Few sectors face as many complex challenges as the finance industry. Increased regulatory scrutiny, heightened cyber security risks, and the complexities of maintaining compliance across multiple jurisdictions creates constant pressure. Additionally, evolving customer expectations and the rapid pace of technological change requires ongoing adaptation. While technologies such as cloud computing, AI, and blockchain have driven unprecedented growth and efficiency for the financial services sector, this digital transformation comes with significant risks, particularly in data protection and recovery. To address these risks, the European Union has introduced the Digital Operational Resilience Act (DORA).
This blog explores the critical aspects of data protection and recovery under DORA, providing key insights and practical guidance from our operational resilience specialists on effectively implementing these measures.
The Importance of Data Protection Under DORA
DORA mandates stringent data protection measures to prevent unauthorised access, data breaches, and other cyber threats. Here are some of the key data protection requirements under DORA:
- Data Security Frameworks: DORA requires financial entities to implement comprehensive data security frameworks. These frameworks must include encryption, access controls, and regular security assessments to protect sensitive financial data from unauthorised access and cyber threats.
- Third-Party Risk Management: Given the reliance on third-party service providers, DORA emphasises the need for secure third-party risk management. As a financial services organisation, you must ensure that your third-party providers also adhere to strict data protection standards. This includes regular audits, contractual obligations, and contingency plans in case of service disruption or data breaches.
- Data Governance: DORA requires organisations to establish strong data governance policies. These policies should cover data lifecycle management, ensuring that data is correctly classified, stored, and destroyed when no longer needed.
Data Recovery: A Pillar of Operational Resilience
While data protection focuses on preventing incidents, data recovery ensures that your organisation can bounce back when an incident does occur. DORA places a strong emphasis on the ability of financial entities to recover from data-related incidents quickly and efficiently. Here are the critical data recovery elements outlined in DORA:
1. Business Continuity Plans (BCPs)
DORA stipulates that you should develop and regularly update your Business Continuity Plans that include data recovery procedures.
How to implement these measures:
The simplest way to adhere to this element of DORA is to ensure that your BCP plans outline the steps to be taken in the event of data loss, this will ensure that your critical operations can continue operating with minimal disruption.
2. Disaster Recovery Plans
In addition to BCPs, DORA requires organisations to maintain Disaster Recovery Plans specifically focused on ICT disruptions.
How to implement these measures:
The best disaster recovery plan is one that prevents disasters from happening in the first place. While this isn’t always in your control, you should look for ways to mitigate disasters from impacting the business.
The best disaster recovery plan is one that prevents disasters from happening in the first place. While complete prevention isn’t always within your control, implementing proactive security detection and prevention solutions such as Managed Detection and Response (MDR), can significantly reduce the risk of a disaster impacting your business. For instance, MDR services provide continuous monitoring and analysis of your systems, allowing for the early detection and rapid response to potential threats. This means that if a security breach is attempted, it can be contained before it escalates into a larger incident.
Your plans should detail how your data will be restored from backups, the timelines for recovery, and the roles and responsibilities of your employees during a recovery operation.
3. Regular Testing, Exercising and Rehearsing
To ensure that data recovery plans are effective, DORA requires regular testing, exercising and rehearsing.
How to implement these measures:
You can have the best disaster recovery plan in the world but if you have never tested them, how do you know if they will work? More to the point, how do you know that your staff will know what to do and when to do it? Do staff know the part they play during an incident? Do they know the process to follow? Testing is one of the best ways to ensure people feel included and to help them to understand the role they must play during an incident. It helps them feel more comfortable with what is expected of them and allows them to practice their response in a ‘safe’ environment without fear of messing up. Remember, it’s far better to find out if something doesn’t work or some critical data is missing, during an exercise than during a real incident, just at the point you depend on it.
4. Data Backups
DORA emphasises the importance of maintaining secure and up-to-date backups.
How to implement these measures:
Your backups are a lifeline in the event of data loss or system compromise, promising to restore operations and minimise downtime. However, as ironic as it sounds, your backups themselves can become a vulnerability if not managed and secured properly.
These backups should follow the 3-2-1 rule of backup – stored in multiple locations, including offsite or in the cloud, to ensure that data can be restored even in the event of a significant disruption, such as a natural disaster or a cyber attack.
The Role of Technology in DORA Compliance
Technology plays a crucial role in ensuring compliance with DORA’s data protection and recovery requirements. Advanced cyber security tools such as Security Information & Event Management, AI-driven threat detection systems such as Endpoint Detection & Response, and automated backup solutions such as Continuous Data Protection and Disaster Recovery as a Service, are all valuable for meeting DORA’s stringent standards. We recommend that if not already implemented, financial organisations leverage these technologies to ensure their infrastructure is capable of withstanding and recovering from digital disruptions.
Moreover, the integration of artificial intelligence and machine learning can enhance data protection measures by identifying potential threats before they materialise and automating responses to incidents, thus minimising human error and response times.
Conclusion
The financial industry’s reliance on digital systems will only continue to grow, making robust data protection and recovery more critical than ever.
DORA’s focus on this area takes a significant step in securing the future of the financial industry. By implementing well-rounded data protection measures and preparing for the worst through well-designed recovery planning, you can ensure that your organisation is not just surviving but thriving in the face of uncertainty.
Need Some Help?
Achieving DORA compliance is a broad undertaking that requires proactive planning, robust implementation, and ongoing monitoring.
No matter what stage you are at on your DORA readiness journey, we have the expertise and tools to guide you seamlessly from start to finish. Our qualified operational resilience and cyber security experts have helped numerous businesses in the financial services sector implement resilient frameworks to improve, document and test their DORA preparations, ahead of the January 2025 deadline.
For more information on DORA and how it impacts your organisation click here.