Key Strategies for Managing Third-Party Risk Under DORA

The European Union has implemented the Digital Operational Resilience Act (DORA), a comprehensive regulatory framework designed to bolster the operational stability of financial entities across member states. DORA mandates stringent requirements for managing Information and Communication Technology (ICT) third-party risks, emphasizing the need for robust oversight, risk assessment, and continuous monitoring of third-party relationships. Compliance with DORA is not just a regulatory obligation but a critical component of an organization’s overall risk management strategy.

In this article we will explore concrete actionable strategies for effectively managing ICT third-party risk (TPR) under the guidelines of DORA. We’ll dig into the key provisions of the act related to third-party risk management, providing insights into how organizations can align their internal processes with these requirements. Additionally, we’ll highlight the role of Identity Governance and Administration (IGA) solutions in enhancing compliance efforts. By integrating IGA, organizations can achieve greater visibility and control over user access, streamline compliance reporting, and mitigate security risks associated with third-party interactions.

Understanding and implementing the measures outlined in DORA is essential for any organization looking to fortify its digital defenses. Through proactive management of third-party risks and the integration of advanced IGA solutions, organizations can not only ensure compliance but also build a resilient operational framework capable of withstanding the complexities of today’s digital threats.

Understanding ICT Third-Party Risk and DORA Compliance

The Importance of Managing Third-Party Risk

Outsourcing ICT services to third-party providers has become standard practice—even in the traditionally conservative financial sector. However, this reliance introduces significant risks, including data breaches, operational disruptions, and regulatory non-compliance. Crucially, many of these risks fall outside an organization’s direct control. No matter how strong an internal cybersecurity posture may be, the organization is only as secure as its weakest link—which could be a compromised third-party application or service. DORA addresses this challenge head-on by mandating a comprehensive strategy to identify, monitor, and mitigate third-party risks, establishing clear expectations for financial entities.

Key Requirements Under DORA for ICT TPR Management

DORA emphasizes establishing strategies, maintaining records, ensuring oversight, and conducting regular audits for ICT third-party providers. It requires organizations to address third-party risks proactively, from contractual agreements to ongoing performance monitoring.

5 Key Strategies for Managing ICT Third-Party Risk

1. Establishing a Strategy and Policy (TPRM)

Organizations must create a robust ICT TPRM strategy, defining third-party classifications, outlining audit approaches, and establishing criteria for critical services. This strategy should align with DORA articles 28.1, 28.2, and 28.61.

2. Maintaining a Register of Contractual Arrangements

A centralized register capturing all ICT service agreements, classifications, and functions is essential. Regular updates and coordination with local authorities (as required for DORA compliance) ensure transparency and readiness for audits.

3. Due Diligence in the Procurement Process

Integrating a due diligence framework into procurement processes enables organizations to assess risks comprehensively. Risk assessment should include evaluating the provider’s operational resilience, compliance posture, and cybersecurity readiness.

4. Reviewing and Monitoring Third-Party Risks

Periodic reviews of contractual and operational risks ensure alignment with the evolving threat landscape. Monitoring provider performance should include measurable KPIs tied to service delivery, compliance, and security posture. These metrics should be tracked over time to identify emerging trends, assess long-term reliability, and detect potential vulnerabilities early. This ensures the continuity and resilience of critical services.

5. Building Exit Strategies

Exit strategies for critical ICT services should be predefined, ensuring operational continuity if a provider fails to meet compliance or operational standards.

Integrating Identity Governance and Administration (IGA)

Why IGA Matters in Third-Party Risk Management

IGA solutions provide a framework for managing access rights, ensuring that third-party providers adhere to the principle of least privilege. This ensures that external users and systems only access necessary data and functions, mitigating the risk of breaches.

How IGA Supports DORA Compliance

1. Centralized Identity Management: IGA solutions provide a single point of truth for managing third-party identities and their associated access rights.
2. Automated Compliance Reporting: They facilitate audit-ready reporting for third-party user access, aligning with DORA’s reporting requirements.
3. Risk-Based Access Control: IGA systems help enforce risk-based controls by continuously evaluating access policies for third-party users.

Practical Steps to Strengthen ICT Third-Party Risk Management

Establish Governance Structures

Create dedicated teams to oversee third-party risk management, incorporating input from legal, IT, and compliance departments.

Leverage Technology for Continuous Monitoring

Use technologies such as Identity Governance and Administration (IGA) platforms, Security Information and Event Management (SIEM) systems, and Third-Party Risk Management (TPRM) tools to continuously track third-party providers’ performance, access rights, and compliance status in real-time. For example, an IGA platform can automatically flag excessive access permissions, while a SIEM system can detect anomalous activity that may indicate a breach or policy violation.

Conduct Regular Risk Assessments

Implement a schedule for assessing third-party risks, revisiting due diligence and performance metrics as part of a continuous improvement strategy.

Train Internal Teams on Third-Party Risk

Equip employees with training to identify risks and manage third-party relationships effectively.

Conclusion

As regulatory frameworks like DORA continue to evolve, the need for robust third-party risk management becomes increasingly critical. This focus on securing third-party and supply chain relationships is not confined to the EU; it’s a global trend reflecting the interconnected nature of today’s digital economy. For instance, the EU’s NIS2 Directive extends cybersecurity requirements to a broader range of sectors and emphasizes the importance of managing supply chain risks. Similarly, international regulations such as the U.S. Cybersecurity Executive Order, NYCRR 500 in the state of New York,  and guidelines from the Financial Stability Board (FSB) highlight the necessity of strengthening third-party and supply chain security.

In this global context, organizations must adopt proactive and comprehensive strategies to manage third-party risks effectively. By combining compliance-driven approaches with modern technologies—such as AI-powered Identity Governance and Administration (IGA) solutions—organizations gain greater visibility and control over external partnerships. These advanced IGA platforms enable businesses to enforce stringent access controls, streamline compliance reporting, and mitigate potential security threats arising from third-party interactions.

Embracing both regulatory compliance and technological innovation is essential for building operational resilience. By doing so, organizations can safeguard sensitive data, ensure business continuity, and maintain trust among customers and stakeholders. In an increasingly interconnected and regulated world, robust third-party risk management is not just a compliance requirement—it’s a strategic imperative that positions organizations for long-term success.