Why Fintech and Financial Services Institutions Need to Prepare for DORA Now
Why Fintech and Financial Services Institutions Need to Prepare for DORA Now
If you’re in financial services and haven’t started your journey to Digital Operational Resilience Act (DORA) compliance, now is the time to take action. The EU regulation, which was officially announced on 27 December 2022, is set to revolutionise cybersecurity governance in the financial industry. And financial institutions only have until 17 January 2025 to get compliant.
DORA’s Impact on Cybersecurity and Business Operations
If you thought GDPR was a game changer, brace yourself for DORA. While GDPR was primarily concerned with data protection and privacy, DORA takes a more holistic approach, targeting core business operations and cybersecurity infrastructure.
What is DORA?
The Digital Operational Resilience Act (DORA) is a comprehensive EU regulation designed to fortify the financial sector’s resilience against a wide array of Information and Communication Technology (ICT) risks. It aims to create a unified framework for cybersecurity, setting stringent standards for financial institutions and their 3rd party suppliers.
How does DORA impact cybersecurity measures?
DORA is intrinsically tied to cybersecurity. It mandates continuous monitoring and control of IT systems, requiring financial institutions to deploy advanced security tools, policies and procedures. Unlike previous regulations that might have focused on specific aspects like data storage or transaction security, DORA encompasses everything. From your internal networks to your cloud storage solutions, from your mobile banking app to your 3rd party payment processors. Essentially, every digital touchpoint within your business is under scrutiny.
Why are stakes so high?
DORA is a fundamental shift in how financial institutions must approach cybersecurity. The consequences of non-compliance are stringent, both in terms of financial penalties and the broader impact on your business operations and brand reputation:
- Financial Penalties – Regulators have the power to impose fines of up to 1% of your daily turnover for every day of non-compliance
- Reputational Damage – A public reprimand could severely damage your brand’s credibility, leading to loss of customers and revenue
- Withdrawal of Authorisation – In extreme cases, non-compliance could result in the revocation of your operating license, effectively putting you out of business
- Global Impact – While DORA is an EU regulation, its impact is global. If you’re a financial institution operating in the EU or dealing with EU customers you’re on the hook for DORA compliance – regardless of where your headquarters are located
- Supply Chain Risks – DORA extends its compliance requirements to your 3rd party suppliers. This means you’re not just responsible for your own compliance but also for ensuring that your suppliers meet DORA’s stringent standards
Why DORA Matters
In an era of increasing cyber threats, DORA aims to fortify the financial sector against operational disruptions. It’s not just about your organisation, it’s about the resilience of the entire financial ecosystem.
The regulation covers everything from network security to third party risk management. In short, DORA is a comprehensive framework designed to help financial institutions “withstand, respond to, and recover from all types of ICT related disruptions and threats.”
The Challenges of DORA Compliance
Broad Scope
DORA’s reach extends beyond your organisation to include your suppliers, especially those providing critical IT services. This adds a layer of complexity to compliance efforts.
Financial and Reputational Risks
Non-compliance comes with hefty financial penalties and the potential for reputational damage, making it imperative to get it right the first time.
Resource Intensive
From risk assessments to third-party audits, DORA compliance will require a significant investment of time and resources.
Regulatory Overlap
Financial institutions must also comply with other regulations such as GDPR, PSD2, and MiFID II, creating a complex regulatory landscape.
The Ripple Effect
As larger organisations start demanding DORA compliance from their suppliers, smaller players will have to fall in line or risk losing contracts. This is a seismic shift in the level of regulation and will require substantial changes in how you manage supplier resilience and risk.
The Time to Act is Now
With the UK government indicating that DORA will become UK law, and given the global trend towards operational resilience, the time to act is now. Whether you’re a credit institution, an investment firm, or a fintech startup, DORA’s reach is extensive. It’s not just about your organisation. Your suppliers, particularly those providing critical IT services, will also need to be compliant.
How to Take Action
- Conduct a Cybersecurity Audit: The first step is to understand your current cybersecurity posture. Identify the gaps in your IT systems and evaluate what you need to do to align with DORA’s requirements
- Develop a Compliance Framework: Create a roadmap that outlines the policies, procedures, and tools needed to meet DORA’s regulation standards
- Engage Stakeholders: This isn’t just an IT issue. Engage C-level board members, senior management and key departments, such as legal and compliance, to ensure full company commitment
- Review Supplier Contracts: Assess the compliance status of your 3rd party suppliers and renegotiate contracts as necessary to ensure they meet DORA’s standards
- Implement and Test: Roll out the necessary cybersecurity measures and conduct regular tests to ensure they are effective and compliant
The Role of a SOC in DORA Compliance
- Continuous Monitoring: A Security Operations Centre (SOC) provides 24/7 monitoring of your IT systems, ensuring real-time detection and response to any security incidents – aligning directly with DORA’s requirement for continuous monitoring and control
- Incident Reporting: A SOC provides a structured incident response framework, complete with real-time alerts, incident categorisation, and immediate remediation steps. This ensures that any major incidents are reported to national regulators within strict deadlines, as mandated by DORA
- 3rd Party Risk Management: A SOC provides a comprehensive view of your entire digital ecosystem. This can help you to monitor the security posture of your suppliers, ensuring that they too meet DORA’s requirements.
- Operational Resilience: By identifying vulnerabilities and threats in real-time, a SOC helps in building operational resilience, a key aspect of DORA compliance
- Intelligence Sharing: A SOC will collect, analyse and disseminate information on emerging threats and vulnerabilities. This can facilitate the sharing of cyber threat intelligence, helping you stay one step ahead of potential security risks
By integrating a SOC into your cybersecurity strategy, you’re not just ticking off a compliance checklist, you’re enhancing your operational resilience and setting your organisation up for long term success in a landscape where cybersecurity protection is increasingly critical.
Why Outsourcing a Security Operations Centre (SOC) is the Optimal Solution
In the fast paced world of Fintech and Financial Services, time is of the essence. The sector is already grappling with a host of challenges, from regulatory compliance to the constant threat of cyberattacks. Adding the responsibilities of DORA compliance to an already stretched internal team, can be overwhelming. This is where outsourcing your SOC can be a game-changer.
Expertise on Tap
Cybersecurity is a complex field that is continually evolving. By outsourcing your SOC, you gain access to a team of experts who are up to date with the latest threats, tooling and technologies, and compliance requirements, including DORA. You’re not just outsourcing tasks, you’re gaining expertise.
Cost Effectiveness
Building and maintaining an in-house SOC, especially one that operates on a 24/7 basis, can be expensive and is often prohibitive for most organisations. From hiring and training staff to purchasing the necessary technology, the costs add up quickly. A managed SOC provides a high level of expertise and technology at a fraction of the cost.
Focus on Core Business
You’re in the business of financial services, not cybersecurity. Outsourcing your SOC allows you to focus on what you do best, secure in the knowledge that experts are taking care of your cybersecurity needs.
Scalability
As your business grows, so do your cybersecurity needs. An outsourced SOC can easily scale with your business, providing more resources as needed without the headache of recruiting and training new staff.
24/7 Monitoring
The world of financial services never sleeps, and neither do cyber threats. A SOC-as-a-Service solution offers round the clock monitoring, 365 days a year. This will ensure that you’re protected at all times and that you meet DORA’s requirements for continuous monitoring and control.
Vendor Accountability
When you outsource your SOC, you’re not just hiring a service, you’re entering into a partnership. A reputable SOC provider will act as an extension of your team and offer service level agreements (SLAs) that clearly define roles, responsibilities, and expectations.
Speed of Implementation
With the DORA compliance deadline looming, speed is crucial. A managed SOC service, manned by experienced security professionals, can be up and running much more quickly than an in-house solution, helping you to become compliant in a shorter timeframe.
By outsourcing your Security Operations Centre (SOC) service to a trusted partner like DigitalXRAID, you’re not just meeting DORA requirements, you’re enhancing your overall cybersecurity posture and freeing up internal resources to focus on strategic business initiatives.
DORA is more than just another regulation – it’s a call to action for the entire financial sector to elevate its cybersecurity posture. With just two years to become compliant, the time for preparation is now. DigitalXRAID’s CREST accredited Security Operations Centre (SOC) service can guide you through this complex landscape, ensuring that you not only meet DORA’s stringent requirements but also enhance your cyber resilience for the long haul.
Get in contact to start your DORA compliance journey today.
