3 Months away from DORA: Is your company prepared?
3 Months away from DORA: Is your company prepared?
The clock is ticking, with just three months remaining until the Digital Operational Resilience Act (DORA) comes into force on 17 January 2025.
By now, most financial entities and service providers should have a clear road-map for ensuring compliance with the new regulations. One area that often presents unique challenges, however, is third-party risk management.
As financial entities increasingly rely on third-party providers for critical services, including cloud computing, data processing, and IT security, DORA places significant emphasis on the oversight of these relationships. If your organisation depends on third-party services, now is the time to ensure that these providers are meeting the required standards and that you have adequate processes in place for monitoring them.
Why Third-Party Risk Matters
DORA places significant emphasis on the oversight and resilience of third-party technology providers, recognising the potential risks that arise from outsourcing critical functions. A failure or disruption at a key service provider could have a cascading effect on the financial institutions that depend on them, leading to system downtime, data breaches, or even wider market instability. Under DORA, businesses will need to thoroughly assess their external partners, ensure they are meeting the same high standards of operational resilience, and establish processes to monitor them on an ongoing basis.
Steps to Ensure Third-Party Compliance
- Contract Review: Revisit your agreements with all third-party service providers. Contracts should clearly outline the responsibilities of each party concerning risk management, incident reporting, and resilience testing.
- Ongoing Monitoring: Implement systems to continuously monitor the performance and risk profile of third-party providers. This includes real-time oversight of their operations, security controls, and compliance with the relevant regulations.
- Due Diligence: Assess whether your providers have the necessary risk management frameworks in place. Request documentation on their business continuity plans, incident response protocols, and testing schedules.
- Contingency Planning: Have back-up strategies in place in case a third-party provider fails to meet its obligations or experiences a major disruption. This might include alternative suppliers or in-house capabilities to take over critical services in an emergency.
The looming DORA deadline is a significant challenge, particularly for firms that rely heavily on third-party service providers. However, the regulation also provides an opportunity to enhance the overall resilience of your organisation. By focusing on third-party risk management now, businesses can not only meet DORA’s requirements but also reduce their exposure to risks from external providers, strengthen their operational resilience, and ensure they are prepared for any future disruptions.