The European Union's Digital Operational Resilience Act (DORA) has become a critical focus for financial institutions across Europe. Designed to strengthen the resilience of the financial system against ICT disruptions and cyber threats, DORA is nearing enforcement. As the deadline approaches, Independent Financial Advisors (IFAs) and Family Offices must act quickly to ensure compliance and reduce operational risks.
DORA: A Pan-European Law with Minimal Variability
DORA is not just another regulation confined to specific regions or financial institutions. It applies uniformly across the EU, with minimal "gold plating" by individual member states. Gold plating refers to the practice where national regulators add extra layers of regulation to EU directives. DORA has been specifically designed to minimize such variations, ensuring consistency across all markets.
For IFAs, which are regulated entities, and Family Offices, which typically are not, this pan-European approach provides both clarity and challenges. On the one hand, it eliminates uncertainty related to jurisdiction-specific rules. On the other hand, it compels organizations to align with a standardized framework, which may introduce new compliance hurdles—especially for Family Offices less familiar with regulatory obligations.
The Impact on IFAs and Family Offices
Although Family Offices are not directly regulated under DORA, their involvement in the financial services ecosystem means they may still be affected, particularly when engaging with regulated entities or using third-party ICT providers subject to DORA. While Family Offices are often outside the traditional regulatory scope, their growing role in managing large family wealth portfolios and financial assets means they cannot fully ignore DORA’s implications. Depending on their operational model, some may choose to voluntarily adopt certain resilience measures to protect their assets and maintain client trust.
In contrast, IFAs are regulated entities and are fully subject to DORA’s provisions. DORA mandates that IFAs monitor third-party ICT risks, report incidents, and implement resilience measures to ensure their systems can withstand cyber threats. For many IFAs, this represents a significant shift, as they will need to intensify their focus on operational risk management and vendor dependencies.
Proportionality: A Key Consideration for IFAs
One of DORA’s key principles is proportionality. While the regulation is comprehensive, it recognizes that not all financial institutions pose the same level of risk. As a result, smaller entities like IFAs have some flexibility in how they comply, provided their overall risk profile is lower than that of larger institutions such as banks.
Proportionality is crucial for IFAs, as it ensures their compliance burden is not as heavy as that of larger financial institutions. However, it is essential for IFAs to fully understand how proportionality applies to them and the specific requirements they must meet. Failure to comply, even with proportionality in place, could result in fines and reputational damage.
Family Offices, although not directly regulated by DORA, should be aware of proportionality when engaging with regulated financial institutions or third-party ICT providers. Being proactive in adopting DORA-aligned measures can strengthen their resilience and offer a competitive edge in wealth management.
The Concept of Microenterprises
DORA introduces the concept of microenterprises to ensure smaller financial institutions, such as IFAs, are not disproportionately burdened by compliance requirements. Many IFAs, due to their size and operational scope, may qualify as micro-organizations. This status provides flexibility in how they meet DORA’s demands, particularly regarding third-party risk management and reporting obligations.
However, not all IFAs will automatically qualify as microenterprise. The extent of their reliance on third-party ICT providers, the volume of assets they manage, and the scale of their operations will determine their compliance obligations. Even if classified as micro-organizations, IFAs must still conduct thorough risk assessments, document incidents, and maintain a robust digital resilience strategy.
Reassurance: Limited Impact but Significant Responsibilities
IFAs, while not facing the same regulatory demands as large banks, are still responsible for implementing the essential checks and measures required by DORA. Vendor management, risk assessments, incident reporting, and cybersecurity measures are vital components of their compliance strategy. Even with a lighter regulatory burden, IFAs must ensure they adhere to DORA’s framework to avoid fines or other penalties.
Family Offices should also take note. Their growing reliance on third-party ICT services and the potential overlap with regulated entities means they too should consider implementing resilience measures similar to those required by DORA to safeguard their operations.
Introducing DORAedge: Simplifying DORA Compliance
For IFAs and Family Offices grappling with the complexity of DORA, Performativ has developed DORAedge a platform specifically designed to simplify compliance with the Digital Operational Resilience Act. DORAedge provides an intuitive, user-friendly solution that addresses the key pain points for smaller financial institutions. Features such as vendor tracking, risk labeling, incident management, and policy review automation streamline the compliance process.
Powered by proprietary AI technology, DORAedge acts as a virtual compliance officer—continuously reviewing policies, managing incidents, and providing actionable insights to enhance resilience and ensure compliance. For IFAs, this solution is particularly valuable, reducing the time and effort required to manage regulatory obligations while allowing them to focus on core activities.
Why Performativ Developed DORAedge
At Performativ, we understand the growing complexity that regulations like DORA introduce for financial institutions - especially smaller entities like IFAs. Our goal is to be a technology provider that truly serves the unique needs of financial institutions across Europe, regardless of size or market. DORAedge was developed with this mission in mind, providing a tailored, scalable solution to address the challenges that IFAs and Family Offices face under the DORA regime.
"DORA represents a major shift in how financial institutions must approach digital resilience and operational risk. At Performativ, we developed DORAedge to simplify this transition. By streamlining vendor management, automating policy reviews, and improving incident tracking, DORAedge enables financial institutions to comply efficiently without diverting focus from their core business.
As DORA takes effect, financial institutions must prepare for an increasingly complex regulatory environment. Compliance will not only be necessary but will become a key factor in ensuring long-term operational stability and digital resilience. Institutions that embrace DORA now, with the support of tools like DORAedge, will be well-positioned to thrive in this new era of financial services." - Albert Geisler Fox, CEO and Co-Founder, Performativ