DORA Enters into Force, Strengthening Digital Resilience Across the EU Financial Sector

On January 17, 2025, the EU takes a significant step towards fortifying the financial sector’s ability to weather the storm of today’s digital and cyber risks with the official rollout of the Digital Operational Resilience Act (DORA). This isn’t just another regulation—it’s a bold response to the growing recognition that the financial sector’s resilience is now as important as its profitability.

DORA isn’t focused solely on protecting banks or insurers. It applies to a broad range of financial entities operating within the EU—whether that’s traditional players like investment firms and credit institutions or newer entrants like crypto-asset service providers and crowdfunding platforms. If you’re in the financial sector in the EU, DORA is here, and it’s time to get familiar with its requirements.

At its core, DORA is about building a safer, more resilient financial ecosystem. The regulation emphasizes that organizations must not only have robust systems in place to prevent disruptions but also be prepared to bounce back quickly when things go wrong. And given the growing complexity of today’s cyber landscape, this kind of operational resilience is no longer optional. It’s a business necessity.

So, what does DORA mean for financial entities? Let’s break it down:

1. The Big Focus on Risk Management: First and foremost, financial entities are now expected to create and maintain an ICT risk management framework that isn’t just a box-ticking exercise but a comprehensive, ongoing effort to minimize digital and operational risks. What does that mean? Well, the management teams will need to be deeply involved. They are expected to define, approve, and oversee the implementation of the framework—holding themselves accountable for the cybersecurity and resilience of their operations.

2. Third-Party Risk - More Than Just Paperwork: A big part of DORA’s focus is on third-party risk. Financial entities have to maintain a detailed register of ICT service providers and report this information annually to regulators. The idea here is simple: if you rely on external partners to run your operations, their resilience matters as much as your own. Financial entities will need to review and manage their relationships with service providers carefully, ensuring their partners can meet the same high standards of resilience.

DORA even goes a step further, requiring financial entities to make sure their contracts with these third-party providers include specific DORA provisions. This means that the risk isn’t just internal—it’s shared. A shift in how entities think about outsourcing and partnerships.

3. Incident Reporting - Speed and Transparency Are Key: One of the most demanding aspects of DORA is its strict requirements for incident management. If a major disruption occurs—think cybersecurity breaches, system outages, or any event that could affect financial operations—DORA requires that financial entities notify regulators within hours. And it’s not just a single notification: entities will need to send updates every 72 hours and again after a month.

But it doesn’t stop there. If an incident has financial consequences, entities will also need to inform their clients quickly and provide guidance on how to protect themselves. The message is clear: be transparent, communicate fast, and ensure your customers are in the loop.

4. Digital Resilience Testing - Preparing for the Worst: To ensure that financial institutions aren’t caught off guard, DORA requires them to implement a comprehensive resilience testing program. Regular stress tests of their ICT systems will be mandatory to ensure they can handle any unexpected event. It's a bit like fire drills for the digital world—ensuring that, no matter what, the financial entity can stay afloat and keep operations running smoothly in the face of serious disruption.

5. The Role of ICT Providers - A Dual Responsibility: Now, DORA also brings a shift in how ICT service providers are viewed. While all ICT providers will face obligations under the regulation—mainly through the contracts with the financial entities they work with—the providers deemed “critical” will be under direct scrutiny. Think of it as a “critical infrastructure” mentality applied to tech services. If you’re a key player in the digital backbone of the financial sector, expect to be closely monitored and held accountable under DORA’s requirements.

In short, DORA represents a game-changer for the EU financial sector. It shifts the focus from simply managing risks to ensuring long-term operational resilience. It requires a higher level of preparedness, more accountability, and a cultural shift in how financial institutions engage with digital risks and third parties.

But ultimately, the goal is to ensure that the EU financial system remains secure, resilient, and able to continue serving its customers, even in the face of major operational disruptions. As financial entities across Europe get ready to comply with these new rules, it is clear that DORA is here to stay, and the future of the financial sector is built on resilience, transparency, and preparedness.