Protecting privacy and security is foundational for all organizations that process, store, or transmit customer data and personal information.
The System and Organization Controls for Service Organizations 2 (SOC 2) determines whether an organization’s practices are sufficient to safeguard that data.
What Are the SOC 2 Requirements?
To gain SOC 2 compliance, a company must prove its ability to protect customer data and process sensitive information. To that end, SOC 2 criteria include five Trust Services Criteria defined by the American Institute of Certified Public Accountants (AICPA): Security, availability, confidentiality, processing integrity, and privacy.
Security
The security element refers to an organization’s ability to protect against unauthorized access and responsiveness to security breaches that may disclose sensitive information.
Availability
This category requires that information and services are available for operation and use to meet the entity’s objectives.
Confidentiality
All confidential material and information should be sufficiently protected, including private customer data.
Processing Integrity
An organization’s system processing should be accurate, timely, and authorized to meet all organizational objectives.
Privacy
Finally, all confidential information and personally identifiable material should be entirely secure, from the point of collection to when it is used, disclosed, and eventually disposed of.
While not every SOC 2 audit must consider all five Trust Services Principles, it provides an excellent basis for knowing what principles could be assessed for compliance. For example, a service provider that only deals with data storage may not necessarily need to include additional criteria, such as processing integrity, in a SOC 2 audit. However, security, availability, confidentiality, and privacy principles will apply to companies that utilize a data center.
Differences Between SOC 2 Type 2 vs. SOC 2 Type 1
SOC Type 1 and 2 address a service organization’s reporting controls and processes concerning the five data trust principles. Furthermore, seeking SOC 2 compliance, whether type 1 or type 2, is entirely elective. Organizations or rules such as the Health Insurance Portability and Accountability Act (HIPAA) or the Payment Card Industry Data Security Standard do not mandate it (PCI-DSS).
However, there are distinctions between SOC 2 Types 1 and 2. The length of coverage of the report is the most noticeable or striking change.
A Type 1 audit report examines the design effectiveness of internal controls as of a specified date. The report only addresses the efficacy of internal controls to achieve the service provider’s goals. It also confirms the appropriateness of those controls to the completion or fulfillment of the objectives.
On the other hand, a SOC 2 Type 2 audit report covers a more extended period. This can range from six to twelve months, with twelve being the most typical. It addresses internal controls’ design and operational efficacy throughout time to accomplish predetermined goals.
Because of the scope of a SOC 2 Type 2 report, service providers must devote more time and effort to preparing for it. However, there is no need to wait for all controls to be implemented.
However, the additional effort and money spent on SOC 2 Type 2 compliance benefits businesses. For example, it explains how a service provider secures its customers’ sensitive data. In addition, it appeals to potential consumers and stakeholders such as partners and insurance companies.
What are the Elements of a SOC 2 Risk Assessment?
SOC 2 risk assessment is essential in the SOC 2 compliance process. In short, it demands you to identify and analyze the effect of your company’s numerous risks, assign a likelihood of occurrence and impact, and implement appropriate mitigation measures. Here are the steps to perform a practical SOC 2 Risk Assessment:
Step 1: Define your Business Objectives
The first stage is to outline your business objectives precisely. Your company objectives are the services you have pledged to provide to your clients and prospects. These might be corporate contracts, Service Level Agreements, or even content from your website, brochures, and social media.
You should also think about your selected Trust Service Criteria (TSC) and the obligations made to them. For example, if an organization keeps sensitive data protected by a non-disclosure agreement or commits to destroy client data upon service completion, the firm’s point of attention for risk assessment should be protecting client data confidentiality and security.
Step 2: Identify In-Scope Systems
The next stage is identifying the critical systems that allow your company to service its clients. You may sort through essential pieces in various sectors, including infrastructure, software, data, people, and processes, to mention a few. For example, if you sell software-as-a-service, your production system is vital, whereas non-production systems are not.
Make a list of the crucial systems relevant to the scope (TSCs) of your SOC 2 audit. This phase is critical for reducing extraneous clutter from your SOC 2 audit.
During your SOC 2 audit, the systems you define as ‘in-scope’ would be assessed for the design and operational efficacy of the controls you apply to manage risks. But we’ll get to that later.
Step 3: Perform Risk Analysis
We will now list the several business-specific and inherent dangers that might interrupt your operations.
At this stage, you will examine the risks to your organization posed by suppliers and business partners, abuse of information access by workers, abrupt changes in the leadership team and legislation, and changes in the economic, physical, and technical landscapes, to mention a few.
Step 4: Document Risk Responses
After you’ve analyzed the risks and given a value to them, the following stage is to include risk-mitigation strategies and solutions. For SOC 2 compliance, you must map the controls (based on selected TSCs) to the identified risks. The controls should assist reduce the risk effect while outlining your risk response strategy.
Documentation should also specify the frequency of control evaluation and who will perform it. Finally, do an internal audit of your controls, sort of a dry run, to search for any apparent weaknesses in the process.
Step 5: Stay Consistent
Risk assessment is a continuous process. You must perform a risk assessment once a year whenever a big event changes your risk quotient or when new hazards are detected. Remember that SOC 2 audits are conducted annually, and you must submit evidence of identifying, assessing, monitoring, analyzing, and preventing the possible effect from your determined risk universe in each audit.
What are the Benefits of SOC 2 Compliance?
The critical advantage of SOC 2 compliance is that it shows that your company maintains a high degree of information security.
The stringent compliance standards, tested on-site, guarantee that sensitive information is handled correctly. As a result, organizations implementing the required measures are less likely to have data breaches or violate consumers’ privacy.
This shields the organization from the negative consequences of breaches, such as regulatory action and reputational harm, while also providing a competitive edge.
SOC 2-compliant organizations may use this fact to demonstrate to clients that they are devoted to information security, resulting in new business prospects.
Because the framework says that compliant organizations can only exchange data with other compliant organizations,
What Are the SOC 2 Controls?
Developing your organization’s internal controls is foundational when preparing for a SOC 2 audit. In addition, your internal controls will help protect information security and compliance risk management.
To help prepare your company for SOC 2 attestation, consult guidance from the Committee of Sponsoring Organizations of the Treadway Commission (COSO), which lays out a framework for internal controls: Control environment, risk assessment, control activities, information and communication, and monitoring.
Control Environment
Your control environment includes several aspects of your control system, from infrastructure to system operations and processes. Workplace culture and accountability play into this control-your company’s explicit segregation of duties will help provide a clear set of guidelines to ensure that each member of your management acts appropriately.
Risk Assessment
Internal and external risk assessment is a significant part of establishing proper controls for your organization. Take advantage of risk management strategies and frameworks to assist your entity in identifying, analyzing, mitigating, and monitoring any risks that could compromise your compliance and information security for your company and any business partners.
Control Activities
Your organization’s internal policies and procedures to minimize risk are included in this category of internal controls. Ensure your control activities are embedded throughout each project lifecycle and manage risk in all functions of your company.
Information and Communication
Paramount to internal control success is ample access to information and communication within your organization. Senior management must record and verbalize expectations to all employees, and staff should share information with upper management to help leaders create policy and risk management processes.
Above all, a consistent and structured flow of information will help maintain compliance and swiftly identify any potential gaps in your system.
Monitoring
When your organization has its policies and risk management practices, ongoing monitoring will help complete the internal control system. Monitoring activities should include continuously assessing metrics, evaluating, and performing audits to keep an eye on compliance requirements. Changes can and should be made as gaps are identified, and upper management should have an agile process for adapting risk management practices and policies where needed.
What is a SOC 2 Assessment?
When it comes time for your SOC 2 assessment, you’ll work with an independent Certified Public Accountant (CPA) or accounting firm and determine your audit scope. To establish the scope of your audit, you’ll decide which of the five Trust Service Categories apply to your organization and which SOC report you need-Type 1 or Type 2.
Then, for each Trust Service Category that applies to your organization, the auditor will examine internal controls by collecting evidence such as organizational charts, asset inventories, and onboarding processes. If any issues come up, your organization will have the opportunity to fix any gaps in your system. Of course, your overall audit cost will increase with any remediation, so preparing as much as possible is wise before going through the official assessment.
Readying your company for a SOC 2 assessment will help your organization gain necessary compliance attestations and assist with risk mitigation and overall ease of governance. SOC 2 protects companies and individuals-your organization will be much stronger with regulatory compliance measures.
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