A Strategic Roadmap for European Crowdfunding Service Providers

The Digital Operational Resilience Act (DORA), a cornerstone of the European Commission’s Digital Finance Package, aims to bolster the financial sector's resilience against ICT-related risks. Recognizing the critical role of digital infrastructure in the financial ecosystem, DORA sets out comprehensive requirements for managing ICT risks, reporting incidents, and ensuring continuous operational resilience.

For European Crowdfunding Service Providers (CSPs), DORA represents a significant regulatory milestone, mandating a robust framework for ICT risk management and operational resilience. As crowdfunding platforms continue to gain traction as viable alternatives for SME and infrastructure project financing, adhering to DORA is essential not only for regulatory compliance but also for maintaining investor trust and market stability. The European Crowdfunding Service Providers Regulation (ECSPR), which we helped to shape over the past years, the first EU law to comprehensively address retail investors' direct investment opportunities in European SMEs and infrastructure assets, is now fully in force. However, DORA introduces additional layers of operational requirements that CSPs must integrate into their existing compliance frameworks.

A critical aspect of DORA is its emphasis on managing risks associated with third-party ICT service providers. CSPs often rely on these third parties for essential services, making it imperative to ensure these providers meet the same high standards of operational resilience. This involves rigorous due diligence, contractual agreements, and continuous monitoring to mitigate risks and safeguard against disruptions.

As the January 2025 compliance deadline approaches, CSPs must take proactive steps to align their operations with DORA’s stringent requirements. This document outlines the key compliance aspects under DORA and provides a strategic roadmap for CSPs to prepare effectively, ensuring they meet regulatory expectations while enhancing their operational resilience.

Legal Compliance Aspects

To comply with the Digital Operational Resilience Act (DORA), European Crowdfunding Service Providers (ECSPs) must address several key legal compliance aspects. This includes establishing a comprehensive ICT risk management framework, implementing rigorous ICT incident reporting systems, conducting regular digital operational resilience tests, managing risks associated with third-party service providers, engaging in information-sharing initiatives, and strengthening governance and internal control structures. These steps are essential for ensuring preparedness against ICT-related threats, enhancing operational resilience, and maintaining regulatory compliance.

1. ICT Risk Management Framework
   • Requirement: Establish a comprehensive ICT risk management framework.
   • Action: Develop robust policies and procedures for the identification, management, and mitigation of ICT risks.
2. ICT Incident Reporting
   • Requirement: Implement a rigorous ICT incident reporting system.
   • Action: Deploy advanced incident detection mechanisms and establish clear reporting protocols to comply with regulatory standards.
3. Digital Operational Resilience Testing
   • Requirement: Conduct regular digital operational resilience tests.
   • Action: Schedule and perform penetration testing and vulnerability assessments, ensuring thorough documentation and remediation of findings.
4. Third-Party Risk Management
   • Requirement: Manage risks associated with third-party ICT service providers.
   • Action: Perform due diligence, formalize contractual agreements, and continuously monitor third-party compliance with DORA.
5. Information Sharing
   • Requirement: Engage in information-sharing initiatives.
   • Action: Participate in relevant forums and establish internal processes to leverage shared cyber threat intelligence.
6. Governance and Internal Control
   • Requirement: Strengthen governance structures and internal controls.
   • Action: Assign responsibilities to senior management, create oversight committees, and integrate ICT risk management into overall governance frameworks.

Strategic Preparation Steps (Mid-2024 Onwards)

As the January 2025 compliance deadline approaches, ECSPs must take proactive steps to align their operations with DORA’s requirements. Key actions include conducting a comprehensive gap analysis to assess current compliance status, developing and updating ICT risk management policies, implementing training and awareness programs, investing in technology and tools for ICT risk management, engaging with third-party providers to ensure compliance, conducting testing and simulation exercises, updating incident response plans, and maintaining ongoing regulatory engagement. These strategic preparation steps will help ECSPs achieve full compliance, enhance their operational resilience, and ensure sustained success in the digital finance landscape.

1. Conduct a Comprehensive Gap Analysis
   • Action: Assess current compliance status relative to DORA requirements.
   • Outcome: Develop a detailed action plan addressing identified gaps.
2. Develop and Update Policies
   • Action: Create or update ICT risk management policies to align with DORA.
   • Outcome: Ensure policies are documented, communicated, and enforced organization-wide.
3. Implement Training and Awareness Programs
   • Action: Roll out training sessions for employees and management on DORA compliance.
   • Outcome: Cultivate a culture of ICT risk awareness and preparedness.
4. Invest in Technology and Tools
   • Action: Deploy technologies and tools for monitoring, detecting, and mitigating ICT risks.
   • Outcome: Enhance capabilities to manage and respond to ICT incidents effectively.
5. Engage with Third-Party Providers
   • Action: Review and renegotiate contracts with third-party ICT providers.
   • Outcome: Establish clear expectations and monitoring mechanisms for third-party compliance.
6. Conduct Testing and Simulation Exercises
   • Action: Plan and execute operational resilience testing and simulation exercises.
   • Outcome: Validate the effectiveness of ICT risk management frameworks and identify areas for improvement.
7. Update Incident Response Plans
   • Action: Ensure the incident response plan aligns with DORA’s reporting requirements.
   • Outcome: Facilitate timely and effective incident response with clear reporting lines.
8. Maintain Regulatory Engagement
   • Action: Engage with regulatory bodies for ongoing guidance and updates.
   • Outcome: Demonstrate proactive compliance efforts and maintain open communication with regulators.

Outlook

By adopting a strategic and structured approach, CSPs can ensure they meet DORA compliance requirements by January 2025. Failure to comply with DORA poses significant risks, including regulatory penalties, reputational damage, and operational disruptions. Non-compliance could result in severe financial losses, diminished investor trust, and potential exclusion from market participation. We expect additional market consolidation as a result.

For those CSP willing to scale their business, ensuring compliance with DORA not only mitigates risks but also enhances operational resilience, positioning CSPs for sustainable growth in an increasingly regulated digital finance environment. The ability to manage ICT risks effectively will be a competitive differentiator, fostering greater investor confidence and market stability.

At EUROCROWD, we understand that the complexities of regulatory compliance and operational resilience are a significant burden to many CSPs. We are ready to assist CSPs in navigating the requirements of DORA within our abilities and help to ensure your organization not only meets regulatory standards but also thrives in the evolving financial landscape.

For more information on how we can support your DORA compliance journey, please contact us