Cybersecurity has become a non-negotiable priority for organizations operating across borders. From ransomware attacks on critical infrastructure to data breaches that expose sensitive customer information, the stakes for businesses increase year after year. These challenges have prompted regulatory bodies around the globe to enforce stricter standards, including the European Union’s Digital Operational Resilience Act (DORA) that came into full effect in January.
Although DORA primarily targets EU-based financial institutions, its implications extend far beyond Europe. U.S. companies that serve EU clients, particularly in the financial and Information and Communication Technology (ICT) sectors, must comply to avoid significant financial, operational, and reputational risks. Understanding DORA and taking proactive measures can protect businesses while demonstrating a commitment to operational excellence in the global marketplace.
What is DORA, and Why Should U.S. Companies Care?
DORA is an EU regulation aimed at fortifying the digital resilience of financial institutions and their critical ICT service providers. It ensures organizations can withstand and recover from digital disruptions, including cyberattacks, to maintain economic stability and societal functioning.
The financial sector, essential for both economies and society, relies heavily on ICT systems, often outsourced to third-party providers. This dependency introduces risks, as disruptions in these services can have cascading effects across other sectors and economies. DORA addresses this by holding EU financial institutions and their ICT supply chains accountable for operational resilience.
For U.S. companies, the implications are clear: if a business provides cloud computing, cybersecurity, or data processing services to EU financial institutions, compliance with DORA is non-negotiable. Non-compliance risks include legal penalties, operational disruptions, and damaged client relationships. Beyond its immediate scope, DORA reflects a global shift toward stricter cybersecurity regulations. Preparing for DORA positions businesses to adapt to similar frameworks emerging worldwide, safeguarding future operations and client trust.
Key Components of DORA That Affect U.S. Companies
DORA’s requirements cover multiple aspects of operational resilience, with provisions that U.S. companies need to prioritize. The first is risk management frameworks; DORA mandates that companies adopt an ICT risk management framework to identify, mitigate, and respond to threats. This involves regular assessments, board-level involvement, and comprehensive incident response planning, all of which are critical for U.S. businesses to maintain partnerships with EU clients.
Another element is incident reporting and response. Under DORA, companies must report significant ICT-related incidents, like cyberattacks, data breaches or system failures, to EU authorities within specific timelines, including details on the cause, impact, and mitigation measures. For U.S. firms, this means establishing processes for detecting and classifying incidents quickly. Additionally, operational resilience testing is a cornerstone of DORA compliance. Regular vulnerability assessments, penetration testing, and scenario-based drills ensure systems are prepared for real-world cyber threats.
Third-party risk management is also an important focus area. EU financial institutions are responsible for the resilience of their supply chain, which includes ICT service providers. Businesses must demonstrate compliance through updated contracts, audits, and evidence of strong security practices. Finally, information sharing is encouraged under DORA to enhance collective resilience. Firms must establish secure channels for sharing cyber threat intelligence with EU partners and clients.
Why Act Now? The Risks of Non-Compliance
The risks of ignoring DORA are significant and multifaceted. Regulatory authorities can impose fines and penalties for non-compliance, but the consequences extend beyond that. Being perceived as a weak link in a client’s cybersecurity chain can result in irreparable reputational damage, leading to lost business opportunities and strained relationships.
Operational risks are also a major concern. Insufficient resilience measures can lead to service disruptions, data breaches, and prolonged recovery periods. These challenges erode client trust and can cause cascading issues throughout operations – including an impact on the bottom line. The cost of non-compliance for DORA can be steep. As global cybersecurity regulations tighten, addressing gaps now will save significant resources in the future while positioning an organization as a leader in operational resilience.
Independent third-party assessments offer an objective evaluation of an organization’s systems, identifying vulnerabilities that may be overlooked internally. These assessments can be conducted in-house or by external experts, depending on the organization’s resources and needs. External experts can thoroughly assess risk management frameworks, incident response plans, and resilience practices, while simulating real-world threats to uncover weaknesses before they are exploited. While third-party assessments provide external validation, internal evaluations offer a deeper, hands-on understanding of specific systems and processes.
Regardless of the approach, the key is to proactively assess vulnerabilities to strengthen security posture. Engaging independent experts can signal a business’s commitment to security, building trust with EU partners and clients, and offering a competitive advantage in a security-conscious market. Businesses should carefully evaluate whether internal or external assessments best suit their needs, as both approaches offer unique benefits for DORA compliance.
Next Steps for U.S. Companies
To be compliant with DORA, businesses should begin with a thorough gap assessment. This will help identify any weaknesses in current cybersecurity and operational resilience practices. Next, they should evaluate existing systems to pinpoint areas for improvement. Strengthening incident response protocols is also crucial – organizations should review current plans to ensure they meet DORA’s strict reporting requirements and establish clear processes for efficiently detecting, classifying, and mitigating incidents.
Regular testing should also be prioritized. Vulnerability assessments, penetration tests, and resilience drills would become routine parts of a cybersecurity strategy. Finally, businesses should consider engaging a trusted partner. Working with a third-party assessor can provide the expertise and resources needed to streamline compliance efforts and ensure alignment with DORA’s standards.
Complying with DORA: An Investment in the Future
DORA’s reach extends beyond the EU, profoundly impacting U.S. companies serving EU financial institutions. Achieving compliance ensures regulatory alignment and also strengthens organizational resilience, builds client trust, and positions businesses for success in a world of growing regulatory demands.
By adhering to DORA’s standards, businesses can mitigate immediate risks, protect their reputation, and fortify operations against future challenges. Investing in compliance is more than meeting legal requirements—it’s a strategic decision to enhance security, bolster client confidence, and thrive in an increasingly cybersecurity-conscious world.
About the Author
Avani Desai is the Chief Executive Officer at Schellman, the largest niche cybersecurity assessment firm in the world that focuses on technology assessments. Avani is an accomplished executive with domestic and international experience in information security, operations, P&L, oversight and marketing involving both start-up and growth organizations. She has been featured in Forbes, CIO.com and The Wall Street Journal, and is a sought-after speaker as a voice on a variety of emerging topics, including security, privacy, information security, future technology trends and the expansion of young women in technology.
Avani sits on the board of Arnold Palmer Medical Center and Philanos; is Audit Committee chairwoman at the Central Florida Foundation; and is the Co-Chair of 100 Women Strong, a female-only venture capitalist-based giving circle that focuses on solving community-based problems specific to women and children by using data analytics and big data. Avani Desai can be reached online at our company website https://www.schellman.com/
