Navigating the DORA Regulation: What UK Finance Firms Need to Know

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The EU’s Digital Operational Resilience Act (DORA) establishes a comprehensive framework for managing IT risks and ensuring operational resilience in the financial sector. It applies to various financial institutions that operate in the EU, including banks, investment firms, payment service providers, and insurance companies.

Even if you're not directly covered, third-party providers will likely impact your operations indirectly.

Key Dates

  • January 2024: Draft regulatory technical standards were released, providing further details on implementation.
  • January 17, 2025: DORA officially comes into effect, although transitional periods exist for specific requirements.
  • Early 2025: Full compliance with DORA becomes mandatory for all covered entities.

DORA aims to improve operational resilience to cyber threats across Europe's financial ecosystem. It mandates robust cyber risk assessment frameworks, rapid incident response capabilities and stringent system testing. By requiring these safeguards, DORA intends to help firms minimize disruptions, swiftly restore critical operations and avoid knock-on impacts if incidents occur.

The Five Pillars of DORA

To satisfy DORA's heightened resilience requirements, UK financial players that have activities in the EU must diligently plan and likely invest in enhanced security capabilities. Here are the five pillars of DORA:

IT Risk Management

DORA prompts organizations to ensure a robust framework to identify, assess, and neutralize potential IT threats. It involves policies, well-defined procedures, and cutting-edge tools supporting the internal teams. Regularly scan your digital landscape to identify vulnerabilities, map potential attack vectors, and design mitigation strategies to reduce the specified attack surface. Risk assessment feeds into risk management on how to treat risks.

Incident Reporting

When an incident occurs, an organization must not be clueless. DORA mandates a rapid-response system for reporting major ICT incidents to the relevant authorities. Consider it a fire alarm for your infrastructure, ensuring swift notification and coordinated action when breaches or disruptions occur. By promptly sounding the alarm, you adhere to regulation guidelines and contain the damage. Under DORA requirements, an incident should be reported within four hours of classification or no later than 24 hours from the time of detection.

Operational Resilience Testing

DORA requires regular operational resilience testing, where you simulate cyber-attacks and disruptions to expose vulnerabilities in your estate. Think of it as ‘war games’ for your IT infrastructure, pushing your systems to their limits and identifying weaknesses before they become critical.

UK firms must conduct recurring penetration tests, vulnerability assessments and resilience scenario simulations on defined schedules. Specifically, threat-led penetration testing is mandated at least every three years. Further, vulnerability scans and scenario-based evaluations must be performed annually.

DORA testing obligations aim to audit regularly and stress-test infrastructure robustness while identifying areas needing remediation.

Third-Party Risk Management

Your perimeter is only as strong as your weakest link. DORA emphasizes rigorous third-party risk management, demanding careful vetting and ongoing monitoring of the cyber practices of your external providers. Think of it as securing your supply chain – every connected system adds to your overall risk profile.

DORA demands financial institutions retain accountability for resilience and breaches involving outsourced IT services. UK companies using third parties like cloud computing or external technology consultancies must govern these through stringent service contracts, in-depth risk evaluations and constant monitoring.

Achieving Compliance

While DORA takes effect in January 2025, UK firms should start preparations immediately. Methodical compliance demands structured planning, provider coordination and likely technology investments. Specialist cyber consultancies can assist by performing gap analyses and program design.

By proactively utilizing appropriate tools over the next two years, UK financial services can validate and refine their DORA programs pre-enforcement.

DORA compliance isn't just a regulatory hurdle; it's an investment in your future. By complying with the regulation, you gain a competitive edge, attracting clients and investors who value your improved security posture.

The modern version of cybersecurity measures, such as incident management and reporting, included in DORA, is helping organizations to be proactive rather than scrambling at the last minute. DORA compliance isn't just about ticking boxes; it's about building a secure and resilient business in the ever-changing threat landscape.

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