In 2023, cyberattacks in Europe surged by 57%, triggering a heightened response from the European Union and its Member States. Recognizing the growing risks, the EU has introduced two key cybersecurity regulations: the updated Network and Information Systems Directive (NIS2) and the Digital Operations Resilience Act (DORA). While these directives share a common goal of bolstering cybersecurity, they differ significantly in scope, reporting requirements, compliance deadlines, and enforcement mechanisms.
For organizations operating in the EU, understanding the differences between NIS2 and DORA is crucial for ensuring regulatory compliance and minimizing risk exposure. In this blog post, we will explore the key distinctions between these two frameworks and provide insights on how businesses can navigate their requirements effectively.
What Are NIS2 and DORA?
Both NIS2 and DORA aim to strengthen cybersecurity and operational resilience across the EU, but they target different sectors and have distinct regulatory approaches.
NIS2 Overview
The Network and Information Systems Directive (NIS2) is a cybersecurity directive that builds upon its predecessor, NIS, first introduced in 2016. The updated version, NIS2, expands its scope to include additional sectors, introduces stricter reporting requirements, and emphasizes personal accountability for cybersecurity resilience. Unlike a regulation, which has direct legal application, NIS2 requires Member States to develop national legislation that aligns with its objectives.
The first compliance deadline for NIS2 is set for October 2024.
DORA Overview
The Digital Operations Resilience Act (DORA) is a regulatory framework specifically designed for the financial sector. With a compliance deadline of January 2025, DORA establishes a unified set of cybersecurity standards aimed at protecting EU financial institutions from cyber threats, IT system failures, and digital risks. Unlike NIS2, DORA mandates prescriptive requirements rather than broad objectives, providing financial entities with clear directives on operational resilience.
For financial institutions, compliance with DORA takes precedence over NIS2.
Key Distinctions Between NIS2 and DORA
To better understand how these frameworks impact different industries, let’s break down the four most critical distinctions: scope, reporting requirements, compliance deadlines and penalties, and oversight and responsibility.
1. Scope of NIS2 vs. DORA
NIS2 Scope
NIS2 applies to eighteen highly critical and other critical sectors, with a size threshold rule that includes all medium and large-sized companies. The directive categorizes entities as either essential or important:
- Essential entities: Operate in a highly critical sector, have over 250 employees, and an annual turnover of €50 million or a balance sheet of €43 million.
- Important entities: Operate in highly critical or other critical sectors with over 50 employees and an annual turnover of €10 million.
DORA Scope
DORA applies to 20 financial entity types, covering banking, financial services, and intermediary service providers. Notably, third-party ICT service providers that are deemed “critical”—even if they operate outside the EU—fall under DORA’s jurisdiction.
Examples of Covered Financial Entities:
- Credit institutions
- Payment institutions
- Investment firms
- Crypto-asset providers
- Insurance and reinsurance undertakings
- Crowdfunding service providers
For organizations in the financial sector, DORA provides a dedicated cybersecurity framework, overriding NIS2 regulations.
2. Incident Reporting Requirements
NIS2 Reporting Requirements
Under NIS2, organizations must report cybersecurity incidents that cause significant service disruptions. The directive requires multiple reports:
- Within 24 hours: Initial notification with suspected cause and severity.
- Within 72 hours: Detailed report with root cause and mitigation measures.
- Within one month: Final report including impact assessment and resolutions.
DORA Reporting Requirements
DORA mandates similar post-incident reporting but allows competent authorities to set specific milestones. Incidents must be reported if they impact:
- Critical services or infrastructure
- Consumers, financial markets, or the broader economy
- Multiple EU jurisdictions
3. Compliance Deadlines and Penalties
NIS2 Compliance and Penalties
Effective Date: October 18, 2024
Penalties:
- Essential entities: Fines of at least €10 million or 2% of global annual turnover.
- Important entities: Fines of at least €7 million or 1.4% of global annual turnover.
- Individual accountability: Organization leaders may face public disclosures and sanctions.
DORA Compliance and Penalties
Effective Date: January 2025
Penalties:
- Non-compliant organizations may face “effective, proportionate, and dissuasive” penalties.
- Third-party ICT providers can receive fines up to 1% of their average daily worldwide turnover.
4. Oversight and Responsibility
NIS2 Oversight and Responsibility
NIS2 requires competent national authorities to enforce compliance, conduct audits, and oversee cybersecurity measures. Management bodies within organizations are directly responsible for compliance, including approving risk management measures and handling incident responses.
DORA Oversight and Responsibility
DORA’s compliance oversight is dual-layered, involving national authorities and European supervisory authorities. This structure enables cross-border collaboration and oversight for critical third-party ICT providers that serve financial institutions across the EU.
Unlike NIS2, DORA integrates operational resilience into financial institutions’ governance, risk, and compliance (GRC) strategies.
Interaction and Integration of NIS2 vs. DORA
The overlap between NIS2 and DORA is significant, as financial institutions under DORA rely on infrastructure covered by NIS2, such as energy, telecommunications, and digital service providers. This interdependence means:
- Financial institutions must coordinate with critical infrastructure providers for compliance.
- Reporting channels between NIS2 and DORA should be streamlined to avoid duplication.
- Regulatory authorities must collaborate to address cyber risks across sectors.
Ultimately, understanding the differences and interactions between these frameworks is essential for organizations aiming to maintain cybersecurity resilience and regulatory compliance.
Navigating Compliance with Connected Risk
With NIS2 and DORA introducing stringent cybersecurity requirements, organizations must adopt a proactive approach to compliance. Connected Risk provides an integrated risk management platform that helps businesses:
- Automate compliance workflows
- Monitor cybersecurity risks in real-time
- Simplify regulatory reporting
- Ensure seamless integration between NIS2 and DORA mandates
Prepare for the evolving regulatory landscape by partnering with Connected Risk. Contact us today to learn how our platform can enhance your cybersecurity resilience and streamline compliance efforts.
