DORA Regulations: How Outdated Tech Puts You at Risk 

Operational resilience has become increasingly vital to any and all organisations that want to do business in the modern day. Data breaches, cybersecurity weaknesses, and a lack of preparedness can all cause catastrophic damage. In 2022 alone, 83% of organisations experienced multiple data breaches, putting sensitive consumer data at risk for millions.  

Larger financial institutions already need to closely monitor sensitive customer data and have actionable plans to respond to a breach. And any data breach can cause consumers to lose trust in organisations, creating a ripple effect that can impact financial institutions for years. It is clear that financial institutions need to bolster their IT security measures and be ready for anything. To that end, the European Union passed DORA, a new regulation that goes into effect January 2025. 

What is DORA? 

The Digital Operational Resilience Act (DORA) is a part of the Digital Finance Package adopted by the European Commission to enhance digital operational resilience within the EU’s financial sector. It aims to ensure that all participants in the financial system can withstand and recover from information and communication technology (ICT)-related incidents, whether they stem from cyberattacks, technical malfunctions, or other disruptions. 

DORA builds on existing guidelines but introduces a uniform regulatory framework that applies to a broad range of financial entities, including banks, insurance companies, payment service providers, investment firms, crypto-asset service providers, and more. With the increasing number of cyber threats and technology-driven disruptions, DORA represents a proactive effort to protect the financial market’s stability, security, and integrity. 

The Key Provisions of DORA 

DORA is a comprehensive set of rules and guidelines across various aspects of ICT risk management and operational resilience. Here is a detailed overview of the main provisions and what they require of financial institutions:

1. ICT Risk Management Framework

Financial institutions are required to establish a comprehensive ICT risk management framework to ensure robust digital operational resilience. The framework must cover: 

• Governance: Clear policies and procedures for managing ICT risks must be defined, with responsibilities assigned to senior management and the board of directors. 

• Risk Identification and Assessment: Regular identification, assessment, and prioritisation of ICT risks, considering internal and external factors, must be part of ongoing operations. 

• Prevention and Protection: Implementation of controls to prevent and mitigate risks, including multi-layered security measures, data encryption, and continuous monitoring. 

• Detection and Response: Institutions must have mechanisms for timely detection of ICT-related incidents and detailed response plans to minimise impact. 

• Recovery and Learning: Establishing backup systems, disaster recovery plans, and incident post-mortem analysis to enhance resilience.

2. ICT Incident Reporting

DORA introduces specific requirements for monitoring and reporting ICT-related incidents: 

• Incident Classification: Institutions must categorise ICT-related incidents based on severity and impact, focusing on those that have the potential to disrupt critical operations or compromise data. 

• Timely Reporting: Major ICT incidents must be reported to competent authorities within a maximum of 72 hours after identification. This allows authorities to assess systemic risks and coordinate responses across the financial sector. 

• Post-Incident Analysis: After an incident, institutions are required to conduct an in-depth analysis to identify root causes and develop strategies to prevent recurrence. 

3. Operational Resilience Testing

Institutions must regularly test their digital operational resilience. This involves: 

• Threat-Led Penetration Testing (TLPT): High-impact institutions must engage in periodic threat-led penetration tests to assess their resilience against sophisticated cyberattacks. 

• Testing Scope: Tests should cover the institution’s entire ICT system, including infrastructure, data processing, and third-party dependencies. 

• External Audits: Independent third parties may be required to conduct certain tests to ensure objectivity and thoroughness.

4. Third-Party Risk Management

Financial institutions frequently rely on third-party ICT service providers for various operations, including cloud services, software, and data processing. DORA introduces stringent requirements for managing third-party risks: 

• Due Diligence: Institutions must conduct thorough due diligence before engaging with ICT service providers to assess potential risks, including operational, financial, legal, and compliance aspects. 

• Contractual Requirements: Contracts with third-party providers must include specific provisions on risk management, service level agreements, incident reporting, and audit rights. 

• Monitoring and Review: Continuous monitoring of third-party providers’ performance and resilience is required to ensure they meet regulatory standards and do not expose the institution to unnecessary risks. 

• Outsourcing Registers: Institutions must maintain an updated register of all outsourcing arrangements, providing full visibility to regulators. 

5. Information Sharing and Cooperation

DORA encourages information sharing among financial institutions and regulators regarding cyber threats, incidents, and risk management best practices. This collaborative approach aims to foster a more resilient financial ecosystem by enabling institutions to learn from each other and respond more effectively to emerging threats. 

Implications of Non-Compliance with DORA 

Failure to comply with DORA’s requirements can have severe consequences for financial institutions, including:

1. Regulatory Penalties

Non-compliance with DORA may result in hefty fines and penalties, which can vary depending on the severity and frequency of violations. The regulatory bodies will have the authority to enforce these penalties to maintain the financial system’s stability and security.

2. Increased Supervision and Restrictions

Institutions that demonstrate persistent non-compliance may face enhanced regulatory scrutiny, including increased audits, reporting obligations, and potential restrictions on certain activities. In severe cases, regulators may even limit or revoke the institution’s authorisation to operate.

3. Reputational Damage

Beyond financial penalties, non-compliance can significantly damage an institution’s reputation. In the financial sector, trust is paramount, and failure to safeguard digital operations can result in a loss of customer confidence, adverse media coverage, and damage to brand integrity.

4. Operational Risks

Lack of compliance with DORA’s ICT risk management and operational resilience requirements leaves financial institutions vulnerable to cyberattacks, data breaches, and other ICT-related disruptions. These incidents can cause operational downtime, data loss, and significant financial and reputational damage.

5. Market Competitiveness

Institutions that fail to comply with DORA may struggle to keep pace with more resilient, innovative competitors who can assure customers and partners of their digital security and operational stability. In an era where digital trust is increasingly becoming a market differentiator, DORA compliance is crucial for maintaining competitiveness. 

Compliance Challenges: Overhauling Core Systems Is Not the Best Option 

Outdated technology significantly raises the risk of non-compliance with DORA regulations. Legacy systems in financial institutions often lack the flexibility, security features, and real-time monitoring capabilities needed to meet DORA’s rigorous standards for ICT risk management, incident reporting, and operational resilience.  

Older systems are prone to vulnerabilities, making them an easy target for cyberattacks and technical failures, both of which are primary concerns under DORA. Additionally, outdated tech hinders the institution’s ability to adapt to regulatory changes or integrate with modern third-party solutions, further complicating compliance efforts.  

As a result, institutions relying on legacy infrastructure face increased operational risks, potential regulatory penalties, and reputational damage, making digital modernisation an urgent priority. 

For many financial institutions, the idea of overhauling their legacy core systems to meet DORA’s requirements can be daunting. A full core system replacement can cost millions of euros, involve years of implementation, and introduce significant operational risks. On the other hand, institutions that choose to maintain outdated systems risk falling behind in regulatory compliance, customer experience, and overall competitiveness.  

FintechOS – A Modern Solution to Stay DORA-Compliant 

FintechOS provides a unique approach to meeting DORA regulations by allowing financial institutions to innovate on top of their existing infrastructure. With a low-code/no-code platform, FintechOS enables banks and insurers to build digital solutions quickly, cost-effectively, and in alignment with regulatory requirements—without the need to overhaul core systems. 

How FintechOS Supports DORA Compliance: 

1. Flexible and Modular Technology: FintechOS’s platform is built with flexibility in mind, offering modular components that can be added to an institution’s existing tech stack. This eliminates the need for a full system replacement, allowing for a more agile approach to compliance and innovation. 
2. Built-In Compliance Tools: The platform includes a suite of compliance tools designed to meet regulatory requirements like DORA, including automated risk assessment, incident tracking, and robust reporting features. These tools can be easily configured to align with the unique needs of each financial institution.
3. Scalability and Customisation: Financial institutions can scale their operations and customise services using FintechOS. As DORA introduces new requirements, the platform can be quickly adapted to ensure ongoing compliance. 
4. Operational Resilience: FintechOS enables institutions to conduct real-time monitoring, stress testing, and proactive risk management, aligning with DORA’s operational resilience mandates. 

Benefits of Using FintechOS for DORA Compliance and Innovation 

1. Reduced Costs: By using FintechOS’s low-code platform, financial institutions can reduce compliance costs by up to 60%, compared to traditional methods that involve extensive core system upgrades. This approach ensures that resources are allocated more efficiently, focusing on customer-centric innovations rather than backend overhauls. 
2. Faster Time-to-Market: FintechOS allows institutions to quickly launch new digital services, ensuring they remain competitive and compliant with DORA. This is crucial in a rapidly evolving financial landscape, where speed and adaptability are key to success. 
3. Enhanced Operational Resilience: The platform supports real-time monitoring and incident reporting, allowing institutions to identify, address, and mitigate potential ICT risks promptly. This capability is crucial in aligning with DORA’s operational resilience requirements and ensuring business continuity. 
4. Seamless Integration with Existing Systems: One of the standout features of FintechOS is its ability to integrate seamlessly with legacy systems. By acting as a digital layer on top of existing infrastructure, FintechOS enables institutions to modernise their operations and improve customer experience without disrupting core functionalities. 

The Bottom Line 

DORA’s comprehensive provisions cover all aspects of digital operational resilience, from risk management to incident reporting and third-party oversight. Financial institutions must adopt a proactive approach to compliance, updating their ICT frameworks, conducting regular testing, and closely managing third-party relationships. Non-compliance carries severe consequences, including regulatory penalties, operational risks, reputational harm, and loss of competitive advantage. 

However, aligning with DORA does not necessarily require a costly core system overhaul. With solutions like FintechOS, financial institutions can build a flexible and robust layer on top of existing systems to meet DORA requirements efficiently and cost-effectively, ensuring both regulatory compliance and ongoing digital innovation. 

For more detailed information, you can refer to the official DORA regulation documents provided by the European Commission. 

Kyla Reed

Kyla is the Content & Communications Director at FintechOS. With nearly a decade of experience in content and PR, she has spent most of her career growing content strategies at tech startups and scale-ups. In her free time, you can find her strolling through an antique market, reading in a coffee shop, or buying one too many house plants.