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Introduction
Digital banks must prove stronger protection & resilience against rising digital threats, including hacks and system disruptions. In European markets, the European Union (EU) regulation, Digital Operational Resilience Act (DORA) sets the benchmark.
Introduced on January 16, 2023, and becoming mandatory from January 17, 2025, the regulation establishes a unified framework that financial institutions cannot ignore, as failing to comply risks regulatory action or financial penalties.
For online banks, DORA brings demanding requirements around IT security, incident response, fraud prevention, and operational resilience. While many institutions adopt automated solutions to address these obligations, without strategic implementation, several benefits often remain unachieved.
This article outlines the key aspects of DORA regulation and describes automation strategies that help compliance officers manage requirements more effectively.
What is DORA Regulation for Banks?
The Digital Operational Resilience Act (DORA) sets high standards for financial institutions to strengthen digital resilience and manage Information and Communication Technology (ICT) risks. It provides banks with a comprehensive framework that prepares institutions to respond effectively to digital disruptions.
DORA guidelines for financial institutions were mainly designed to support both security and operational continuity. Its rules cover disaster recovery planning, producing standardized audit records, and ensuring rapid responses to incidents.
Key aspects of DORA regulation include:
- ICT Risk Management- Banks must establish detailed policies for identifying, assessing, and controlling ICT-related risks.
- ICT Incident Reporting- Institutions must submit standardized incident reports to regulators using approved templates.
- Digital Operational Resilience Testing- Banks are required to conduct regular threat-led penetration testing across critical systems.
- Information Sharing- Institutions should share relevant cyber threat information with industry peers and authorities.
The Challenges for Banking Compliance Officers Under DORA Regulations
As digital banks expand, compliance responsibilities become complex. More customers bring higher transaction volumes, and larger vendor networks introduce complex risks. Compliance officers relying on outdated processes struggle to comply effectively. Common challenges include:
- Adapting to Evolving Regulations: DORA requirements update frequently. Manual processes fail to update in real-time, leaving systems and policies vulnerable to fraud or cyberattacks.
- Third-Party ICT Risk Management: The European Banking Authority (EBA) requires banks to manage and document risks from all third-party ICT providers. As vendor networks grow, manual monitoring of contracts and risks becomes fragmented, increasing monitoring failures and hidden risks.
- Delayed Incident Reporting and Communication: With growing transaction volumes, relying on manual approaches slow response times. Institutions risk late filings that fail DORA’s strict timelines and create exposure to penalties.
- Audit Preparation and Documentation: Collecting and organizing reports from multiple systems takes significant time. Manual tracking of incidents, vendor activities, and system logs makes audits slow and error prone.
Manual gap creates reporting delays, monitoring failures, and costly compliance errors. Under DORA, such failures may result in penalties reaching €5 million or even more. Automating regulatory compliance strategically helps compliance officers manage growing compliance risks effectively.
Key DORA Compliance Automation Strategies for Digital Banks
To ensure compliance with the Digital Operational Resilience Act (DORA), digital banks must implement advanced automation strategies that address the complexities of regulatory requirements, operational resilience, and third-party risk management.
- Prioritize High-Risk Areas with AI-Driven Monitoring - Leverage AI to continuously monitor IT systems and controls, focusing on high-risk areas. Balance automation with human oversight to avoid blind spots during scaling operations.
- Dynamically Assess Third-Party Risks - Deploy platforms that evaluate vendors in real time, integrating risk scoring and alerts. Combine automated insights with manual review to manage growing third-party networks effectively.
- Streamline Incident Reporting with Human Oversight - Automate detection and reporting workflows while validating critical events manually. This ensures timely, accurate submissions under DORA while reducing delays in high-volume scenarios.
- Test Operational Resilience Strategically - Conduct automated simulations and stress tests to identify ICT vulnerabilities. Complement AI-driven testing with manual scenario reviews to strengthen systems against complex disruptions.
- Centralize Documentation with Verification - Implement centralized platforms for audit trails, control evidence, and reports. Combine automated aggregation with human verification to maintain reliable records across expanding operations and vendor ecosystems.
The Impact of Implementing Automated DORA Frameworks in Banking Operations
Automating Digital Operational Resilience Act processes with advanced AI-powered solutions helps banks achieve significant results, including:
1. Operational and Risk Management Impact
- Reduced Compliance Costs: Automation reduces manual workload, decreasing compliance expenses by up to 30%.
- Accelerated Incident Handling: Real-time monitoring allows faster detection and resolution of ICT incidents.
- Better Risk Management: Proactive threat identification minimizes potential operational disruptions.
- Stronger Vendor Control: Continuous monitoring improves oversight of third-party ICT risks.
2. Audit and Reporting Impact
- Faster Audits: Automated documentation shortens audit preparation time significantly.
- Timely Regulatory Reporting: Real-time reporting ensures consistent compliance with DORA timelines.
- Accurate Data Management: Consistent records reduce errors and regulatory scrutiny.
- Clear Compliance Visibility: Traceable logs improve transparency across departments.
Best Practices for Compliance Automation in Digital Banking
Implementing compliance automation effectively is essential for meeting DORA obligations. Below are structured practices that digital banks must follow:
1. Enable AI-Powered Automation Across DORA’s Five Pillars
AI can continuously monitor ICT risks, detect anomalies, and validate controls across multiple systems. Applying automation across all regulatory pillars ensures faster detection, reduces human errors, and maintains resilience even as operations expand and become more complex.
2. Use Centralized Dashboards for Real-Time Tracking
Implement dashboards that unify data across systems, transactions, and vendors. It provides the real-time visibility that allows compliance teams to track risks, identify anomalies, and respond quickly without relying on fragmented manual reports.
3. Maintain Updated Automation Rules and Workflows
Regularly review and update automated compliance workflows and rule sets. Keeping them current ensures accurate risk assessments, correct reporting, and smooth handling of evolving regulatory requirements without manual intervention.
4. Integrate Compliance Automation Tools
Leveraging RegTech platforms into digital banking systems enables smarter risk assessments, faster reporting, and continuous adaption against evolving regulations. For quick and disrupt-free integration, deploy pre-built AI models that provide instant compliance automation results without the need for updating controls.
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Conclusion
The Digital Operational Resilience Act (DORA) provides a clear framework for maintaining stability and managing ICT risks in European banking operations. It supports continuous operations, even during system disruptions or cyber incidents.
For banks, the value of DORA lies not only in protecting against threats but also in minimizing disruptions and restoring operations rapidly. Leveraging compliance automation solutions strengthens resilience by reducing manual errors, accelerating reporting, and monitoring third-party activities effectively.
Even minor disruptions can cost banks millions annually in operational losses, excluding regulatory fines. Deploying pre-built AI models from industry experts like Flux-Force allows plug-and-play compliance automation, ensuring workflows and risk rules remain current without banks needing to handle constant model updates.
By adopting these automated frameworks, banks can meet DORA requirements confidently while improving operational efficiency.
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