Are there particular challenges that Luxembourg-based funds might face concerning DORA that you don’t foresee in other jurisdictions? The adoption of DORA is expected to have a significant impact on the financial industry, requiring various reforms to comply with the new regulatory framework. DORA seeks to increase the operational resilience of financial institutions by pushing investment firms to make significant changes to their internal procedures, risk management systems, reporting, and transparency methods. Many Luxembourg-based financial institutions benefit from the IT infrastructure of a parent firm that is not based in Luxembourg. Control, oversight, and incident reporting are frequently assigned to the parent corporation. This will have to change; under DORA, the Luxembourg organisation must be able to demonstrate complete ownership of the IT infrastructure. Investment businesses will need to conduct a thorough examination of their internal procedures in order to identify flaws and potential sources of failure. To avoid disruptions caused by cyberattacks or technological failures, comprehensive operational risk management practises, such as the establishment of contingency plans and seamless communication between departments, will be essential. DORA intends to impose higher transparency standards on investment firms, forcing them to provide more detailed and regular disclosures to regulatory agencies and investors. This will need the development of new reporting frameworks capable of capturing a greater range of operational risks and occurrences. DORA implementation will increase compliance costs and resource allocation for investment firms. Adapting procedures and systems to satisfy the new criteria will necessitate a significant investment in both financial and human capital. Investment firms will need to invest in advanced technology and cybersecurity measures to boost operational resilience. Cyber threats constitute a significant threat to operational continuity; therefore, enhancing cyber defences is vital. DORA is a critical step towards enhancing the financial industry’s technology and cyber risk management and resilience. DORA’s goal is to offer a uniform regulatory framework that improves the industry’s operational resilience across all EU member states by focusing on risk management, incident reporting, and oversight of critical third-party providers. Financial organisations must proactively embrace DORA’s criteria to ensure their ability to withstand, respond to, and recover from ICT-related disruptions and threats, ultimately safeguarding the stability and security of the financial system. What opportunities might the introduction of DORA bring for the funds industry, particularly in Luxembourg? The implementation of DORA in Luxembourg opens several opportunities for the funds business, leading to increased growth, innovation, and competitiveness in the global financial market. • Increasing Investor Confidence: DORA’s focus on improving investor protection and market integrity has the potential to boost investor trust and confidence. This could increase the amount of investment in Luxembourg-based funds by attracting both institutional and retail investors. • DORA compliance is projected to increase demand for professional advising services from financial consulting and law companies, which will help fund management organisations navigate the rule’s complexities. • Investment firms will need to modernise their digital infrastructure to boost operational resilience and cybersecurity, fuelling demand for fund-specific fintech solutions. • DORA can foster innovation in the finance sector, resulting in enhanced productivity and cost-effectiveness. DORA’s implementation has the potential to improve collaboration and knowledge exchange across the funds industry, resulting in a more unified and forward-thinking financial ecosystem. How should fund managers prepare for the implementation of DORA? What steps can they take now to ensure a smooth transition and ensure they are ready for January 2025? Fund managers need to plan ahead of time for the adoption of DORA to ensure a smooth transition and compliance with the new regulatory framework. Early and planned action will help them mitigate hazards, streamline processes, and improve overall resilience. Business 48 Finance Monthly.
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