Why It's Needed and What It Means for Financial Institutions
The Digital Operational Resilience Act (DORA) is a landmark regulation from the European Union designed to bolster financial entities' operational and cyber resilience. With technology becoming increasingly integral to financial operations, ensuring that companies can withstand, recover from, and mitigate cyber risks is paramount. DORA aims to safeguard the financial system’s stability by setting clear standards for cybersecurity, technology risk management, and the oversight of third-party providers.
Identity and Access Management (IAM)
DORA emphasises strict control over who can access financial institutions' critical systems. Key implications include:
- Implementation of multi-factor authentication (MFA) and dynamic access controls.
- Regular reviews and audits of user access to critical applications.
- Enhancing the security of login credentials and preventing
Identity Governance and Administration (IAG)
DORA requires financial entities to govern their identity management rigorously:
- Implement role-based access controls (RBAC) to ensure employees only have access to relevant data and systems.
- Regularly review and update user roles and access privileges to ensure compliance.
- Maintain detailed audit trails of access changes and requests.
Privileged Access Management (PAM)
Privileged accounts pose significant security risks and are a key focus under DORA:
- Enforce strict controls over privileged user access, granting it only when necessary.
- Monitor and log activities performed by privileged users to detect potential security breaches.
- Implement just-in-time access for sensitive systems, limiting the duration of elevated permissions.
Why Is DORA Required?
The financial sector has seen a rapid digital transformation, increasing reliance on third-party tech providers, cloud services, and digital platforms. While this shift offers benefits such as efficiency and scalability, it also exposes institutions to significant risks, including:
- Cyberattacks: The financial industry is one of the most targeted sectors by cybercriminals, with potential breaches leading to substantial financial losses and reputational damage.
- Operational Disruptions: Tech failures, data breaches, or system downtimes can have a ripple effect across financial markets, affecting consumer trust and market stability.
- Lack of Oversight on Third-Party Providers: Many financial institutions rely on third-party service providers, such as cloud platforms, which can introduce operational vulnerabilities. DORA seeks to ensure that these providers also meet strict resilience standards.
What Does DORA Cover?
DORA applies to a broad range of financial institutions, including banks, insurance companies, payment service providers, and investment firms. It also extends to third-party providers offering critical tech services to these institutions, such as cloud computing providers, data analytics platforms, and cybersecurity services.
The regulation focuses on several core areas:
1. ICT Risk Management: Financial firms must develop and implement robust Information and Communication Technology (ICT) risk management frameworks to identify, assess, and mitigate risks.
2. Incident Reporting: Firms must report significant ICT-related incidents to authorities promptly and ensure transparency in how they handle these incidents.
3. Digital Resilience Testing: Regular testing of ICT systems to assess their resilience against potential threats.
4. Third-Party Risk Management: Stronger oversight and accountability for third-party tech providers that support financial institutions.
5. Information Sharing: Encouraging secure information sharing about cyber threats and incidents among financial entities.
Key Checklists for Compliance with DORA
ICT Risk Management:
✓ Establish a clear framework for identifying and managing ICT risks.
✓ Regularly assess vulnerabilities in systems and implement measures to mitigate them.
✓ Continuously monitor threats and develop response plans for potential incidents.
Resilience Testing:
✓ Conduct regular digital resilience testing, including penetration testing and vulnerability assessments.
✓ Assess third-party providers' resilience to ensure they meet DORA’s requirements.
✓ Implement corrective measures based on test outcomes.
Governance and Controls:
✓ Ensure senior management is accountable for ICT risk and operational resilience.
✓ Develop internal reporting processes to keep management informed of cyber risks and system vulnerabilities.
✓ Maintain clear documentation of roles and responsibilities within ICT risk management.
Incident Reporting:
✓ Implement mechanisms for detecting and reporting ICT-related incidents.
✓ Ensure that significant incidents are reported to authorities within prescribed timeframes.
✓ Create a communication plan to inform relevant stakeholders in the event of a breach.
Third-Party Risk Management:
✓ Identify critical third-party providers and ensure they adhere to DORA's resilience standards.
✓ Establish contracts that clearly define expectations and accountability for operational resilience.
✓ Conduct regular audits of third-party service providers to ensure compliance.
If you'd like to discuss this subject further and see how DORA will impact your business, please reach out to our team