Tomorrow, 17^th January 2025, marks a transformative milestone for the financial sector as the Digital Operational Resilience Act (DORA) takes effect. This legislation heralds a profound shift in the way financial institutions—ranging from banks and insurers to fintech companies and their ICT providers—approach digital risk and operational resilience. However, with the deadline fast approaching, the pivotal question remains: Are you truly ready?

DORA is far more than a simple compliance requirement; it is a strategic imperative for organisations reliant on digital infrastructure for delivering financial services. Recent high-profile incidents, such as a global payment provider crippled by ransomware or a stock exchange disrupted by a software glitch, underscore the urgency of this wake-up call. These are not hypothetical scenarios but real-world challenges that must be addressed.

The enactment of DORA is strategic, responding to evolving risks within the financial sector. It transcends mere regulatory enforcement and aims to ensure the financial system’s continuity amid potential disruptions.

Understanding DORA’s Significance

At its essence, DORA addresses a fundamental query: What happens to the financial sector when technology falters? History has shown us tragic consequences, from debilitating ransomware attacks to widespread IT failures, which have demonstrated how digital vulnerabilities can severely impact operations and erode customer trust.

DORA serves as more than a regulatory compulsion; it is a strategic blueprint for survival. By emphasising ICT risk management, incident reporting, digital resilience testing, and third-party risk oversight, the act compels organisations to identify their weakest links and fortify them comprehensively.

However, a significant challenge persists: many organisations erroneously view resilience as an external issue. IT departments are often expected to handle risks without robust leadership support, and third-party vendors are frequently neglected until problems arise. DORA shifts this responsibility directly onto financial entities, promoting a proactive culture of resilience throughout the organisation rather than a reactive approach to the latest threats.

Critical Oversights to Address

As the deadline looms, organisations may be overlooking crucial aspects of DORA. Here are three essential elements requiring immediate attention:

1. Third-Party Risk: Financial institutions are increasingly reliant on third-party vendors for services such as cloud computing, data analytics, and payment processing. DORA mandates that while outsourcing functions, responsibility and accountability remain with the financial entities. In case of a cybersecurity breach or service disruption involving vendors, the repercussions—both reputational and financial—fall on you. Immediate actions include auditing critical vendors to ensure their resilience and renegotiating Service Level Agreements (SLAs) to incorporate provisions for operational resilience.

2. Resilience Testing: Assumptions of resilience, particularly in the absence of historical incidents, can lead to vulnerabilities. DORA requires regular resilience testing to simulate potential disruptions like cyberattacks and system failures, ensuring ICT systems can withstand unexpected challenges. Organisations should prioritise testing high-risk scenarios and engage external specialists to uncover hidden vulnerabilities before they cause real damage.

3. Incident Reporting: Promptness is key. Under DORA, immediate reporting of disruptions is crucial to avoid penalties and regulatory scrutiny. Organisations should update incident response plans to align with DORA requirements and train teams to ensure efficient reporting processes.

The Cost of Non-Compliance

Compliance with DORA is mandatory; non-adherence poses significant threats to businesses. Penalties could be financially devastating, particularly for smaller entities. Reputational damage from ICT failures, amplified by swift social media and news dissemination, can erase customer trust built over the years. Moreover, operational disruptions carry systemic risks extending beyond individual organisations.

 Immediate Action Steps

With the deadline imminent, certain steps can be taken to demonstrate intent and readiness:

• Conduct a rapid ICT risk assessment to identify vulnerabilities and document mitigation plans.
• Align leadership, IT, compliance, and risk teams with DORA priorities.
• Audit vendors, focusing on those at high risk, to ensure compliance with DORA’s resilience expectations.
• Perform basic resilience testing on mission-critical systems to identify gaps.
• Document plans thoroughly, as regulators value transparency and a documented strategy can prove beneficial even if full compliance is not achieved by the deadline.

Looking Beyond the Deadline

DORA marks the beginning of a new era rather than a one-time regulatory requirement. Organisations that embrace resilience as an ongoing strategic priority will enhance their competitiveness and better navigate the uncertainties of the digital age.

At SS-Consulting, we understand that resilience transcends mere compliance; it involves safeguarding your business, customers, and reputation. Should you require assistance in meeting DORA’s requirements or developing a comprehensive operational resilience strategy, we are here to support you. Please contact us at sales@ss-consulting.co.za  to begin your journey towards strengthened resilience.