approach, establish appropriate vulnerability management policies, and ensure robust authentication mechanisms. Limiting physical and virtual access to ICT resources and data is also essential. DORA requires organizations to establish processes for detecting, managing, and notifying ICT-related incidents, including early warning indicators. Moreover, organizations must report and describe significant incidents to DORA authorities.

What Are the Technical Requirements for DORA?

DORA imposes technical requirements on financial entities and ICT providers in the following domains:

• ICT Risk Management and Governance: Entities are responsible for ICT management, including risk assessments, mitigation plans, and cybersecurity measures.
• Incident Response and Reporting: Entities must establish systems for reporting critical incidents to regulators and stakeholders.
• Digital Operational Resilience Testing: Entities must test ICT systems to identify vulnerabilities and improve resilience.
• Third-Party Risk Management: Financial firms must actively manage ICT third-party dependencies, ensuring contracts address accessibility, integrity, and security.
• Information Sharing: Information sharing is encouraged between entities to enhance incident response and resilience.

How Do I Start Preparing for DORA?

Financial institutions are granted a year to align their operations with the Digital Operational Resilience Act (DORA) regulations. Compliance requirements are tailored to the institution’s scale and nature of business. The European Supervisory Authorities (ESAs) will establish appropriate technical standards to guide compliance. Notably, entities facing elevated cybersecurity risks are provided an additional 36-month grace period to prepare and execute advanced penetration testing, ensuring they are adequately equipped to safeguard their digital infrastructure.

Familiarize Yourself with DORA

It is crucial to thoroughly understand the DORA regulation and its implications for financial institutions. This involves delving into the regulatory text and grasping its scope, objectives, and specific requirements. A clear understanding of DORA will guide your compliance efforts and ensure that your institution aligns with its mandates.

Assess Your Compliance Status

Once you have a firm grasp of DORA, the next step is to conduct a thorough assessment of your institution’s current compliance status. This involves identifying gaps between your existing practices and the requirements set forth by the regulation. A comprehensive assessment will highlight areas where improvements are necessary, enabling you to prioritize your compliance efforts.

Develop a Compliance Plan

Based on the results of your compliance assessment, develop a comprehensive plan that outlines the steps your institution will take to achieve compliance with DORA. This plan should include specific timelines, resource allocation, and a clear roadmap for implementation. By establishing a structured plan, you ensure that your institution is on track to meet the regulatory requirements in a timely and effective manner.

Prioritize Investments

It is essential to prioritize investments in areas where there is a significant need for improvement. This may include investing in supply risk management capabilities, enhancing threat intelligence gathering, or implementing advanced security testing tools. By strategically allocating resources, you can optimize your compliance efforts and address the most critical areas of concern.

Seek Expert Advice

Throughout the DORA compliance journey, do not hesitate to consult with experts in ICT and cybersecurity for guidance and support. These professionals can provide invaluable insights, best practices, and technical assistance to help your institution navigate the regulatory landscape and achieve compliance efficiently.

DORA Compliance Checklist

This checklist provides a structured approach to achieving compliance with the Digital Operational Compliance Act (DORA) for finance entities.

1. Scope Determination: Identify whether your organization falls within the scope of DORA, as outlined in Article 2.
2. Gap Analysis: Conduct a thorough assessment to identify gaps in ICT systems that hinder compliance with DORA requirements.
3. Remediation Plan: Develop a roadmap to address compliance gaps, based on the findings of the gap analysis.
4. Critical Third-Party ICT Providers: Identify third-party ICT providers deemed critical under Article 31 and ensure their compliance with DORA.
5. Threat-Led Penetration Testing (TLPT): Implement a TLPT framework as required by Article 26, meeting the following criteria:
   • Use an approved framework (e.g., TIBER-EU)
   • Include critical functions of the financial entity
   • Define the scope and obtain approval from competent authorities
   • Conduct testing on live production systems
   • Perform testing every three years or as needed based on risk assessment
   • Document findings, corrective actions, and compliance with requirements
6. Incident Response Plan: Establish an ICT incident management process as per Article 17, including:
   • Early warning indicators
   • Incident identification, tracking, and classification
   • Roles and responsibilities
   • Communication and notification procedures
   • Reporting of major incidents to senior management
7. Continuous ICT Monitoring: Monitor ICT systems continuously to identify risks as specified in Article 8, including:
   • Identifying and documenting ICT assets and dependencies
   • Assessing cyber threats and vulnerabilities
   • Performing additional risk assessments for major changes
   • Maintaining inventories of information assets and third-party dependencies
   • Regularly assessing legacy ICT systems
8. Board Responsibilities: Ensure that the board of directors and executive management fulfill their responsibilities under Article 5, including:
   • Setting security policies
   • Defining governance arrangements
   • Approving digital resilience strategy
   • Reviewing ICT plans and third-party services
   • Allocating resources for ICT security and training

How Lepide Helps

DORA aims to enhance the resilience of the EU financial sector by establishing mandatory requirements for digital operational risk management. The Lepide Data Security Platform can help companies comply with DORA in the following ways:

Real-time Detection and Response: Lepide monitors, detects and responds to suspicious activity and security incidents in real-time, enabling prompt detection and reporting as per DORA’s incident notification deadlines.

Data Classification: Lepide’s built-in data classification feature will automatically scan your repositories for DORA-related information and classify it accordingly. This facilitates granting granular access controls to ensure that only authorized individuals have access to sensitive data, strengthening data protection and adhering to DORA’s access management requirements.

Compliance Reporting: The platform provides detailed audit logs and compliance reports that be generated at the push of a button, demonstrating compliance with DORA and other regulations, such as GDPR.

Incident Response and Recovery: The platform facilitates efficient incident response by providing a centralized dashboard where IT teams can review an immutable history of events surrounding a security incident.

If you’d like to see how the Lepide Data Security Platform can help you comply with DORA, schedule a demo with one of our engineers.