Harnessing the Digital Operational Resilience Act to Enhance Your Business Operations
Opportunities, Challenges, and Outcomes for Brokers & Market Makers
As demonstrated by events such as the CloudStrike outage earlier this year, the need for robust digital operational resilience has never been more critical. The Digital Operational Resilience Act (DORA) aims to ensure that financial entities can withstand, respond to, and recover from all types of IT-related disruptions and threats. This article explores how Brokerages and Market Makers can use DORA as an opportunity to enhance IT Risk management operations, examines the likely challenges they will face, and considers the possible outcomes brought about by adherence to DORA.
Leveraging DORA to Enhance Operations
Broker/Dealers and Market Makers have much to gain from embracing DORA. While the framework imposes stringent requirements, it also offers a pathway to efficiency and business strength. For example, a brokerage firm that had previously suffered downtime due to cyberattacks could use the guidelines provided by DORA to implement stronger cybersecurity measures. By doing so, the firm can protect its digital infrastructure more effectively, minimising time out of the market and maintaining client trust.
DORA encourages firms to take a proactive stance on digital risk management by mandating regular testing and assessment of IT systems. This proactive approach will help firms to identify vulnerabilities before they can be exploited and should better prevent unexpected disruptions. For example, firms conducting comprehensive digital and software risk assessments as part of their DORA compliance efforts are far more likely to discover outdated and vulnerable software. By updating these components, firms not only protect their systems from bad actors, but also significantly enhance their overall operational security.
Challenges in Adopting DORA
The path to DORA compliance presents many challenges, particularly for broking firms. One of the primary hurdles is the need to overhaul existing IT systems to meet the new standards. This can be a costly and time-consuming process, especially for smaller firms with limited resources.
Moreover, the requirement for continuous monitoring and regular reporting can strain the operational capacities of firms. Ensuring that all digital activities are compliant with the new regulations necessitates a robust monitoring framework, which can be complex to implement and maintain.
Another significant challenge is the cultural shift required within organisations. DORA demands a high level of awareness and involvement from employees at all levels, which means that firms must invest in training and development programs.
Struggling to see a clear path to DORA compliance?
DORA Implementation Timeline
Outcomes of Adopting DORA
Despite the challenges, the adoption of DORA is likely to yield substantial benefits for Broker/Dealers and Market Makers. Firms that comply with DORA will more likely enjoy enhanced operational resilience and reduced risk of IT-related disruptions.
Drawing a parallel to GDPR, we feel it’s likely that DORA compliance will come to not just serve as a competitive advantage, but instead the “gold standard” for firms operating in the broking and wider financial services sectors. Firms adhering to this standard that demonstrate robust operational resilience are more likely to attract and retain clients, who are increasingly aware of the importance of cybersecurity and operational stability.
The structured approach to risk management that is mandated by DORA fosters a culture of continuous improvement within organisations – one that is likely to bring about benefits across a business.
"Preparing for the enforcement of the Digital Operational Resilience Act in early 2025 presents real challenges for Broker/Dealers across the sector. With increased resource and budget demands for systems overhauls, regular penetration testing and reporting its clear that compliance with the Act will demand a significant investment. However, along with these challenges the opportunities for building trust, resilience, and reputation are clear, leading to broader investor confidence across the board. "
Andrew Watson
Chief Commercial Officer
Titan Institutional Services
Conclusion
The Digital Operational Resilience Act presents both challenges and opportunities for Broker/Dealers. By embracing the framework, firms can enhance their operational resilience, protect their digital infrastructure, and gain a competitive edge in the market. However, the path to compliance requires significant investment in technology, processes, and potentially a cultural change. Firms that navigate these challenges successfully will not only meet regulatory requirements but also position themselves for long-term success.
Disclaimer
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