The Digital Operational Resilience Act (DORA) marks a pivotal development for the European financial sector, introducing comprehensive rules to bolster operational resilience and manage information and communication technology (ICT) risks. As of January 17th, when DORA came into force, financial entities across the EU must ensure full compliance with these stringent new regulatory requirements.

DORA establishes a unified framework for digital risk management, covering a broad range of obligations for financial entities. These include robust ICT governance, effective risk management practices, detailed incident reporting protocols, regular resilience testing, and comprehensive operational continuity plans. Importantly, DORA extends its oversight to third-party ICT service providers, requiring financial entities to ensure resilience throughout their supply chains.

Key Challenges in Implementing DORA

While DORA’s objectives are clear, its implementation presents significant challenges for financial entities:

1. Complexity of ICT Risk Management: Financial entities must develop frameworks capable of identifying, assessing, and mitigating ICT risks across all operations. This includes establishing mechanisms to manage evolving threats, such as cyberattacks and technological disruptions.
2. Managing Third-Party Risks: The regulation imposes new responsibilities on entities to monitor and manage risks associated with third-party ICT service providers. This includes assessing the compliance and security practices of these providers, negotiating contracts with provisions for regulatory cooperation, and ensuring ongoing oversight.
3. Streamlining Incident Reporting: DORA requires financial entities to implement structured and timely reporting mechanisms for ICT-related incidents. This involves not only meeting tight deadlines but also ensuring that reports are thorough enough to satisfy regulatory scrutiny.

Ensuring Compliance Through Contractual Terms

One of the critical challenges in implementing DORA is ensuring that contractual arrangements with ICT service providers are clear, comprehensive, and aligned with regulatory requirements. These agreements must enable financial entities to maintain control and oversight over outsourced services while minimizing legal and operational risks. Some of the key contractual requirements between financial entities and ICT third-party providers include:

• Detailed descriptions of functions, services and security measures,
• Clear provisions for incident management, including reporting and escalation procedures.
• Specified data processing locations,
• Defined termination rights.

Our team reviews and updates existing contracts to ensure alignment with DORA, reducing legal and operational risks. We help clients draft agreements that not only comply with regulatory standards but also offer robust protections for their operations. By proactively addressing these challenges, we enable clients to achieve compliance efficiently and securely.