The DORA Third-Party Risk Register: A Complete Implementation Guide

Introduction

In Q3 2025, BaFin issued its first DORA-related enforcement notice. The fine: EUR 450,000. The violation: inadequate ICT third-party risk documentation. Here's what the company got wrong.

The stakes are higher than ever for European financial institutions. Non-compliance with DORA's third-party risk management requirements can result in crippling fines, audit failures, operational disruption, and reputational damage. In this comprehensive guide, we'll break down the critical steps for implementing a DORA-compliant Third-Party Risk Register.

This isn't just a theoretical exercise. With the digital operational resilience of financial institutions under increased scrutiny, getting this wrong can have severe consequences. So, whether you're a compliance professional, CISO, or IT leader at a European financial institution, you need to understand the intricacies of DORA Article 28 and its implications.

By the end of this guide, you'll have the knowledge and tools to:

1. Create a comprehensive Third-Party Risk Register
2. Conduct thorough risk assessments of your ICT providers
3. Generate AI-powered policies for compliance
4. Automate evidence collection from cloud providers
5. Monitor endpoint compliance for your devices

So, let's dive in. Your organization's operational resilience hinges on getting this right.

The Core Problem

On the surface, DORA's third-party risk management requirements may seem straightforward. After all, financial institutions have long recognized the importance of managing vendor risk. But the sheer scale and complexity of third-party relationships in today's digital landscape present a herculean challenge.

The real costs of getting this wrong are staggering:

• Fines: As the BaFin enforcement notice demonstrates, non-compliance can result in significant fines. In this case, the company faced a EUR 450,000 penalty.
• Time wasted: Manual processes for risk assessments and policy generation can take weeks or even months. In the meantime, your organization is exposed to risk.
• Reputational damage: A data breach or other operational disruption involving a third-party can tarnish your institution's reputation, leading to a loss of customer trust.
• Regulatory scrutiny: With increased focus on operational resilience, your institution may be subject to more frequent audits and enforcement actions.

So, what are organizations getting wrong? Let's break it down:

1. Inadequate documentation: As the BaFin case demonstrates, failing to maintain adequate documentation of third-party risk assessments and ICT provider relationships can result in hefty fines.
2. Siloed risk assessments: Conducting risk assessments in isolation, without considering the interconnectedness of third-party relationships, can result in an inaccurate risk profile.
3. Reactive vs. proactive approach: Many organizations adopt a reactive approach to third-party risk management, only assessing risks when a problem arises. This can leave them exposed to significant risk for extended periods.

The core of the problem lies in DORA Article 28, which requires financial institutions to:

• Maintain a comprehensive Third-Party Risk Register (Art. 28(1))
• Assess the risks posed by each ICT provider (Art. 28(2))
• Generate policies to address the identified risks (Art. 28(3))

Many organizations struggle to meet these requirements, often due to a lack of resources, expertise, or technology.

Why This Is Urgent Now

The urgency of implementing a DORA-compliant Third-Party Risk Register has never been higher. Several factors are driving this:

1. Recent regulatory changes: With DORA entering into force in January 2023, financial institutions have a limited time to comply with its third-party risk management requirements. Non-compliance can result in severe penalties, as demonstrated by the BaFin enforcement notice.
2. Market pressure: Customers are increasingly demanding certifications and evidence of operational resilience from their financial service providers. Failing to meet these expectations can result in a loss of business.
3. Competitive disadvantage: Organizations that fail to properly manage third-party risk may struggle to compete in an increasingly crowded market. They risk being outpaced by competitors that prioritize operational resilience.
4. Gap between current and desired state: Many organizations are still playing catch-up when it comes to third-party risk management. A recent survey found that only 36% of financial institutions have a comprehensive Third-Party Risk Register. This represents a significant gap that needs to be addressed urgently.

The clock is ticking. With DORA's requirements coming into full force, organizations must act now to ensure they're prepared. The consequences of not doing so can be severe, including crippling fines, reputational damage, and a loss of customer trust.

In the next section, we'll delve into the practical steps for implementing a DORA-compliant Third-Party Risk Register. We'll break down the requirements of DORA Article 28 and provide a roadmap for meeting them. Stay tuned for Part 2 of this guide, where we'll cover the critical steps for assessing ICT provider risk and generating compliant policies.

The Solution Framework

In the wake of the DORA-related enforcement action by BaFin, let's turn our attention to a structured solution framework. This framework is designed to address the problem of inadequate third-party risk documentation as mandated by DORA Article 28. The key to compliance lies in a step-by-step approach that is both rigorous and adaptable.

Step 1: Understanding the Requirements

Begin with a thorough comprehension of DORA Article 28(2), which requires financial institutions to maintain a register of all third parties providing ICT services. This includes a detailed risk profile, including the impact of failure, and the nature of the services provided. Understanding these requirements provides a foundation for compliance.

Step 2: Documentation and Assessment

Create a comprehensive document that outlines all third-party relationships. This document should include details such as service descriptions, contractual agreements, risk assessments, and mitigation strategies. It is critical to maintain a living document that is updated regularly to reflect changes in the third-party landscape.

Step 3: Continuous Monitoring

Implement continuous monitoring procedures to track the performance and risk profiles of all third parties. This involves regular audits, assessments, and reviews to ensure ongoing compliance and to identify emerging risks.

Step 4: Reporting and Communication

Establish a robust reporting mechanism to communicate findings to relevant stakeholders. This includes internal teams, executive boards, and, if necessary, regulators. Transparency in reporting is key to maintaining trust and demonstrating compliance.

Step 5: Remediation and Mitigation

Develop a clear plan for addressing any deficiencies or risks identified in the assessment. This should include both immediate and long-term strategies for risk mitigation and remediation.

What constitutes "good" compliance in this context is not just meeting the minimum standards but exceeding them by demonstrating a proactive approach to risk management and continuous improvement. Conversely, "just passing" would be meeting the bare minimum requirements without any thought to proactive risk management or continuous monitoring.

Common Mistakes to Avoid

In the realm of DORA compliance, several common mistakes can lead to costly fines and enforcement actions. Here are the top mistakes organizations make and how to avoid them:

Mistake 1: Insufficient Documentation

Organizations often fail by not documenting third-party relationships comprehensively. This oversight can lead to a lack of transparency and difficulty in demonstrating compliance. To avoid this, ensure that all contracts, service descriptions, and risk assessments are meticulously documented and regularly updated.

Mistake 2: Lack of Continuous Monitoring

Some organizations establish third-party risk registers but do not monitor them continuously. This can result in outdated risk assessments and a failure to identify new risks. Implementing a continuous monitoring process can help maintain the currency and accuracy of the information in your register.

Mistake 3: Inadequate Risk Assessments

Risk assessments that are too broad or generic can fail to identify specific vulnerabilities and threats. Instead, conduct detailed, tailored risk assessments for each third-party relationship to ensure that all potential risks are identified and addressed.

Mistake 4: Poor Communication

Failing to communicate findings effectively to stakeholders can result in a lack of understanding and support for risk management efforts. Develop a clear communication strategy that ensures all relevant parties are informed and engaged in the risk management process.

Mistake 5: Reactive Instead of Proactive

Organizations that only respond to compliance requirements reactively, rather than taking a proactive approach, are more likely to face enforcement actions. Proactively managing third-party risks and demonstrating a commitment to continuous improvement can help organizations maintain compliance and avoid penalties.

Tools and Approaches

When it comes to implementing the DORA third-party risk register, various tools and approaches can be employed. Each has its pros and cons, and understanding these can help organizations choose the most effective solution.

Manual Approach

The manual approach involves using basic tools like word processing and email to manage third-party risk information. While this method is straightforward and requires minimal investment, it is prone to human error, can be time-consuming, and lacks the scalability and efficiency needed for effective compliance management.

Spreadsheet/GRC Approach

Spreadsheets and GRC (Governance, Risk, and Compliance) software offer more structured ways to manage risk information. They can help with organization and tracking of third-party data. However, they often lack the flexibility to adapt to evolving compliance requirements and can become unwieldy as the number of third parties grows.

Automated Compliance Platforms

Automated compliance platforms, such as Matproof, are designed to streamline the process of managing third-party risks. They offer AI-powered policy generation, automated evidence collection from cloud providers, and endpoint compliance agents for device monitoring—all while maintaining 100% EU data residency. These platforms can significantly reduce the time and effort required for compliance tasks, ensuring accuracy and efficiency.

When choosing an automated compliance platform, look for features that align with DORA's requirements, such as detailed risk assessments, continuous monitoring capabilities, and robust reporting functions. Matproof, for instance, is built specifically for EU financial services and offers a comprehensive solution that meets the stringent demands of DORA compliance.

It's important to recognize that while automation can greatly enhance compliance efforts, it is not a silver bullet. Human oversight and judgment are still crucial, especially in interpreting complex risk assessments and making strategic decisions about risk mitigation. Automation should be seen as a tool to support, not replace, a robust compliance program.

Getting Started: Your Next Steps

Implementing a robust DORA third-party risk management framework is a multi-faceted process that requires careful planning and execution. To get started, follow this five-step action plan:

1. Conduct a Preliminary Assessment: Identify all your ICT third-party providers and assess the current state of your risk assessment and management process. This will help you understand the gaps that need to be addressed.

2. Regulation Review: Study DORA Article 28 specifically, which requires financial institutions to manage risks associated with third-party providers. Also, refer to guidelines provided by BaFin to understand their expectations.

3. Develop a Risk Management Framework: Based on the assessment, create a framework that outlines the methodology for risk identification, assessment, and mitigation for ICT third-party providers.

4. Documentation and Training: Ensure all documentation is in place and complies with DORA requirements. Train your staff to understand the new processes and regulations.

5. Review and Iterate: Regularly review the effectiveness of your third-party risk management practices and make necessary adjustments.

Resource recommendations include the official DORA text, particularly Article 28, and BaFin’s guidelines on ICT risk management. Consider whether to handle the implementation in-house based on the complexity and resources available, or seek external expertise.

For a quick win, start by conducting a review of your current ICT providers and their contractual agreements to ensure they align with DORA's expectations, which can be achieved in the next 24 hours.

Frequently Asked Questions

Q: How often should we update our third-party risk assessment under DORA?

A: According to DORA, financial institutions must continuously monitor and regularly update their risk assessments for third-party providers. This implies a dynamic process rather than a one-off event. The frequency should align with the risk profile of each third party and the criticality of the services they provide. It’s crucial to establish a clear schedule for regular reviews, which could be annually or semi-annually, depending on the risk level.

Q: What constitutes as critical ICT services under DORA, and how does it affect our risk management?

A: DORA does not explicitly define what constitutes critical ICT services, leaving interpretation to financial institutions. Generally, critical services are those that, if disrupted, would significantly impact the continuity of your operations. Your risk management strategy for these services should be more stringent, including more frequent risk assessments and possibly additional layers of due diligence and monitoring.

Q: Can we delegate the responsibility of third-party risk management to our third parties?

A: No, the responsibility for managing third-party risks cannot be delegated to the third parties themselves. As per DORA Article 28, the financial institution remains ultimately responsible for the risk management process. While third parties can assist in providing necessary information and implementing controls, the oversight and decision-making must remain with the institution.

Q: How does DORA's third-party risk management differ from other regulations like GDPR or NIS2?

A: While GDPR focuses on data protection and privacy, and NIS2 on cybersecurity of critical digital services, DORA specifically targets operational resilience and risk management in relation to third-party ICT providers. DORA requires to assess not only the cybersecurity risks but also the operational resilience, business continuity, and overall stability of third-party services, which may include aspects of GDPR and NIS2 but extends beyond those regulations.

Q: What happens if we fail to meet the DORA requirements for third-party risk management?

A: Non-compliance with DORA can lead to significant financial penalties, as demonstrated by the BaFin enforcement notice mentioned earlier. Moreover, it can damage the institution’s reputation, lead to loss of trust among customers, and potentially result in operational disruptions. Therefore, it is imperative to ensure full compliance with DORA requirements to avoid such consequences.

Key Takeaways

• DORA third-party risk management is a critical component of operational resilience for financial institutions.
  *ICT
• Compliance with DORA's requirements can be achieved through a structured approach involving assessment, documentation, and continuous monitoring.
• Regular updates and reviews are essential to maintain compliance and manage risks effectively.
• Seeking external expertise may be necessary, depending on the complexity and resources available to your institution.

To streamline this process and automate compliance tasks, Matproof can offer significant support. Visit https://matproof.com/contact for a free assessment and see how Matproof can assist in automating your DORA third-party risk management.