CompliancePutting in the Reps: Building the Muscle of Digital Operational Resilience through Microsimulations

In a world where technology is advancing at an unprecedented pace, it’s never been more important to look beyond the silos of individual disciplines.

The intersection of policy, practice, and technology is where our collective future is forged. Policymakers provide the necessary frameworks that guide our continuously evolving code of ethics, fair rules of play, and measure societal impact. Practitioners offer invaluable insights from their direct experiences and realities. Technologists continue to expand humanity’s potential through supercharged insights and new toolsets that stretch the boundaries of both our imagination and capabilities.

Together, they form a triad of checks and balances.

However, the guiding principle remains, “Just because we can, doesn’t mean we should.” This philosophy is particularly pertinent in the realms of Risk, Resilience, Security, and Compliance and underscores the criticality of actively shaping a world in rapid change.

With this aim, the Digital Operational Resilience Act (DORA) has set a new precedent in the financial services industry. It emphasizes the need for financial services institutions and technology organizations to align their operations with stringent digital resilience standards. In the middle of these evolving disciplines, Microsimulations emerge as a crucial tool, bringing communities of practice together and bridging the gap between regulators, financial services institutions and technology providers through experiential learning.

DORA represents a significant shift in how financial services and technology providers manage digital risks. It mandates regular testing of Information and Communication Technology (ICT) risk management frameworks, incident reporting, and resilience testing. Financial institutions and technology providers alike must now adopt a more proactive and comprehensive approach to digital operational resilience, which extends beyond traditional risk management practices.

 

The Role of Microsimulations in Meeting DORA Compliance

Aligning with Digital Operational Resilience Act (DORA) Requirements

Microsimulations offer an interactive and dynamic platform to ensure DORA compliance by simulate various ICT risk scenarios, aligning closely with DORA’s focus areas. These simulations allow financial institutions to conduct periodic testing of their ICT frameworks in a controlled, yet realistic environment.

Microsimulations are emerging as a pivotal tool in bridging the gap between financial services companies and their technology partners. These simulations offer an engaging and accessible platform to put into practice response repetitions under varied potential futures.  The concept of Microsimulations, which can be likened to interval training in that they can be used to deploy short, sharp, and engaging gamified exercises, in as little as 15 minutes at a time, is particularly effective in bringing together diverse groups such as technology vendors, IT teams, business leaders, and executive leadership around the common goal of resilience building. The immersive nature of Microsimulations allows for a deeper understanding of complex financial scenarios and ICT risks in a controlled environment.

Enhancing Decision-Making and Preparedness

Through realistic scenario-based learning, Microsimulations prepare financial teams for actual digital operational resilience challenges. They foster enhanced decision-making capabilities, crucial for navigating the complex requirements of DORA.

Microsimulations are especially valuable for gaining the engagement of senior leaders. Often, high-level decision-makers may not be deeply involved in the day-to-day operational details, but Microsimulations provide a concise and impactful means of demonstrating the real-world implications of digital risks and compliance challenges. By participating in these simulations, leaders can gain a firsthand understanding of the complexities involved, making the abstract more concrete and actionable.

Encouraging Cross-Disciplinary Collaboration

DORA necessitates a collaborative approach involving various departments within financial institutions. Microsimulations facilitate this by bringing together diverse teams to engage in simulated ICT risk scenarios, promoting a comprehensive understanding of digital resilience.

Microsimulations enable both financial institutions and technology providers to pinpoint specific areas where resilience needs to be strengthened. By simulating various risk scenarios, institutions can proactively develop strategies to mitigate these risks, ensuring better preparedness for future challenges.

In essence, microsimulations are more than just training tools; they are a convergence point for collaboration, strategic planning, and resilience-building within the financial sector.

 

 

Implementing Microsimulations for Digital Operational Resilience

1. Develop DORA-focused Scenarios

Developing DORA-focused scenarios involves creating realistic and relevant simulations that align with the specific requirements and challenges outlined in the Digital Operational Resilience Act. Here are some examples:

1. Cybersecurity Breach Scenario: Simulate a situation where the financial institution faces a sophisticated cyber-attack, challenging the team to respond effectively. This scenario can test the institution’s incident response plan, communication protocols, and decision-making process under pressure.
2. Data Privacy Violation: Create a scenario involving a data breach that compromises sensitive customer information. This simulation can help in understanding the implications of data privacy regulations under DORA, and in evaluating the effectiveness of data protection measures and reporting procedures.
3. Third-Party Vendor Risk: Develop a scenario where a critical third-party service provider faces a major operational disruption. This situation can test the institution’s ability to manage third-party risks, assess the impact on critical functions, and implement contingency plans.
4. System Downtime Simulation: Simulate an unexpected IT system failure that affects key banking services. This scenario can assess the resilience of IT infrastructure, the effectiveness of business continuity plans, and the ability to maintain critical operations under DORA compliance.
5. Regulatory Compliance Drill: Create a scenario that involves navigating a new regulatory change under DORA. This can include implementing new compliance measures, training staff on updated regulations, and assessing the overall readiness of the institution to adapt to regulatory changes.

These scenarios, designed in collaboration between financial institutions and technology providers, ensure that the simulations are not only tailored to the specific needs of the organization but also provide practical insights into complying with DORA’s regulatory landscape. By engaging in these simulations, teams can gain a deeper understanding of the challenges and develop more robust strategies for digital operational resilience.

2. Engage Teams in Interactive Learning

To make Microsimulation exercises engaging and effective, integrating them into various organizational meetings and events can be a strategic approach. Here are several formats to consider:

1. Vendor Quarterly Business Review (QBR): Incorporate a Microsimulation focused on third-party risk management. During the QBR, run a scenario where a vendor faces a critical issue, requiring collaborative problem-solving and strategic decision-making, mirroring real-life vendor management challenges.
2. Board Meetings: Integrate a cyber risk Microsimulation in a board meeting. Present a scenario involving a significant cybersecurity threat or data breach, requiring board members to engage in crisis management and decision-making, aligning with their governance and oversight roles.
3. Executive Strategy Sessions: During these sessions, use Microsimulations to explore the impact of strategic decisions on digital resilience. Simulate scenarios such as adopting new technologies or entering new markets, focusing on the associated ICT risks and DORA compliance aspects.
4. Staff Development Days: Use Microsimulations as part of staff training and development programs. Create scenarios that employees are likely to encounter in their roles, such as handling a customer data protection issue, to enhance their skills and awareness in a practical, hands-on manner.
5. Annual Risk Management Workshops: Conduct workshops where Microsimulations form the core activity. These can include scenarios like responding to regulatory changes under DORA, enabling participants to actively engage in risk assessment and mitigation planning.
6. Team Building Events: Integrate Microsimulations into team building events to foster teamwork and collaboration. Design scenarios that require cross-departmental cooperation, such as a coordinated response to a simulated operational disruption, enhancing team cohesion and problem-solving skills.
7. ‘Lunch and Learn’ Sessions: Host informal lunchtime meetings where a brief and focused Microsimulation is presented. This can be an effective way to engage staff in learning about specific aspects of DORA in a relaxed, conversational setting.

By leveraging Microsimulations in your business-as-usual operations, financial institutions and technology organizations can ensure that learning and compliance with DORA are woven into the fabric of their organizational culture, engaging a wide range of stakeholders in a meaningful and interactive way.

3. Analyze Outcomes for Continuous Improvement

Analyzing the outcomes of Microsimulations is a critical step in ensuring continuous improvement and compliance with DORA’s evolving requirements. Here are some examples of how financial institutions and their technology service providers can analyze and use this feedback effectively:

1. Post-Simulation Debriefs: After each simulation, conduct a debriefing session. Discuss what strategies were effective, what challenges were encountered, and how the team could have responded differently. This feedback is invaluable for identifying areas of strength and weakness.
2. Quantitative Analysis: Use data collected during the simulations to perform a quantitative analysis. Metrics such as response times, decision accuracy, and compliance adherence rates can be evaluated to gauge performance objectively.
3. Scenario Outcome Reporting: Develop comprehensive reports on each scenario’s outcomes. These should detail the decisions made, actions taken, and the results of these actions. Comparing these outcomes with best practice or regulatory expectations can highlight areas for improvement.
4. Feedback Surveys: Distribute surveys to participants to gather their insights and perceptions of the simulation. Questions can focus on the realism of the scenario, the applicability of the skills learned, and suggestions for future simulations.
5. Trend Analysis: Over time, compile data from multiple simulations to identify trends or recurring challenges. This can reveal systemic issues or areas where further training and development are needed.
6. Benchmarking Against Industry Standards: Compare your institution’s performance in the simulations with industry standards or benchmarks. This can provide an external perspective on where the institution stands in terms of digital operational resilience.

By systematically analyzing the outcomes of Microsimulations, financial institutions and technology providers can turn these exercises into powerful tools for ongoing learning and adaptation, ensuring both regulatory compliance and enhanced operational resilience.

Conclusion

As the financial services and technology sectors navigate the complexities of DORA, Microsimulations stand out as an innovative and effective tool to not only ensure compliance but also foster a culture of proactive risk management and resilience.

In bridging the gap between financial institutions and technology providers, Microsimulations play a crucial role in shaping a future where technology is wielded with responsibility and foresight in the financial and technology sectors.

To learn more about how iluminr can help you achieve DORA compliance by building the muscle of resilience with your third party technology vendors through Microsimulations, book a demo.

 

 

Author

Paula Fontana

VP, Global Marketing

iluminr