In today’s digital age, financial institutions are tasked with the critical mission of upholding high standards of service, continuity, and resilience while combatting evolving cyber threats. The ability to innovate and enhance the security of digital financial services is essential for growth, differentiation, and for building trust with customers. To address these challenges, financial institutions must establish and maintain robust security processes and adapt their cyber defenses continuously.
One key regulatory initiative designed to assist financial institutions in enhancing their operational resilience and cybersecurity posture is the Digital Operational Resilience Act (DORA).
Understanding DORA
The Digital Operational Resilience Act (Regulation (EU) 2022/2554) is a pivotal regulatory framework that focuses on digital operational resilience within financial services. Representing the EU’s primary regulatory initiative on operational resilience and cybersecurity, DORA aims to empower financial institutions to maintain control over ICT-related risks, establish comprehensive capabilities for effective ICT risk management, and implement specific mechanisms for handling and reporting ICT-related incidents. Moreover, DORA emphasizes the importance of policies for testing ICT systems, controls, and processes, as well as managing ICT third-party risks.
DORA entered into force on January 16, 2023 and will be enforced starting January 17, 2025. DORA is a legislative measure that applies to financial organizations operating financial activities in the EU, including traditional financial entities, such as banks, investment firms and credit institutions, and non-traditional entities, including crypto-asset service providers and crowdfunding platforms.
Once the standards are finalized and the January 2025 deadline has arrived, enforcement will fall to designated regulators in each EU member state, known as “competent authorities.” The competent authorities can request that financial entities take specific security measures and remediate vulnerabilities.
Under DORA, non-complying financial institutions may be fined up to one percent of their average daily worldwide turnover in the preceding fiscal year. This fine can be levied every day until the financial entity is found to have achieved compliance.
What you need to know about the 5 Key Chapters of DORA:
Chapter II: ICT Risk Management
An effective ICT risk management framework is imperative for financial institutions to maintain control over ICT risks and ensure a high level of digital operational resilience. Financial entities must establish internal governance and control frameworks to manage ICT risk, with a focus on setting clear roles, defining risk appetite, monitoring risk levels, and implementing comprehensive threat detection mechanisms. This framework should cover strategies, policies, procedures, IT protocols, and tools necessary to protect information and ICT assets from risks and unauthorized access.
Chapter III: ICT-Related Incident Management, Classification, and Reporting
Financial entities need robust mechanisms for ICT incident handling, tracking cyber threats, and reporting major incidents within their risk management framework. DORA standardizes incident management processes, focusing on classification, response, and reporting. It outlines thresholds and cadences for timely detection, response, and recovery without disrupting critical services. Entities must establish procedures for monitoring, documenting, and addressing incidents to prevent reoccurrence. Reporting should detail impact, duration, and critical service downtime. Key DORA steps include incident management strategies, classification levels, cyber threat categorization, and the learning and evolution of ICT processes.
Chapter IV: Digital Operational Resilience Testing
Rigorous testing of operational resilience is crucial for financial institutions to assess the effectiveness of their ICT Risk Management framework and Incident Management processes. DORA mandates various testing categories, including vulnerability assessments, network security assessments, and penetration testing to evaluate security defenses comprehensively. Financial entities must work with authorized professionals to conduct advanced Threat-Led Penetration Testing (TLPT) to emulate real-life threat scenarios.
Chapter V: ICT Third-Party Risk Management
Financial entities must extend their ICT risk management framework to third-party service providers to ensure consistent risk analysis, incident management, and testing protocols. DORA emphasizes that contractual arrangements with third-party providers comply with appropriate information security standards, and financial entities must assess the risks associated with these arrangements, and take an active approach to oversee and ensure the availability and integrity of all services provided by third-party service providers and outsourced entities.
Chapter VI: Information Sharing Arrangements
Collaborative information-sharing arrangements among financial entities play a significant role in enhancing digital operational resilience and preventing cyber threats. Sharing threat intelligence, indicators of compromise, cyber security alerts, and configuration tools can bolster incident response capabilities and safeguard against cyber threats. DORA recommends fostering a culture of collaboration with industry peers, reputable partners, and the regulatory authorities themselves.
How Continuous Exposure Management Aids DORA Adoption
Effective exposure management is crucial for financial institutions aiming to align with the Digital Operational Resilience Act. Supporting ICT Risk Management and ICT-related Incident Management with attack path modeling to identify, prioritize and validate the exploitability of exposure across the digital attack surface. It ensures security operation teams can focus their remediation efforts and threat investigations on high-impact exposure that presents the biggest risk to business-critical assets and ICT systems. To help optimize digital operational resilience and accelerate the successful adoption of DORA.
Quantification of risk using Attack Path Validation
The risk intelligence and exposure insights provided through the platform help organizations identify & classify critical ICT assets, and quantify the risk presented by vulnerabilities, misconfiguration, weak security posture, and identity issues across their digital attack surface on a continuous basis, to optimize ICT Risk Management.
Accelerate and Enrich incident investigation to aid recovery and prevent future breaches
Holistic exposure risk intelligence and attack path insights to enrich advanced Threat Hunting and post-incident investigation. With rich contextual information reported in threat scenarios to accelerate incident investigation, and enhance the learning and evolution of the ICT-related Incident Management processes.
Simplify Digital Operational Resilience Testing
Continuous Exposure Management delivers a comprehensive, automated approach to support digital operational resilience testing. The right platform will deliver end-to-end testing of the external attack surface of financial entities and their third-party ICT service providers, as well as internal digital attack surface testing for Vulnerability assessments, security control testing, and an ongoing approach to Threat-led Penetration Testing. To aid audit readiness, uncover risk, and prevent cyber threats.
Conclusion:
DORA is more than a regulation; it’s a foundation methodology to drive the innovation of digital financial services
Digital operational resilience is a cornerstone for financial institutions operating in a dynamic and evolving threat landscape. DORA provides a structured approach to strengthen operational resilience and cybersecurity defenses, requiring a holistic alignment of technology, people, and processes.
DORA goes beyond being a mere regulatory framework; it is a strategic necessity that shapes the future of operational resilience in the financial industry. With its comprehensive approach, DORA tackles the diverse challenges financial organizations encounter daily, in the face of advanced persistent threats and a dynamic competitive landscape.
Although adopting DORA requires a comprehensive set of tools, knowledge and capabilities, leveraging the XM Cyber Continuous Exposure Management Platform can help financial institutions optimize ICT systems, mitigate risks, and enhance operational resilience.
By partnering with XM Cyber, financial entities can gain valuable risk intelligence insights, accelerate incident investigations, and streamline DORA compliance efforts throughout their operations. Ultimately, embracing DORA and fortifying operational resilience will empower financial institutions to navigate the complexities of the digital landscape and safeguard their assets effectively.
For additional insights into the Digital Operational Resilience Act, please watch our Demystifying DORA with XM Cyber, featuring Patrick Frech from KPMG:
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Attendees will also receive an exclusive copy of the Demystifying DORA with XM Cyber Whitepaper.
About XM Cyber:
XM Cyber is a leading Continuous Exposure Management company that revolutionizes organizations’ approaches to cyber risk management. Using XM Attack Graph Analysis™, the platform identifies vulnerabilities, misconfigurations, and identity issues across various environments and provides actionable remediation guidance. Founded by industry veterans from the Israeli cyber intelligence community, XM Cyber operates globally with offices in North America, Europe, Asia, and Israel.
Dale Fairbrother — Senior Product Marketing Manager, XM Cyber
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