Unlocking the Full Potential of DORA Compliance with Cyber Risk Quantification

How to strengthen resilience and third party risk management with a ‘proportional’ response to the new EU financial industry regulation

By Nicola (Nick) Sanna

The Digital Operational Resilience Act (DORA) goes into full effect on January 17, 2025, and represents a significant step forward in fortifying the digital resilience of financial institutions across the European Union. By establishing a robust framework for managing Information and Communication Technology (ICT) risks, DORA seeks to ensure that financial entities can withstand and recover from cyber threats and operational disruptions. DORA’s emphasis on continuous, explicit impact-focused risk management practices, creates the opportunity for forward-thinking organizations to adopt automated risk quantification as a key enabler for compliance and operational excellence.

• Nicola (Nick) Sanna is President of Safe Security, founder of the non-profit FAIR Institute advancing the discipline of cyber and operational risk management, and a veteran of international business.

Here we explore how leveraging risk quantification not only aligns with DORA’s requirements but also creates substantial strategic advantages for financial institutions.

Understanding DORA’s Key Requirements

DORA emphasizes several critical aspects of ICT risk management, including:

• Implementing a proportional ICT risk management framework.
• Conducting regular risk assessments and operational resilience testing.
• Classifying incidents based on their severity and impact.
• Managing third-party risks and ensuring business continuity.
• Reporting incidents to regulatory authorities promptly.

These requirements are designed to foster a proactive, risk-aware culture within financial organizations. However, to truly excel under DORA, institutions must go beyond qualitative assessments and embrace quantification as a means of meeting and exceeding regulatory expectations.

The Case for Risk Quantification

DORA’s principles strongly align with the benefits of quantifying risk. Here are the ways risk quantification complements DORA’s provisions:

1. Enhancing Proportionality

DORA requires ICT risk management practices to be proportional to the size, scale, complexity, and risk profile of the entity. Risk quantification translates potential risks into measurable financial impacts, providing an objective basis for demonstrating proportionality. This ensures that resource allocation and risk mitigation strategies are not only compliant but also cost-effective.

2. Improving Incident Classification

Under DORA, financial institutions must classify incidents by their severity and potential impact. Quantifying risks and incident impacts in financial terms allows organizations to:

• Objectively assess incident severity.
• Prioritize responses based on potential operational and financial harm.

3. Prioritizing Critical Functions

DORA emphasizes the identification and protection of critical ICT systems. Quantitative analysis helps organizations assess the potential financial consequences of disruptions, enabling them to prioritize resources where they’re needed most and meet resilience goals. 

4. Strengthening Third-Party Risk Management

Managing risks posed by third-party providers is a cornerstone of DORA. Risk quantification provides:

• A clear view of potential losses associated with third-party dependencies.
• Insights into cost-benefit analyses for outsourcing critical services and control options.
• Data-driven negotiation power in contracts with vendors.

5. Demonstrating Operational Resilience

DORA’s requirement for resilience testing, including threat-led penetration testing (TLPT), is an opportunity to quantify risk exposure through simulated scenarios. This approach delivers actionable insights into the financial implications of threats and vulnerabilities, strengthening both compliance and preparedness.

6. Elevating Risk Reporting

DORA mandates transparent reporting of ICT risks and incidents. Risk quantification enhances reporting by:

• Providing objective, financial-based incident and risk classifications.
• Offering clear metrics for stakeholders and regulators.
• Strengthening accountability and enabling risk-informed decision-making.

Strategic Advantages of Risk Quantification

Beyond regulatory compliance, adopting a quantitative risk management framework delivers significant organizational benefits:

1. Better Decision-Making: Quantified risks enable business leaders to make informed decisions that balance cost and impact, aligning risk mitigation with business objectives.
2. Enhanced Stakeholder Communication: Translating technical risks into financial terms fosters clear communication with boards, regulators, and investors, improving trust and transparency.
3. Improved Resource Allocation: Quantifying risks helps prioritize investments in cybersecurity and resilience measures, ensuring optimal use of resources.
4. Future-Proofing Compliance: As regulatory environments evolve, organizations that quantify risk are better equipped to adapt to new requirements and demonstrate compliance effectively.

Implementing Risk Quantification with DORA

Financial institutions seeking to integrate risk quantification into their DORA compliance strategy can take the following steps:

• Adopt a Proven Framework: Leverage standard quantitative risk models, such as the FAIR Framework for Cyber Risk Management, to assess and prioritize risks on a continuous basis.
• Integrate Quantification into Governance: Align risk quantification with existing ICT governance structures to ensure consistency and accountability.
• Leverage Technology: Use advanced tools and platforms to automate risk quantification processes, ensuring real-time insights and scalability.
• Educate Stakeholders: Train staff and stakeholders to interpret and act on quantified risk data, fostering a culture of informed decision-making.

Conclusion: The DORA Opportunity

DORA represents a transformative opportunity for financial institutions to elevate their ICT risk management practices. While compliance may be achievable through traditional methods, organizations that embrace risk quantification will unlock greater resilience, efficiency, and strategic value. By translating complex ICT risks into financial terms, institutions can not only meet DORA’s requirements but also position themselves as leaders in the evolving digital landscape. 

CTA: Contact Us to learn how SAFE can help you unlock the full potential of DORA Compliance with Cyber Risk Quantification