Venture capitalists and financial institutions must adeptly navigate evolving regulations like the Digital Operational Resilience Act (DORA) to manage investment risks. Compliance challenges include maintaining ICT service registers and operational resilience, particularly for smaller firms. AI technologies are becoming essential for enhancing risk assessment, compliance, and cybersecurity, with 75% of UK firms already utilising AI. Regulatory sandboxes are facilitating the testing of AI tools for DORA compliance. Financial institutions need to implement AI-driven solutions swiftly to avoid penalties and enhance operational efficiency.
For venture capitalists, financial institutions, and investment firms, staying ahead in today’s financial landscape means expertly navigating evolving regulations and astutely managing investment risks.
The Digital Operational Resilience Act (DORA) is now firmly established, setting a new standard for operational resilience across the financial sector. As firms adapt, AI-powered due diligence is becoming indispensable, crucial for achieving DORA compliance and safeguarding investments.
DORA Compliance: Navigating the Hurdles
Financial institutions are encountering significant challenges in meeting DORA’s extensive requirements. Maintaining precise registers of ICT service contracts and ensuring robust operational resilience are key obstacles. With initial compliance deadlines now in effect, many financial firms, especially smaller ones with fewer resources, find these demands burdensome.
Keeping these registers up-to-date is just one part of DORA’s broad framework, highlighting the need for automation to streamline these processes [1].
AI’s Revolution in Risk Assessment
AI is transforming risk assessment in financial services. Advanced AI-driven tools are enhancing both compliance and operational resilience, using machine learning, natural language processing (NLP), and predictive analytics. These technologies are not only improving the accuracy of risk detection but also significantly reducing false positives, thereby streamlining regulatory compliance processes vital for DORA adherence [2].
This trend points towards increasingly sophisticated AI due diligence tools that promise clearer decision-making and better collaboration between AI systems and human expertise. In fact, AI is revolutionising risk assessment in financial services by improving the detection of patterns and anomalies, enhancing accuracy and reducing false positives, as recently published by Mondaq [3].
This proactive risk management is becoming essential. How prepared is your organisation to leverage AI for both regulatory compliance and competitive advantage?
The Rise of AI in Private Equity Due Diligence
The UK financial sector is seeing considerable adoption of AI technologies. Currently, 75% of UK firms are already using AI, with another 10% planning to adopt it within the next three years [4]. This high adoption rate highlights a strong move towards AI integration, mainly driven by the need to boost operational efficiency and ensure regulatory compliance.
This widespread acceptance suggests that AI-powered due diligence tools are quickly becoming indispensable for navigating complex regulations like DORA. Private equity firms are also leveraging AI to transform their due diligence and deal origination processes. AI tools are improving decision-making in selecting target companies and streamlining the entire due diligence process, offering a distinct competitive edge in deal origination [5].
A KPMG survey indicated that a significant majority—91% of corporate and 60% of private equity respondents—consider AI crucial or supportive in making strategic decisions about target company selection [6]. For private equity, this means more efficient and comprehensive due diligence, especially when assessing a target’s DORA adherence. AI’s ability to analyse potential targets and evaluate regulatory compliance is becoming increasingly vital.
Fortifying Cybersecurity with AI Under DORA
DORA strongly emphasises cybersecurity resilience, requiring financial institutions to strengthen their defences against cyber threats. However, the cybersecurity landscape is becoming increasingly intricate. The Thales 2024 Data Threat Report reveals a concerning trend: AI-powered attacks in financial services are escalating, with 95% of respondents reporting an increase, nearly doubling the figures from 2022 [7].
This necessitates a proactive cybersecurity strategy where AI is not just a compliance tool but a critical defence mechanism. Financial institutions must deploy AI for advanced threat detection, rapid incident response, and comprehensive digital operational resilience to meet DORA’s stringent cybersecurity mandates.
Retail Banker International reported just yesterday that AI is supercharging cybercrime, emphasising the need for financial institutions to stay ahead by adopting intelligent, adaptive security strategies [8]. How robust is your organisation’s defence against AI-powered cyber threats?
"AI is the defining technology of our time, offering opportunities to address global challenges while transforming industries." - Mark Zuckerberg
Regulatory Sandboxes: Testing AI for Compliance
Regulatory sandboxes are proving invaluable for testing AI technologies while ensuring regulatory compliance. The EU is leading the way by requiring each member state to establish at least one regulatory sandbox by 2 August 2026 [9]. These controlled environments are designed to encourage the development of AI-powered due diligence tools that can effectively meet DORA compliance requirements without stifling innovation.
Sandboxes offer a structured environment for financial institutions and technology providers to refine AI solutions, ensuring they are robust and compliant before full-scale implementation. This initiative highlights regulators’ commitment to balancing technological advancement with essential safeguards.
EU member states are indeed leveraging regulatory sandboxes to ensure AI tools for due diligence comply with DORA and other regulations. Mondaq published yesterday that these sandboxes provide a structured environment for testing and validating AI technologies, addressing both operational resilience and sustainability concerns [10].
Countering AI Washing and Misinformation
Financial institutions must be alert to ‘AI washing’—where vendors exaggerate AI capabilities without delivering real value. When assessing AI-powered due diligence tools, set clear performance metrics and request evidence-based case studies demonstrating tangible compliance outcomes.
Conduct thorough proof-of-concept testing before full implementation to confirm that AI solutions genuinely enhance DORA compliance rather than just adding technological complexity. Ethical AI implementation also requires prioritising data security and privacy, using advanced encryption and zero-trust architecture.
Nasdaq highlighted the importance of balancing AI with human oversight to maintain ethical and practical AI usage [11]. Consider your current vendor evaluation process: does it effectively distinguish between genuine AI capabilities and marketing hyperbole?
Breaking Down Operational Silos and Resistance to Change
Successful DORA compliance through AI requires addressing operational silos and resistance to change. Financial institutions should establish cross-functional teams that include compliance, IT, risk management, and business units to ensure holistic implementation.
Develop comprehensive change management strategies with clear communication plans, training programmes, and performance incentives aligned with compliance objectives. This integrated approach ensures that AI-powered due diligence tools deliver their full potential across the organisation.
To further enhance operational resilience, modern CFOs are seeking modular and agile tech stacks, with AI integration in back-office functions becoming crucial for real-time data to executive dashboards, supporting strategic decision-making, as PYMNTS recently reported [12].
Modernising Legacy Systems with AI-Powered Code Migration
AI-powered code migration technologies are becoming essential for financial institutions modernising their legacy systems to align with DORA. These technologies streamline upgrades to IT infrastructure, enhance operational resilience, and reduce risks associated with system migrations—often a prerequisite for DORA compliance.
AI tools are boosting developer productivity and providing valuable insights into workflows, thereby improving key DORA metrics such as deployment frequency and change failure rate [13]. For institutions grappling with outdated legacy systems, AI-powered code migration offers a clear path to modernisation, ensuring both compliance and enhanced operational resilience.
"If this can help them get 75 per cent of that job done, they can focus more of their energy and time on these growth areas and opportunities." - Andrew Schlossberg
Recent Progress in AI-Driven Solutions
Recent progress in AI-powered code migration for financial services highlights significant advancements. Financial institutions are increasingly integrating AI into their core services, with 27% planning further integration within the next year [14]. This is driven by the need for enhanced data security and risk management, especially as AI-driven cyberattacks escalate [7].
Mobile banking is also evolving towards AI-driven finance, embedding services into non-financial platforms and using AI for personalised advice [15].
Vertical AI solutions, like those from Arc, are automating complex workflows for private credit lenders, improving borrower qualification and deal origination [4]. Nomentia’s AI-powered cash flow forecasting now offers real-time financial insights [16], while EY is transforming audit processes globally with AI, enhancing efficiency and accuracy [17]. These developments collectively underscore AI’s transformative impact, offering enhanced efficiency, security, and customer experiences.
For example, automated contract analysis platforms using generative AI are helping firms meet DORA’s ICT service register requirements. Tools like Icertis’ Risk Assessment Copilot can review thousands of contracts rapidly, achieving 85% accuracy in identifying non-compliant clauses and cutting manual review time by 70% [18]. These systems can even map fourth-party dependencies through natural language processing [2], which is crucial, given that many financial entities lack full visibility beyond their direct suppliers [15].
Consider a leading EU Fund of Funds that implemented CENTRL’s AI-powered DD360 platform. By automating over 90% of manager submissions, they achieved a fivefold increase in efficiency for internal reporting and audit requirements, alongside an 85% reduction in operational due diligence costs [Internal Research 1]. Such case studies demonstrate the tangible ROI of AI in compliance and operational efficiency.
Strategic Implementation for Financial Institutions
To effectively implement AI due diligence for DORA compliance, financial institutions should adopt a structured approach:
- Conduct a Comprehensive Gap Analysis: Evaluate current capabilities against DORA requirements to pinpoint areas needing improvement.
- Prioritise High-Impact Areas: Focus on areas where AI can deliver immediate compliance benefits, such as ICT risk management and third-party monitoring.
- Establish Clear Governance Frameworks: Define roles and responsibilities for AI implementation to ensure accountability and effective oversight.
- Develop Metrics for Effectiveness: Measure the performance of AI solutions against compliance objectives to track progress and ROI.
- Create a Continuous Improvement Cycle: Regularly review AI performance and adapt strategies to meet evolving regulatory expectations.
AI-driven efficiency and cost savings are becoming increasingly clear. Gradient Labs CEO recently commented on how AI customer service agents achieve impressive resolution rates and cost savings, indicating a substantial ROI for financial institutions adopting AI for compliance [19].
For venture capitalists, financial institutions, and investment firms, AI due diligence is shifting from a futuristic concept to a critical operational necessity. With DORA compliance deadlines upon us and cyber threats intensifying, AI-powered tools offer a robust solution for risk assessment, cybersecurity, and operational resilience.
By embracing AI, financial organisations can confidently navigate the complexities of DORA, protect their investments, and build a more resilient operational framework.
Diligize stands ready to assist your organisation in harnessing AI for DORA compliance and investment risk mitigation. With decades of IT expertise and a deep understanding of the private equity lifecycle, Diligize offers tailored technology advisory services that mitigate risks, unlock growth opportunities, and ensure operational efficiency.
For a detailed discussion on how Diligize can support your strategic goals in achieving DORA compliance through AI-powered due diligence, please reach out to our expert team. Financial institutions must act swiftly to implement robust AI-powered due diligence processes or risk significant regulatory penalties and competitive disadvantage. How prepared is your organisation to leverage AI for both regulatory compliance and competitive advantage in this evolving financial landscape?
Our Opinion
At Diligize, we consider the integration of Artificial Intelligence to be fundamental, not merely futuristic, for private equity and financial institutions. Regulations such as DORA reinforce this view, establishing AI-powered due diligence as crucial for robust risk management, cybersecurity, and operational resilience. We see AI as a strategic imperative, providing a clear route to meet stringent compliance standards and simultaneously unlock considerable competitive advantages through enhanced efficiency and deeper, data-driven insights. For us, precision and innovation are central tenets, and AI embodies these perfectly, delivering the analytical edge our clients require to confidently navigate the complexities of today’s financial sector.
Our expertise at Diligize is ideally suited to guide firms through this essential evolution, ensuring AI adoption is both structured and impactful. We champion a rigorous, evidence-based approach, steering clear of unsubstantiated claims and focusing on tangible results. Modernising existing systems and encouraging cross-departmental collaboration are vital steps in fully realising AI’s transformative potential. For Diligize, this is about converting technological challenges into strategic opportunities, empowering our clients not only to achieve regulatory compliance but to flourish in an increasingly digital and demanding environment.
Author
Steve Denby, based in London, UK, is a Senior Partner and an entrepreneur, technologist, consultant, public speaker, and leader with 28 years of experience in managed IT services. Specialising in private equity-backed businesses and rapid-growth organisations, Steve has deep expertise in mergers and acquisitions (M&A), supported by his studies at Imperial College Business School. He focuses on minimising risk and creating value through technology in privately invested companies growing by acquisition.
References
[1] https://www.scrut.io/post/dora-compliance
[2] https://www.bankofengland.co.uk/financial-stability-in-focus/20225/april-20225
[3] https://www.mondaq.com/unitedstates/new-technology/1610232/ai-driven-risk-assessment-enhancing-financial-crime-compliance-and-internal-audit
[4] https://kyp.ai/dora-compliance-guide–key-challenges-and-how-to-addressthem/
[5] https://www.soprasteria.nl/newsroom/blog/details/dora-and-ai-act-boost-yourcybersecurity-posture
[6] https://vcheckglobal.com/the-dangers-of-ai-washing-due-diligence-background-checks-in-venture-capital/
[7] https://www.osfi-bsif.gc.ca/en/about-osfi/reports-publications/osfi-fsac-risk-report-ai-uses-risks-federally-regulated-financial-institutions
[8] https://www.retailbankerinternational.com/comment/ai-supercharging-cybercrime-how-financial-institutions-can-stay-ahead/
[9] https://associatepro.ai/portfolio/ai-risk-assessment-private-equity/
[10] https://www.mondaq.com/italy/new-technology/1610640/regulatory-sandboxes-for-ai-and-cybersecurity-bridging-the-gap-between-innovation-and-compliance
[11] https://www.nasdaq.com/articles/ever-changing-landscape-ai-safety
[12] https://www.pymnts.com/news/b2b-payments/2025/chief-financial-officers-tech-stack-is-business-strategy/
[13] https://www.tucan.ai/blog/dora-management-of-ict-third-party-risks-contract-review-and-due-diligence-with-ai/
[14] https://diligize.pe/the-future-of-tech-due-diligence-integrating-ai-for-smarter-investments/?utmsource=openai
[15] https://www.pymnts.com/cybersecurity/2025/dora-takes-effect-eu-fis-to-focus-on-third-party-risk-management/
[16] https://www.nomentia.com/solutions/cash-flow-forecasting/
[17] https://www.ey.com/enuk/news/2024/ey-teams-with-microsoft-to-transform-audit-with-generative-ai
[18] https://www.icertis.com/research/blog/dora-compliance-for-financial-services-with-ai/?utmsource=openai
[19] https://www.crowdfundinsider.com/2025/04/238487-gradient-labs-ceo-comments-on-how-ai-adoption-is-impacting-the-fintech-sector/
