Source URL: https://www.owndata.com/blog/the-dora-quest-beware-of-vendors-with-magic-beans
Source: CSA
Title: What is DORA? Key Compliance Impacts and Strategies
Feedly Summary:
AI Summary and Description: Yes
**Summary:** The text discusses the implications of the Digital Operational Resilience Act (DORA) on financial services firms and their ICT third-party providers, emphasizing the legislation’s impact on risk management, incident reporting, resilience testing, and third-party relationships. It highlights the need for proactive compliance strategies and transparency in contractual agreements, forecasting increased costs and enhanced regulatory scrutiny ahead of the enforcement date.
**Detailed Description:**
– **Overview of DORA:**
– DORA aims to strengthen the financial services sector’s resilience against digital operational risks in Europe.
– It has been active since January 2023, with full enforcement commencing on January 17, 2025.
– The regulation sets specific obligations concerning risk management, incident management, resilience testing, third-party risk management, and intelligence information sharing.
– **Key Focus Areas:**
1. **ICT Risk Management**:
– Financial services firms are required to enhance their risk management frameworks specifically for digital operational resilience.
– Firms must demonstrate compliance through documentation and proactive risk assessments.
2. **Incident Management**:
– DORA enforces stricter incident reporting protocols, requiring timely and detailed notifications to regulators.
– Increased scrutiny will demand actionable remediation plans for any incidents.
3. **Digital Operational Resilience Testing**:
– Reliance on theoretical exercises like paper-based testing will no longer suffice.
– Firms must conduct regular, risk-based testing and present concrete evidence of service robustness to regulators.
4. **Third-Party Risk Management**:
– Firms are now accountable for the obligations of their third-party providers, including subcontractors.
– Firms must enhance transparency in contractual terms to encompass audit rights and data handling for critical services.
5. **Intelligence Information Sharing**:
– While currently voluntary, sharing information about emerging cyber threats may become mandatory.
– This shared knowledge can bolster collective resilience within the financial sector.
– **Regulatory Impacts on Third-Party Providers**:
– DORA will likely increase costs for financial firms, as third-party providers may seek to charge more for managing the elevated risks associated with critical services.
– Regulators will assess the criticality of third-party providers based on their impact on the financial sector.
– **Operational Changes Required**:
– Firms need to transition to operational resilience that goes beyond paperwork and embraces real-world testing and accountability.
– Transparency and communication must improve between financial entities and their service providers to mitigate risks effectively.
– **Practical Recommendations**:
– Financial services firms are advised to identify their critical services and understand their risk profiles.
– They should seek partners who help manage these risks and facilitate compliance with DORA.
– It is crucial to ensure the integrity and reliability of backups and recovery methods to maintain operational continuity.
Overall, the text illustrates a pressing need for the financial services industry to adapt quickly to DORA’s requirements while addressing potential cost implications and improving communication with third-party providers to ensure regulatory compliance and operational resilience.