NIS2 Directive: Key Compliance Requirements and Security Measures

Cyberattacks are becoming more frequent and costly, with the average data breach reaching $4.88 million in 2024—the highest ever recorded. In response, the European Union introduced the NIS2 Directive (EU 2022/2555), a major overhaul of its cybersecurity regulations. This updated framework expands security obligations, tightens compliance standards, and increases accountability for organizations operating in critical sectors.

NIS2 isn’t just about following rules—it’s about closing security gaps that have left businesses exposed for too long. Industries like finance, healthcare, energy, and transportation, along with their supply chains, must now adopt stronger risk management, faster incident reporting, and stricter oversight of third-party security risks.

This article explains who needs to comply, what is required, and how businesses can prepare. Whether you’re leading cybersecurity efforts or managing risk at an executive level, understanding NIS2 is crucial to staying compliant, protecting assets, and avoiding costly breaches.

What is the NIS2 Directive?

The NIS2 Directive (EU 2022/2555) is a legislative framework introduced by the European Union to enhance cybersecurity resilience across its member states. It builds upon the original NIS Directive (EU 2016/1148) by expanding its scope, strengthening security requirements, and improving incident response and cooperation between entities. 

This updated framework aligns with the EU’s digital strategy to protect the economy and foster a unified approach to cybersecurity. As digital infrastructure becomes increasingly interconnected, NIS2 reflects the growing need for a robust and coordinated defense against cyber crimes.

The Limitations of the Original NIS Directive (2016)

The first NIS Directive (EU 2016/1148) was a landmark law that aimed to boost cybersecurity across critical sectors. It required certain organizations—such as those in energy, healthcare, and financial services—to implement security measures and report cyber incidents. However, as cyber risks evolved, the directive revealed several shortcomings:

• Narrow Scope: Many industries that were increasingly targeted by cybercriminals, such as waste management, space, and postal services, were not covered.
• Weak Enforcement: Cybersecurity obligations varied between EU countries, leading to inconsistent implementation and gaps in security.
• Limited Supply Chain Oversight: Third-party vendors and suppliers, often the weak links in security, were not held accountable under the original rules.
• Slow Incident Reporting: Organizations had up to 72 hours to report incidents, leaving authorities with delayed insights into ongoing threats.

By 2022, with ransomware attacks surging and supply chain vulnerabilities becoming a major concern, the EU recognized that a more robust and uniform approach was needed—leading to NIS2.

Key Improvements in NIS2:

The NIS2 Directive builds on its predecessor but introduces critical improvements to address modern threats and create a harmonized cybersecurity framework across the EU. The directive applies to large corporations, mid-sized businesses, and suppliers, ensuring a broader and more consistent level of protection.

Here’s what NIS2 changes:

1. Expanded Industry Coverage

The directive now applies to a wider range of industries, categorized into two groups:

• Essential Entities: Organizations providing critical infrastructure or services, including:
  • Energy (electricity, oil, gas)
  • Healthcare (hospitals, laboratories, medical device manufacturers)
  • Banking and financial services
  • Transportation (air, rail, maritime, and road transport)
  • Public administration
• Important Entities: Businesses that, while not as critical as essential entities, still play a key role in economic stability. This includes:
  • Postal and courier services
  • Waste management
  • Chemical manufacturing
  • Space industry (satellite services, space tech suppliers)

By expanding its scope, NIS2 ensures that more businesses adopt strong cybersecurity practices, reducing weak points in the digital infrastructure.

2. Stronger Security and Risk Management Requirements

The directive imposes clear and enforceable security obligations on covered entities. Organizations must now:

• Conduct regular risk assessments and identify potential vulnerabilities.
• Implement multi-layered security controls, including encryption and multi-factor authentication.
• Develop and test incident response plans to ensure quick recovery from cyberattacks.

These measures push businesses to move from reactive security to proactive risk management.

Read: Web-Based Advanced Risk Assessment and Management Software Solutions

3. Accountability for Third-Party Suppliers

Supply chain attacks, in which cybercriminals target third-party vendors to infiltrate larger organizations, have become a major cybersecurity risk. The 2020 SolarWinds hack, which compromised thousands of businesses through a trusted software update, is a prime example.

To close this loophole, NIS2 introduces mandatory supply chain security measures, requiring organizations to:

• Vet third-party vendors for cybersecurity risks before signing contracts.
• Monitor suppliers regularly to ensure continued compliance.
• Implement contractual obligations that hold suppliers accountable for security breaches.

This makes cybersecurity a shared responsibility, forcing businesses to be as strict with their vendors as they are with their internal security.

4. Stronger Enforcement and Higher Penalties for Non-Compliance

NIS2 introduces uniform penalties across the EU, making it costly to ignore cybersecurity.

• Essential Entities: Fines of up to €10 million or 2% of global turnover, whichever is higher.
• Important Entities: Fines of up to €7 million or 1.4% of global turnover.

The NIS2 Directive enforces stringent penalties for non-compliance, emphasizing the critical importance of robust cybersecurity measures. Below is a summary of the penalties:

Entity Classification	Maximum Fine	Additional Sanctions
Essential Entities	Up to €10 million or 2% of global annual turnover, whichever is higher.	Potential non-monetary penalties include compliance orders, binding instructions, security audit mandates, and threat notification directives. Executives and board members may also be held personally liable for significant cybersecurity failures.
Important Entities	Up to €7 million or 1.4% of global annual turnover, whichever is higher.	Similar non-monetary penalties as essential entities, with a focus on ensuring compliance and enhancing cybersecurity measures.

These stringent penalties underscore the necessity for organizations to prioritize cybersecurity and ensure adherence to the NIS2 Directive.

Additionally, executives and board members can be held personally liable for cybersecurity failures—ensuring that security isn’t just an IT concern but a top-level business priority.

Moreover, directors and management could be held personally liable for failures in implementing and maintaining compliance, underscoring the importance of proper governance. Non-compliant organizations may also be required to implement additional cybersecurity measures, improve risk management strategies, or undergo further staff training to meet the necessary standards.

Key Differences Between NIS and NIS2 

Here’s a table outlining the key differences between the original NIS Directive (2016/1148) and the updated NIS2 Directive (EU 2022/2555):

Aspects	NIS Directive (2016/1148)	NIS2 Directive (EU 2022/2555)
Scope	Focused mainly on critical infrastructure in certain sectors (energy, transport, banking, etc.).	Broader scope, covering additional sectors such as public administration, waste management, and space.
Target Entities	Covered operators of essential services (OES) and digital service providers (DSPs).	Extends to both essential and important entities and includes stricter requirements for larger entities and third-party suppliers.
Incident Reporting Time	Required to report incidents within 72 hours of detection.	The reporting deadline was reduced to 24 hours for significant incidents, with more detailed follow-up within 72 hours.
Cybersecurity Requirements	Basic security measures like risk management and incident response.	More stringent requirements for risk management, incident detection, and reporting, and a stronger focus on supply chain security.
Supply Chain Security	No explicit requirement for securing third-party vendors.	Mandatory risk management for supply chain and third-party providers, emphasizing the security of external relationships.
Governance and Oversight	Limited governance requirements for organizations.	Emphasizes senior management accountability, with specific responsibilities for cybersecurity at the executive level.
Cybersecurity Culture	Less focus on cybersecurity training and organizational culture.	Strong emphasis on cybersecurity training and awareness programs for both staff and senior management.
Cross-Border Cooperation	Encouraged but lacked strong formal cooperation frameworks.	Enhanced cooperation between member states and third countries, including information sharing and joint response to incidents.
Security Audits and Assessments	Focused on incident reporting and basic risk management.	Requires regular security audits, vulnerability assessments, and updates to cybersecurity practices.
Sector Coverages	Focused on specific sectors like energy, transport, and health.	Expanded sector coverage, including ICT services, public administration, and space industries.
Enforcement Authorities	Implementation was left to national authorities.	Stronger EU-level oversight alongside national authorities, with powers to enforce compliance more consistently.

Also Read: What Is Anti-Bribery and Corruption Compliance?

How NIS2 Affects Businesses Outside the EU

The NIS2 Directive (EU 2022/2555) primarily regulates cybersecurity for organizations operating within the EU. However, its impact extends far beyond European borders. Given the interconnected nature of global supply chains and digital services, many non-EU companies will need to comply with NIS2 requirements—either directly or indirectly.

Whether a company provides critical services to EU-based businesses, operates a branch within the EU, or contributes to European digital infrastructure, it may be subject to strict cybersecurity obligations, risk management requirements, and reporting mandates.

This section explains how NIS2 applies to non-EU entities, who must comply, and what obligations they must meet.

1. Non-EU Companies Providing Essential or Important Services to the EU

The EU relies on numerous non-EU service providers in sectors like cloud computing, telecommunications, data storage, and software development. Under NIS2, any company that delivers essential services to an EU-based organization may be required to comply with the directive’s cybersecurity standards.

Who Falls Under This Category?

• Cloud service providers handling EU customer data or infrastructure.
• ICT service providers supporting EU businesses, including managed IT services, cybersecurity firms, and software providers.
• Data centers and hosting providers that store or process data for EU companies.
• Critical infrastructure suppliers, such as energy providers, financial technology firms, or logistics companies, deliver services to EU-based clients.

Even if these companies do not have a physical presence in the EU, they must align their cybersecurity practices with NIS2 standards to continue working with European businesses.

Key Compliance Requirements for Non-EU Service Providers

• Meet EU cybersecurity standards, including risk management, incident response, and governance policies.
• Ensure fast and transparent incident reporting, notifying EU organizations of security breaches that could impact their operations.
• Cooperate with EU cybersecurity authorities, which may require compliance with audits and regulatory oversight.

Failure to meet these requirements could lead to financial penalties or termination of contracts with EU clients.

2. Incident Reporting Obligations for Non-EU Companies

Under NIS2, companies within the EU must report cybersecurity incidents within 24 hours. This requirement may extend to non-EU service providers or vendors if they handle critical operations for an EU business.

Who Needs to Report Cyber Incidents?

• Non-EU cloud and data hosting providers that experience a breach affecting EU-based clients.
• Third-party software vendors whose vulnerabilities lead to security incidents in EU organizations.
• Logistics, transportation, or energy suppliers outside the EU that provide critical services to European businesses.

What’s Required in Incident Reporting?

• Initial notification within 24 hours of discovering a significant cybersecurity event.
• Detailed follow-up report within 72 hours, outlining the impact, root cause, and mitigation steps.
• Ongoing updates to EU authorities if new details emerge or additional remediation steps are taken.
• Ignoring these reporting requirements could result in penalties or loss of business relationships with EU clients.

For companies managing multiple EU clients, incident reporting is crucial to ensure compliance with regulatory requirements. Automated incident management solutions, such as VComply’s Incident Management Platform, simplify the process by ensuring that incidents are reported accurately, tracked, and submitted within the required timeframes.

3. Cross-Border Cooperation and Data Sharing

NIS2 emphasizes cross-border cybersecurity coordination, meaning that non-EU entities may be required to share security information with EU regulators.

How This Affects Non-EU Businesses

• Organizations operating in multiple jurisdictions must ensure their data-sharing practices align with NIS2 standards.
• Threat intelligence sharing between EU and non-EU partners may become mandatory for high-risk sectors.
• Some businesses may need to appoint a representative within the EU to handle compliance requests from regulators.

This aspect of NIS2 reflects the growing international effort to build a unified cybersecurity defense, making collaboration between non-EU and EU businesses essential.

4. How Brexit Impacts UK Businesses Under NIS2

Since the UK is no longer part of the EU, it is not automatically bound by NIS2. However, UK-based companies that serve EU clients may still need to comply.

Key Considerations for UK Companies

• Any UK business working with EU-based critical infrastructure (finance, healthcare, energy, etc.) must follow NIS2 standards.
• Contracts with EU organizations may require proof of compliance, even if the UK has separate cybersecurity regulations.
• UK regulators may choose to adopt similar cybersecurity laws to maintain alignment with EU trade and security requirements.
• Adopting NIS2-aligned practices could be a competitive advantage for UK firms that rely on EU business. This would ensure seamless cross-border operations.

The NIS2 Directive is reshaping global cybersecurity expectations and even businesses outside the EU will feel its impact. Whether through direct obligations, supply chain security mandates, or incident reporting requirements, non-EU organizations must take action now to align with these new regulations.

Next Steps for Non-EU Companies

The NIS2 Directive is reshaping global cybersecurity expectations and even businesses outside the EU will feel its impact. Whether through direct obligations, supply chain security mandates, or incident reporting requirements, non-EU organizations must take action now to align with these new regulations.

• Assess your cybersecurity posture and determine if your business falls under NIS2’s scope.
• Strengthen supply chain security to maintain EU business relationships.
• Prepare for incident reporting obligations and invest in automated compliance solutions.
• Monitor regulatory developments in case your country adopts similar cybersecurity laws.

Explore how VComply can enhance your regulatory compliance operations for a streamlined approach to cybersecurity and risk management. Secure operations and thrive in an era where cyber resilience is no longer optional.

Best Practices for NIS2 Compliance: Practical Steps for Cybersecurity Readiness

Complying with the NIS2 Directive requires more than just regulatory adherence—it’s about building a cybersecurity-first approach that protects your organization from real-world threats. The directive sets strict guidelines for risk management, incident response, and governance, but taking proactive steps now can make compliance manageable and effective.

Here’s what businesses should focus on to meet NIS2 requirements and enhance cybersecurity resilience.

1. Implement a Proactive Risk Management Framework

Cyber risks are constantly evolving, and organizations need a structured approach to identifying, assessing, and mitigating security threats.

What You Should Do:

• Conduct regular cybersecurity risk assessments to identify vulnerabilities before attackers do.
• Strengthen multi-layered security controls, including encryption, firewalls, and access management.
• Implement continuous monitoring systems to detect anomalies and potential threats in real-time.
• Establish clear cybersecurity policies that define risk management responsibilities at every level of the organization.

Read: What is Cyber Risk and What is Its Impact on Your Organization.

2. Strengthen Governance and Accountability

NIS2 makes cybersecurity a board-level priority, meaning senior leadership must be actively involved in security decisions.

What You Should Do:

• Appoint a Chief Information Security Officer (CISO) or assign security leadership responsibilities at the executive level.
• Train board members and senior executives on cybersecurity risks, obligations, and compliance.
• Conduct regular cybersecurity performance reviews to measure policy effectiveness and make improvements.
• Develop a structured security governance framework with clear roles and accountability.

Why It Matters:
Strong governance ensures cybersecurity decisions are strategic, well-funded, and continuously improved rather than treated as a secondary concern.

3. Build a Resilient Incident Response & Business Continuity Plan

A cyberattack can cripple operations, so organizations need a clear strategy to contain incidents and restore systems quickly.

What You Should Do:

• Develop a detailed Incident Response Plan (IRP) with step-by-step actions for security teams.
• Establish a Business Continuity Plan (BCP) to ensure critical operations continue with minimal disruption.
• Conduct regular tabletop exercises and attack simulations to test response effectiveness.
• Maintain secure backups and test restoration procedures to minimize downtime in case of a breach.

Why It Matters:
Organizations that prepare in advance can minimize damage, protect sensitive data, and meet NIS2’s strict reporting deadlines.

4. Ensure Compliance with Incident Reporting Obligations

NIS2 mandates faster and more structured incident reporting to improve cybersecurity oversight.

What You Should Do:

• Report significant security incidents within 24 hours of detection (previously 72 hours).
• Submit a detailed follow-up report within 72 hours, outlining the cause, impact, and mitigation measures.
• Maintain detailed documentation of security breaches to demonstrate regulatory compliance.

Why It Matters:
Failure to report incidents on time can lead to regulatory fines and reputational damage. A well-structured approach ensures compliance without the risk of oversight.

5. Secure the Supply Chain and Third-Party Vendors

Supply chain attacks have become one of the biggest cybersecurity threats, making third-party security a top priority under NIS2.

What You Should Do:

• Assess cybersecurity risks in third-party vendors before entering contracts.
• Include NIS2-compliant security clauses in vendor agreements.
• Require regular security audits and compliance certifications from suppliers.
• Monitor vendor security on an ongoing basis to detect risks early.

Why It Matters:
A weak link in the supply chain can compromise the entire organization. NIS2 holds businesses accountable for ensuring their vendors follow strict security practices.

6. Foster a Culture of Cybersecurity Awareness

Technology alone can’t prevent cyberattacks—employees must be trained and vigilant to recognize threats.

What You Should Do:

• Conduct mandatory cybersecurity training to help employees identify phishing attacks, social engineering tactics, and malware threats.
• Implement role-based security awareness programs, ensuring IT teams, executives, and front-line staff receive relevant training.
• Run regular security drills and phishing simulations to test employee awareness.

Why It Matters:
Human error remains a leading cause of data breaches. A well-trained workforce reduces security risks and strengthens overall compliance.

7. Automate Compliance and Regulatory Tracking

NIS2 introduces stricter enforcement and oversight, making manual compliance tracking inefficient. Organizations need centralized compliance solutions to streamline operations.

What You Should Do:

• Centralize regulatory documentation to stay audit-ready and avoid compliance gaps.
• Track real-time regulatory changes to adapt security measures accordingly.

Why It Matters:
With higher penalties for non-compliance, businesses need structured compliance management to stay ahead. Automating these processes reduces the risk of errors and ensures continuous compliance.

Meeting NIS2 compliance isn’t just about avoiding penalties. It is about ensuring business continuity, safeguarding critical data, and strengthening resilience against real-world cyber threats. Organizations that take a structured approach to risk management, governance, and incident response will not only meet regulatory expectations but also create a security-first culture that protects their operations in the long run.

For businesses handling complex compliance requirements, a GRC suite can provide centralized oversight, real-time risk tracking, and automated compliance workflows, making cybersecurity management more efficient and less resource-intensive.

NIS2 vs. Other Cybersecurity Regulations: A Comparative Overview

Understanding how NIS2 differs from other major frameworks is essential for businesses navigating cybersecurity compliance. Below is a comparative table outlining key aspects of NIS2, GDPR, the EU Cybersecurity Act, NIST, and CMMC.

Regulation	Scope	Key Requirements	Enforcement	Key Differences from NIS2
NIS2 Directive (EU)	Covers essential & important entities in sectors like energy, healthcare, banking, and transport	Risk assessments, incident reporting (within 24 hours), supply chain security, senior management accountability	Strict fines: up to €10 million or 2% of global turnover for essential entities, €7 million or 1.4% for important entities	Stronger focus on critical infrastructure protection & supply chain security
GDPR (EU)	Focuses on data privacy and protection for individuals and organizations handling personal data	Data protection by design, mandatory breach notifications (72 hours), encryption, and risk assessments	Severe penalties: up to €20 million or 4% of global turnover	Emphasizes personal data protection rather than broader cybersecurity resilience
EU Cybersecurity Act	Establishes a cybersecurity certification framework for ICT products and services	Cybersecurity certifications for ICT products enhanced ENISA oversight	Certification compliance is encouraged, but no direct penalties	Focuses on cybersecurity certification rather than operational security requirements
NIST Cybersecurity Framework (US)	Voluntary guidelines for cybersecurity risk management across industries	Framework structured around Identify, Protecting, Detect, Responding, and Recover	Voluntary adoption, often referenced in federal contracts	Guidelines-based and voluntary, while NIS2 is a legally binding regulation
CMMC (US)	Mandatory cybersecurity framework for defense contractors handling sensitive information	Five maturity levels requiring progressive cybersecurity measures, regular audits for compliance	Non-compliance leads to loss of eligibility for US Department of Defense contracts.	Industry-specific framework for defense, while NIS2 applies across multiple sectors

Simplifying Compliance Management in a Complex Regulatory Landscape

As compliance expectations grow, organizations need a structured, efficient approach to managing risk, reporting incidents, and maintaining audit readiness.

How Compliance Platforms Can Help:

• Centralized Oversight: Manage all compliance activities from a single platform, reducing administrative burden and improving visibility.
• Custom Dashboards & Reporting: Generate tailored reports for different departments and stakeholders, ensuring clear insights for decision-making.
• Pre-Configured Regulatory Frameworks: Align with industry-specific compliance requirements without starting from scratch.
• Secure Documentation & Evidence Management: Maintain well-organized, role-based access to compliance records, making audits smoother and more efficient.

By integrating compliance management solutions, organizations can reduce complexity, streamline workflows, and focus on strengthening cybersecurity and regulatory adherence.

Conclusion

The NIS2 Directive is more than just a regulation. It is a necessary shift toward stronger cybersecurity practices. With cyber threats becoming more sophisticated, compliance is essential for protecting operations, sensitive data, and customer trust.

For companies in critical sectors, the priority should be long-term security measures rather than quick compliance fixes. Strong governance, proactive risk management, and incident readiness will define the organizations that stay ahead in this evolving regulatory landscape.

Managing compliance does not have to be complicated. Try VComply’s 21-day free trial to see how an automated approach can simplify your NIS2 compliance journey.