Understanding DORA Regulation: A Paradigm shift for Cybersecurity in the Financial Sector

In an increasingly digitalised world, financial institutions rely on innovative technologies to provide improved customer services. However, due to the convergence of traditional banking with digital innovation, financial institutions are more vulnerable and exposed than ever to cyber threats, IT failures, and operational disruptions. Recognising that cybersecurity in financial services presents unique challenges against potential threats, the European Union introduced the Digital Operational Resilience Act (DORA – Regulation (EU) 2022/2554) to enhance the financial sector’s IT security and operational resilience.

What is DORA?

DORA entered into force on 17 January 2025 and applies directly across all EU Member States. This has significant implications for organisations operating in the financial sector. Cloud platforms, data analytics, and audit services are also subject to this new Regulation. ​Unlike previous regulations that addressed IT risks in a fragmented manner, DORA provides a holistic approach to ensure financial stability in the digital era. Under DORA’s Regulation, financial entities and their critical third-party technology service providers must implement strict ICT system guidelines.

This initiative aims to establish a unified and standardised regulatory framework for managing and mitigating ICT risk in the financial landscape. This ensures the European financial sector can stay resilient during severe operational disruption.

Key Pillars of DORA

DORA is built upon five main pillars that financial institutions must cover:

ICT Risk Management
Companies must establish robust risk management frameworks to identify, assess, and mitigate ICT-related risks. These frameworks should include governance structures, business continuity planning, and ongoing security monitoring. 

Incident Reporting
Financial institutions are required to report major ICT-related incidents quickly. Standardised reporting mechanisms will improve transparency and enable regulators to respond effectively to threats affecting the sector.

Digital Operational Resilience Testing
DORA mandates regular testing of ICT systems, including advanced penetration testing for critical infrastructures, to ensure financial institutions can resist cyberattacks and operational failures. 

ICT Third-Party Risk Management
As financial institutions increasingly rely on external suppliers for ICT services, DORA imposes strict requirements for third-party risk management. Companies must ensure contractual agreements and oversight mechanisms are in place to mitigate risks associated with outsourced services. 

Information Sharing
DORA encourages financial institutions to share information on cyber threats, vulnerabilities, and best practices to enhance the industry’s resilience, fostering a collaborative approach to digital security. 

How Can Financial Institutions Comply with DORA?

Financial institutions must take proactive steps to align with DORA requirements: 

Assess Current Resilience Measures
Conduct a gap analysis to understand where current ICT risk management practices are inadequate. 

Enhance Governance and Policies
Update internal policies, frameworks, and governance structures to meet DORA’s strict requirements. 

Strengthen Incident Reporting Processes
Implement robust mechanisms for detecting, managing, and reporting ICT incidents effectively. 

Test Digital Resilience
Conduct stress testing and penetration testing to assess vulnerabilities and enhance security controls. 

Manage Third-Party Risk
Establish comprehensive due diligence and monitoring processes for all ICT service providers.
Maintain a register of service providers and submit an annual report to the competent authority. 

Train and Educate Employees 
Ensure staff are aware of DORA’s requirements and equipped with the necessary skills to support compliance. 

LOQR’s Role in Dora Regulation

DORA is a significant regulatory development that represents a major step forward in protecting the financial sector against growing digital threats. By standardising cybersecurity and operational resilience measures, it ensures financial institutions can safeguard their operations, protect customers, and enhance market stability. 

LOQR’s expertise in cybersecurity and compliance and in-depth knowledge of the industry’s complexities and regulatory landscape enable institutions to deliver exceptional financial services to their customers with the highest level of security and compliance. Our solutions are designed to guarantee scalability and adaptability, seamlessly meeting financial institutions’ ever-changing demands and allowing the harmonisation of cybersecurity and resilience requirements across the EU. With our solutions, institutions will be better positioned to handle future ICT-related challenges while staying ahead in an increasingly complex regulatory landscape.   

Does your institution already offer solutions compliant with the DORA Regulation?
Talk to our team of experts to find out more about our DORA-compliant solutions and how we can help ensure a resilient and secure digital future for your financial institution.