The Digital Operational Resilience Act (DORA) was published by the European Parliament in December 2022. This Regulation aims to consolidate and upgrade ICT risk requirements as part of the operational risk requirements that have, up to this point, been addressed separately in various European Union legal acts.
While those acts covered the main categories of financial risk (e.g. credit risk, market risk, counterparty credit risk and liquidity risk, market conduct risk), they did not comprehensively tackle, at the time of their adoption, all components of operational resilience. The operational risk rules, when further developed in those Union legal acts, often favoured a traditional quantitative approach to addressing risk (namely setting a capital requirement to cover ICT risk) rather than targeted qualitative rules for the protection, detection, containment, recovery and repair capabilities against ICT-related incidents, or for reporting and digital testing capabilities. Those acts were primarily meant to cover and update essential rules on prudential supervision,
market integrity or conduct. By consolidating and upgrading the different rules on ICT risk, all provisions addressing digital risk in the financial sector should for the first time be brought together in a consistent manner in one single legislative act. Therefore, this Regulation fills in the gaps or remedies inconsistencies in some of the prior legal acts, including in relation to the terminology used therein, and explicitly refers to ICT risk via targeted rules on ICT risk-management capabilities, incident reporting, operational resilience testing and ICT third-party risk monitoring. This Regulation should thus also raise awareness of ICT risk and acknowledge that ICT incidents and a lack of operational resilience have the possibility to jeopardise the soundness of financial entities.
Financial entities should follow the same approach and the same principle-based rules when addressing ICT risk taking into account their size and overall risk profile, and the nature, scale and complexity of their services, activities and operations. Consistency contributes to enhancing confidence in the financial system and preserving its stability especially in times of high reliance on ICT systems, platforms and infrastructures, which entails increased digital risk. Observing basic cyber hygiene should also avoid imposing heavy costs on the economy by minimising the impact and costs of ICT disruptions.
A Regulation helps reduce regulatory complexity, fosters supervisory convergence and increases legal certainty, and also contributes to limiting compliance costs, especially for financial entities operating across borders, and to reducing competitive distortions. Therefore, the choice of a Regulation for the establishment of a common framework for the digital operational resilience of financial entities is the most appropriate way to guarantee a homogenous and coherent application of all components of ICT risk management by the Union financial sector.
Who does this regulation apply to?
This Regulation applies to the following entities
- Credit institutions
- Account information service providers
- Investment firms
- Trade repositories
- Managers of alternative investment funds
- Trade repositories
- Payment institutions, including payment institutions exempted pursuant to Directive (EU)2015/2366
- Management companies
- Electronic money institutions, including electronic money institutions exempted pursuant to Directive 2009/110/EC
- Crypto-asset service providers as authorised under a Regulation of the European Parliament and of the Council on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (‘the Regulation on markets in crypto-assets’) and issuers of asset-referenced tokens
- Central securities depositories
- Central counterparties
- Trading venues
- Data reporting service providers
- Insurance and reinsurance undertakings
- Insurance intermediaries, reinsurance intermediaries and ancillary insurance intermediaries
- Institutions for occupational retirement provision
- Credit rating agencies
- Administrators of critical benchmarks
- Crowdfunding service providers
- Securitisation repositories
- ICT third-party service providers
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