The Digital Operational Resilience Act (DORA) is a landmark regulation introduced by the European Union (EU) to improve the digital operational resilience of financial entities. Adopted in December 2022 and fully enforceable from January 17, 2025, DORA aims to ensure that all participants in the financial system can effectively manage and withstand Information and Communication Technology (ICT) disruptions and cyber threats.

DORA applies to a wide range of financial institutions including banks, insurance companies, investment firms, credit rating agencies, crypto-asset service providers, and even critical ICT third-party providers such as cloud service vendors and software suppliers.

In recent years, the financial sector has become increasingly dependent on digital technologies. This has introduced new risks such as cyberattacks, system failures, data breaches, and service outages. Despite the growing threat landscape, there was no unified regulation across the EU that directly tackled ICT risk—until DORA.

DORA addresses this gap by creating a single, coherent regulatory framework that ensures digital resilience is treated with the same importance as financial resilience. It reduces fragmentation in existing national rules and strengthens collective preparedness across EU member states.

1. ICT risk management

DORA requires financial entities to establish and maintain a robust ICT risk management framework. This includes:

• Identifying and assessing all ICT-related risks

• Implementing preventive and corrective controls

• Ensuring ongoing monitoring of ICT systems

• Developing and testing business continuity and disaster recovery plans

This framework must be regularly reviewed and updated to reflect new threats and vulnerabilities.

2. ICT incident reporting

DORA introduces a standardized process for classifying, reporting, and responding to ICT-related incidents. Major incidents must be reported to the relevant national competent authorities (NCAs) within strict timeframes.

The goal is to improve visibility, promote coordinated responses, and reduce the impact of significant ICT disruptions on the financial system.

3. Digital operational resilience testing

Financial entities are required to conduct regular resilience testing to validate the strength of their ICT systems. For larger institutions, DORA mandates Threat-Led Penetration Testing (TLPT), which simulates real-world cyberattacks to identify vulnerabilities in a controlled environment.

This ensures that systems are not just compliant on paper but are also technically resilient in practice.

4. Third-party risk management

DORA places strict obligations on financial institutions to monitor and manage risks associated with external ICT service providers, especially those offering critical or essential services.

Key requirements include:

• Conducting risk assessments before engaging vendors

• Including resilience-related clauses in contracts

• Continuously monitoring vendor performance

• Ensuring exit strategies and contingency plans are in place

Additionally, critical ICT providers will be directly supervised by EU regulators such as the European Supervisory Authorities (ESAs).

5. Information sharing

To strengthen collective resilience, DORA encourages voluntary sharing of cyber threat intelligence and best practices among financial institutions. This helps entities proactively identify risks and improve their defense strategies.

DORA applies to all financial entities operating within the EU, regardless of size or structure. This includes:

• Credit institutions

• Payment institutions

• Investment firms

• Central securities depositories

• Crypto-asset service providers

• ICT third-party providers deemed critical

Entities must assess their readiness and begin aligning their policies, processes, and technologies with DORA's requirements before the compliance deadline in January 2025.

The Digital Operational Resilience Act (DORA) is a transformative regulation that shifts digital resilience from an operational concern to a regulatory requirement. By harmonizing ICT risk management across the EU, DORA enhances the stability and security of the financial sector in an increasingly digital world.

Financial institutions must act now to review their ICT frameworks, test their digital defenses, and ensure they are prepared to meet the upcoming compliance standards.