Mastering DORA compliance: Key requirements and solutions

Introduction

In an increasingly digital world, operational resilience is paramount for financial entities. The European Union's Digital Operational Resilience Act (DORA) is a testament to this fact. It sets forth a comprehensive set of rules designed to ensure that financial entities can effectively manage and mitigate information and communication technology (ICT) risks.

This blog post aims to provide a comprehensive understanding of DORA, its key requirements, and how financial entities can master compliance. We will delve into the specifics of the regulation, its implications for financial entities, and explore solutions that can simplify the path to compliance.

DORA, published in the Official Journal of the European Union as Regulation (EU) 2022/2554 on December 27, 2022, is set to come into effect on January 17, 2025. It is binding in its entirety and directly applicable in all EU Member States. The regulation addresses several aspects of operational resilience, including ICT risk management, incident reporting, operational resilience testing, and ICT third-party risk monitoring.

In the following sections, we will break down these requirements and provide insights into how financial entities can navigate this new regulatory landscape effectively and efficiently. Stay tuned as we unravel the complexities of DORA and guide you toward mastering compliance.

Understanding DORA

The Digital Operational Resilience Act (DORA) is a significant step forward in the European Union's efforts to regulate the financial sector's digital operations. It aims to ensure that financial entities can effectively manage and mitigate information and communication technology (ICT) risks, thereby enhancing their operational resilience.

The regulation addresses several key areas of operational resilience:

• ICT Risk Management: Financial entities are required to implement measures to manage and mitigate ICT risks. This includes establishing a robust ICT risk management framework and implementing appropriate security measures to protect against ICT-related incidents.
• Incident Reporting: Financial entities must report major ICT-related incidents to the competent authorities. This allows for a coordinated response to such incidents and helps to mitigate their impact on the financial system.
• Operational Resilience Testing: DORA requires financial entities to regularly test their digital operational resilience. This helps to identify potential vulnerabilities and ensure that the entity can effectively respond to and recover from ICT-related incidents.
• ICT Third-Party Risk Management: Given the increasing reliance on third-party ICT service providers, DORA sets out requirements for the management of ICT third-party risk. This includes rules for the contractual arrangements between financial entities and ICT third-party service providers, but also specific requirements regarding risk analysis and due diligence assessments.

Understanding these requirements is the first step towards achieving DORA compliance. In the next section, we will delve deeper into the role of third-party risk management in DORA and how financial entities can effectively manage this aspect of their operations.

DORA requirements related to third-party risk

One of the critical aspects of DORA is its focus on third-party risk management. Financial entities increasingly rely on third-party ICT service providers for various operations, so the risk associated with these third parties has become a significant concern. DORA acknowledges this and sets out specific requirements for managing ICT third-party risk.

• ICT Risk Management: Financial entities must manage ICT third-party risk as an integral component of their ICT risk management framework. This includes areas such as contract management, third-party criticality, reporting, pre-contract due diligence, auditing, and exit strategies.
• Preliminary Assessment of ICT Concentration Risk and Further Sub-Outsourcing Arrangements: Entities are required to assess concentration risk and the risk associated with fourth and Nth parties. This includes recommendations for risk monitoring and contractual requirements.
• Key Contractual Provisions: DORA requires that third-party vendor contracts include rights and obligations that can be continuously assessed. This includes establishing and tracking key performance indicators (KPIs) from the beginning of the relationship, automated profiling and tiering of all third parties, comprehensive and automated due diligence assessments, built-in remediation recommendations, and programmatic third-party offboarding.
• Oversight Framework: Financial entities are encouraged to have in place an oversight framework covering the complete supply chain, from ICT third-party providers, related ICT service providers, communications technology ICT risk, to cloud service providers and ICT-related incidents.
• Performing Due Diligence and Continuous Monitoring: DORA advises financial organizations to perform due diligence assessments and increase their oversight and monitoring of third-party ICT providers to reduce potential risks resulting from critical dependencies on them.

The solution - leveraging technology for DORA compliance

Achieving DORA compliance, particularly in third-party risk management, can be a complex and challenging task. However, with the right tools and technologies, financial entities can simplify this process and ensure they are well-prepared to meet DORA's requirements.

One such tool is 3rdRisk's third-party risk management SaaS platform. Our platforms is designed to help financial entities manage and mitigate the risks associated with their third-party ICT service providers. They provide a comprehensive suite of tools and features that can assist with various aspects of third-party risk management, including:

• Risk Assessment: Our cloud-based risk platform can help financial entities identify and assess the risks associated with each of their third-party ICT service providers. This includes areas such as cybersecurity risk, operational risk, sustainability, continuity and regulatory compliance risk.
• Contract Management: Our third-party risk management platform can assist with managing contracts with third-party ICT service providers. This includes tracking key contract terms, monitoring performance against contract KPIs, and managing contract renewals and terminations.
• Incident Reporting: The 3rdRisk platform can facilitate the reporting of major ICT-related incidents involving third-party service providers. This can help financial entities meet their reporting obligations under DORA and ensure a coordinated response to incidents.
• Continuous Monitoring: Our third-party risk platform can continuously monitor third-party ICT service providers. This can help financial entities identify and respond to potential risks and issues promptly.

Conclusion - Embracing the future of financial services

DORA represents a significant step forward in regulating digital operational resilience in the financial sector. By setting out clear and comprehensive requirements for financial entities, DORA aims to ensure that the financial sector is well-prepared to manage and mitigate the risks associated with ICT systems and services.

However, achieving DORA compliance can be a complex and challenging task, particularly in third-party risk management. This is where tools like the 3rdRisk platform can make a significant difference. By providing a comprehensive suite of features designed to assist with various aspects of third-party risk management, 3rdRisk can help financial entities simplify the process of achieving DORA compliance and enhance their overall operational resilience.

In conclusion, while DORA presents new challenges for the financial sector, it also presents new opportunities. By embracing DORA and leveraging the right tools and technologies, financial entities can not only ensure compliance with the new regulations but also enhance their operational resilience and prepare themselves for the future of financial services.

Frequently asked questions - How 3rdRisk could help you with DORA compliance

Below is an overview of commonly asked questions: 

Would it be possible to define, document, and maintain the important and critical functions within your platform? Yes, the platform allows you to upload your organisation (such as organisation hierarchy, functions, key services, processes) and indicate if it is important or critical to you based on a customizable set of questions.

Does your platform allow us to analyse concentration risks? Yes, you can quickly assess whether an existing or new third-party relationship poses a concentration risk. Furthermore, our platform comes with various options to visualise the supply chain and aid decision making. You can also easily register an issue or risk that associated with a third-party relationship.

Would it be possible to perform risk profile assessments on ICT services as well as ICT service providers? Yes, risk profile analysis can be done on a third-party level as well as a contract (ICT service) level.

Can I create and document exit plans per third-party within the platform? Yes, you can easily attach an exit strategy and exit plan run book to a third party. You can also include a reference to a local file share.

Does your platform support SLA management? Yes, you can register, manage and maintain SLA-agreements and performance indicators per third party. The entire life-cycle is being supported.

Does your platform enable registering and maintaining indirect suppliers? Yes, you can register up to n-99 levels deep.

Can I register if a third-party is easily replaceable? Yes, you typically do this in our platform when performing the risk profile wizard at third-party or service level.

Does your platform integrate with my existing procurement system and GRC solution? Yes, our platform can be integrated with most procurement systems and GRC solutions. Many of our customers are using our platform in conjunction with other tooling. Schedule a call with us to explore the possibilities.

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