Towerwall’s Michelle Drolet discusses the two threads of SOC 2 compliance (types 1 and 2), outlines the Trust Services Criteria, and details the benefits of adhering to these standards.
While Service Organization Control (SOC) 2 compliance isn’t mandatory, it can bring a range of benefits for your organization. Created by the AICPA (American Institute of Certified Public Accountants), this auditing process helps you to assess your data privacy and security standards. Once achieved, you will have a comprehensive set of security policies that will clearly show your commitment to information security.
If you have concerns about the cost of SOC 2 compliance, weigh them against the potential cost of a data breach. The average cost was pegged at $3.86 million last year, according to research from IBM and the Ponemon Institute. SOC 2 compliance can also give you a competitive advantage, helping you close business deals as well as making it easier to respond to vendor questionnaires. There’s also ROI to be realized. Since it can readily ease the path to necessary regulatory compliance to standards like GDPR and HIPAA, it gives you valuable insight into your security efforts and potential weak spots. Having SOC 2 compliance under the belt is a competitive advantage in many ways and makes the compliant organization stand out among its peers with a nod of respect.
The First Step to SOC 2 Compliance: Putting a Team Together
To work toward SOC 2 compliance, you need to choose a team to be responsible for the project. The selection of a suitable outside partner is also key, as is the inclusion of key stakeholders from across your organization. These can include members of the executive level to project managers to IT and security professionals. Don’t forget to include representatives from your legal and HR departments to ensure you build a team capable of considering all the angles. Their first task will be to define the scope based on the “Trust Services Criteria.”
Trust Service Principles
SOC 2 establishes the path to secure customer data management through five trust service principles, known as the Trust Services Criteria. Your chosen team should work together to establish which principles apply to your organization. They are as follows:
This is all about protecting your system from unauthorized access. You must establish stringent access controls, consider how to reduce the risk of data exfiltration (be it deliberate or accidental), and ensure that you can validate data integrity. Identify tools and platforms that can help guard against data breach, such as managed detection and response services, multifactor authentication, and standards like firewalls and phishing filters. There are some excellent free security tools out there.
This concerns the accessibility of your services and systems. Can you adhere to service level agreements (SLAs)? Are you monitoring your network traffic and performance closely? Do you have a proper breach response plan? It’s crucial to have a clear plan in place for recovery from network outages or security incidents so that you can continue to provide the level of service your customers and partners expect.
3. Processing Integrity
Are your systems fit for purpose when it comes to data processing? You need to assess the way data is handled and processed through your organization. Can you access the data that’s required in a timely fashion? Is it complete and accurate? Can you validate data and ensure access is controlled and limited to authorized end users? A mix of real-time data monitoring and quality assurance is important.
It’s crucial that you handle private data carefully and ensure it’s not accessible to anyone or any organization without authorization. Build a complete picture of your data and make sure you’re fully aware of precisely where it resides. This is especially important if you use third-party cloud services. Data encryption, both at rest and in transit, is a necessity. Make sure your systems are correctly identifying and classifying confidential data and that you have the capability to track and limit data access to the right personnel.
Every organization requires a privacy notice to clarify precisely what data is being collected, how it is used, how it is stored, who it may be shared with and how it is disposed. Any personally identifiable information (PII) that might be used to identify someone has to be correctly flagged and dealt with sensitively to guard against any unauthorized access. Check that your privacy notice is complete and that it accurately reflects the way you collect and handle data.
Crafting Policies and Gap Analysis
After establishing the scope, it’s time to craft information security policies and procedures that enforce your principles. These should be drafted and fine-tuned by your chosen team and assessed by an external auditor. Follow this up with a gap analysis designed to expose any potential weaknesses or high-risk areas in your current security practice. It’s a good idea to fully test your new procedures to ensure they are fit for purpose.
An audit should touch on all areas and ensure you are fully adhering to relevant trust principles. The resulting SOC 2 Type 1 report will give you deep insight into the effectiveness of your security policies and your compliance efforts. This proactive approach to data security will reduce your risk and stand you in good stead with other regulatory frameworks, potential partners and customers seeking assurances about your security standards.
While a SOC 2 Type 1 report gives you a snapshot view of SOC 2 compliance (assessing the scope, management structure, and controls you’ve put in place), a Type 2 report goes much further. Type 1 establishes the suitability of your plan and highlights your compliance posture for a specific point in time. Type 2 is a much more thorough assessment that analyzes how your plan works in practice over a prolonged period.
A SOC 2 Type 2 audit report will usually cover a period of at least six months, though a full year is more typical. Continuous assessment like this highlights the operating effectiveness of the policies and procedures you have developed. This more in-depth audit results in a much higher level of assurance. Prospective customers and third-party vendors can see precisely how an organization handles sensitive data, not just how they plan to handle it.
The assessment is still based on the core Trust Services Criteria, but Type 2 reports touch on some additional areas you won’t typically find in a Type 1 report.
This details the design of the organization’s infrastructure, investigates services and systems, and asserts its suitability for purpose. Auditors will analyze this description and ensure it is a fair representation. It will be measured against the trust service principles to confirm that the original design of controls has met the criteria.
Independent Auditor’s Report
Auditors will offer their opinion on whether or not the controls established operated effectively during the assessment period. This summary will measure the real-world operation of security policies and procedures measured against the Trust Services Criteria. It will outline the scope of the assessment, the auditor’s responsibilities, and any limitations in the report they will ultimately produce. The opinions offered will be qualified with a description of the tests performed and a clear statement of what and who the report is for. (Because it will contain extremely sensitive information, it will be for internal use only).
This section will detail all people, policies and processes pertaining to every piece of data used by the organization. It should provide a clear picture, including the geographical location, of cloud services, patch management, backup systems, databases, any other relevant software and networking hardware. It may also cover the purpose of different systems and highlight any relevant customer or third-party responsibilities for data access.
Every aspect of the internal control of data must be outlined here. Starting with the control environment, organizations should consider their objectives and risk appetite. They should detail policies and procedures, showing how they relate to management directions on control. They need to factor in all communication and information channels. There must be a process in place to continually measure the efficacy of internal controls and to identify and analyze risks in a timely manner so they can be properly managed.
Before commissioning a SOC 2 Type 2 report, organizations must be confident in their systems and controls. Ensure that the independent auditors chosen are fully qualified and take time to prepare. It is prudent to run some tests of your own to validate systems before an audit begins. Ultimately, the auditor will provide a qualified opinion on how closely the organization adheres to trust service principles.
This process doesn’t result in a straightforward pass or fail, but rather an opinion about whether the organization’s assertion is fair and accurate. Type 2 reports may highlight minor exceptions and areas that require improvement, but still broadly agree with the assertion. If there are significant failures in assessed controls, this could result in an adverse opinion, but it will highlight where action is required to raise standards.
Proving Your Commitment
The Type 2 report shows a firm commitment to data protection and an ongoing effort to identify and mitigate risk. This level of data security awareness will likely chime with wider regulatory requirements and compliance efforts, displaying a high level of trustworthiness not just to regulators, but also to prospective customers and partners.
If a competition for a lucrative contract is close-run, but only one of the organizations competing has SOC 2 compliance, then it’s likely to get the nod. Further, Type 2 compliance will win out over Type 1 as it provides a much more thorough assessment. A positive Type 2 report can enhance an organization’s reputation as it delivers the peace of mind that everyone is seeking around data security today.