Financial institutions are increasingly dependent on technology, regulatory bodies are continually evolving to address emerging risks. One such regulation is the Digital Operational Resilience Act (DORA), a European Union directive aimed at strengthening the IT resilience of financial entities.
However, how does DORA stack up against other global regulatory frameworks, lets understand.?
Exploring the parallels and differences between DORA and other key regulations like GDPR, SOX, and NIS2.
1. Purpose and Scope: Digital Risk vs. Other Risks
DORA: Primarily targets financial institutions, emphasizing IT risk management to ensure they can withstand, respond to, and recover from cyber threats and technology failures.
GDPR (General Data Protection Regulation): While DORA focuses on operational resilience, GDPR deals with data privacy and the protection of personal data across industries, not just financial institutions.
SOX (Sarbanes-Oxley Act): Focuses on financial integrity, ensuring companies maintain accurate financial reporting, but it lacks a dedicated focus on IT risk or resilience.
NIS2 (Network and Information Security Directive): Similar to DORA in terms of cybersecurity but broader in scope, covering various sectors critical to the EU’s economy.
Key Difference: DORA zeroes in on operational resilience within the financial sector, while GDPR and SOX address broader compliance areas like data privacy and financial integrity.
2. Cybersecurity Focus: Threat Management
DORA: Mandates a comprehensive framework for managing and reporting cyber incidents, including third-party risk management.
NIS2: Also emphasizes cybersecurity and risk management but spans more sectors, including energy, healthcare, and transport.
GDPR: Primarily concerned with data breaches and ensuring individuals’ rights are protected, but it overlaps with DORA when it comes to securing personal data within financial services.
Parallels: Both DORA and NIS2 focus on incident reporting and third-party risks, while GDPR’s interest in cyber incidents is more about data breaches.
3. Resilience and Recovery: System Continuity
DORA: Introduces operational resilience testing as a core requirement, compelling financial firms to simulate cyberattacks and verify their ability to recover from them.
SOX: No explicit focus on IT or operational resilience, as it’s mostly aimed at financial reporting.
GDPR and NIS2: Both require organizations to demonstrate they can ensure ongoing confidentiality, integrity, and availability of their systems, but these are more focused on data and network security than overall operational continuity.
Key Similarity: DORA and NIS2 both stress the importance of resilience testing but within different scopes (financial entities for DORA, critical sectors for NIS2).
4. Third-Party Risk Management: Overseeing Outsourced Providers
DORA: Stresses the need for financial entities to manage third-party risks, requiring them to scrutinize the operational resilience of their ICT service providers.
GDPR: Requires organizations to ensure data processors comply with data protection rules, though it doesn't dive as deeply into third-party IT risk.
NIS2: Also addresses third-party risks but focuses on entities providing essential services, making it broader than DORA in some sectors.
Difference: DORA places a sharper focus on third-party ICT risk within financial services, while GDPR and NIS2 take a more generalized approach to third-party management.
5. Enforcement and Penalties: The Cost of Non-Compliance
DORA: Failure to comply can lead to hefty fines and regulatory sanctions, similar to other EU regulations.
GDPR: Known for its severe penalties for non-compliance, including fines up to 4% of global turnover.
SOX: Has stringent penalties for financial misreporting, but no specific focus on cybersecurity or resilience.
Key Takeaway: The enforcement under DORA could follow in GDPR’s footsteps, with significant penalties, emphasizing the need for firms to be prepared and proactive.
Conclusion
DORA is shaping up to be a vital regulation for ensuring digital resilience in the financial sector, and its parallels with frameworks like NIS2 show a growing trend toward stringent cybersecurity requirements. While DORA shares some similarities with regulations like GDPR in terms of data protection and incident reporting, its focus on operational resilience and third-party risk management makes it a distinct regulatory force, particularly in financial services.
As organizations navigate these regulations, it’s critical to understand both the parallels and the nuances to ensure full compliance and safeguard against potential threats.
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