SOC (Service Organization Control) reports cover a wide range of business operations. Some are designed to protect customer data, while others are meant to streamline workflows and reduce operating costs. SOC2 reports are among the most common, and the purpose of this framework is to establish secure IT controls.
SOC2 reports cover a wide range of digital processes in any business. Whether you store customer data in the cloud or provide services as a third-party vendor, you will need robust SOC2 reporting to ensure the privacy, security, and confidentiality of company data.
Furthermore, SOC2 reports provide evidence that your business has taken steps towards handling sensitive data according to established guidelines. Customers who conduct business with you will have confidence that any shared data is safe, secure, available, and accessible when needed.
Small and Medium-sized Businesses (SMEs) are particularly at risk of data security breaches. With SOC2 reporting, your business can implement the 5 trust principles that help detect and prevent hacking.
It can be challenging as an SME to know where to start with regards to SOC2 reporting. This guide will shed more light on what SOC2 reports contain, why they’re important, and how you can develop a framework for compliance.
What is SOC 2 Compliance?
SOC 2 compliance refers to a framework where organizations outline their basic structure for data security. This framework is primarily designed for inter-business relationships, where one company provides services to another as part of its information system (IT) network.
SOC 2 reporting is critical because it highlights the controls that a service provider has put in place to safeguard your data. For example, if you rely on a cloud provider to deliver SaaS services, such as payroll software, you may wish to know how the data you process through those channels is being handled.
SOC2 compliance is a combination of best practices that are designed to protect business data. Being compliant involves generating regular internal reports, subjecting your infrastructure to external audits, managing vendors, and implementing IT controls.
You can also customize internal controls to meet the specific needs of your business-particularly when protecting against areas of greatest vulnerability. The nature of SOC2 reporting makes it more adaptable than other strict guidelines such as PCI DSS. And as an SME, you can determine the best procedures for optimizing company operations to remain compliant.
The framework around SOC 2 Compliance
Because SOC 2 mainly covers systems and data transmitted across digital channels, there are 5 main principles that form the foundation of SOC 2 compliance. These principles include:
Privacy refers to the controls put in place when preventing unauthorized access to company information. In other words, the collection, use, and disclosure of personal data should be protected under this principle.
The security principle covers all physical and electronic data forms. It ensures that this data is protected from hacking, unauthorized access, and other types of suspicious activity.
This trust principle refers to how sensitive data should be handled between service organizations. For example, are there policies in place that determine who has access to credit card information, health records, or customer names? Establishing and adhering to these principles will be key to SOC 2 compliance under this principle.
As much as data protections are critical, they shouldn’t interfere with availability and accessibility. Business partners should be able to access the required data and systems that are necessary to facilitate smooth operations.
There should also be a contract in place that specifies the type of data available to specific personnel. In this way, data protection can be implemented without resulting in the disruption of services.
5. Process integrity
Process integrity refers to an assessment of whether current controls are performing as was originally intended. This principle ensures that all controls are actually being turned into actionable steps and not just guidelines on a piece of paper or electronic document.
Furthermore, process integrity uncovers many different insights that arise during the implementation of data security controls. An example is data encryption. Are all data-sensitive transactions being conducted across encrypted networks? Are there controls in place to ensure that only authorized personnel can access sensitive customer data?
Also, remember that each trust principle is optimized for specific types of data and company operations. This means that you don’t necessarily have to meet all the above criteria, as you can select the ones most applicable to your business.
Auditors will test your internal controls for the trust principles that you’ve specified. Similarly, business partners will closely scrutinize your operations to determine whether they can partner with your company without being exposed to data risks.
Steps to establishing SOC 2 compliance
Being aware of what SOC 2 compliance is, and understanding the 5 trust principles, is just the first step towards actually becoming compliant.
Small and medium sized businesses should also establish actionable steps that will help them achieve and maintain a compliant environment. In this way, business partners (and other customers) will build confidence in your systems and feel more comfortable working with your company.
There are many different routes you can take to establish SOC 2 compliance. However, the steps outlined below will simplify the process and allow you to dedicate resources in a more targeted manner.
1. Establish a dedicated SOC 2 compliance team
The first step that SMEs should take is establishing a dedicated team that will be the primary resource for SOC2-related activities. The team should contain skilled personnel who are familiar with SOC reporting and what your business needs to do in order to become compliant.
A good place to start is including Executive/Management personnel such as Chief Security Officers (CSOs) and Chief Information Officers (CIOs), project managers, IT consultants, and compliance management officials.
2. Set specific compliance goals
The next step is to establish goals for your SOC 2 reporting. As previously mentioned, you can select specific components from the 5 principles of SOC 2 reporting. Once those principles have been identified, set targeted goals that you would like to achieve. Are you more concerned with a specific product/service, or would you like to expand compliance to the entire organization?
3. Prepare and organize all relevant materials
Establishing IT controls will require a thorough assessment of your current systems. Start by collecting all relevant data, assessing effectiveness, and identifying gaps that may need to be filled. In this way, you can determine what should be done with regards to each of the 5 principles in SOC 2 reporting.
4. Establish a self-auditing framework
Self-auditing is an excellent way of testing your new IT controls to determine whether they actually work. Rather than waiting until a few days before an external audit, you can continuously improve on internal processes so you can be ready before an actual audit takes place.
You will find that there are many things to work on, including document trails, security practices, and vendor system management.
Getting these details right will put you in a better position when the external audit is carried out.
Preparing an SOC report
After going through the detailed process of establishing an SOC 2 compliant environment, you will undergo auditing as a precursor to receiving your SOC 2 compliance certificate. This certificate is essentially a report that verifies the establishment of data security standards.
It can be used to verify compliance to current and potential business partners- as well as other entities that may be concerned about your data security environment.
The report will include details of the following components:
- Current security controls as they relate to your chosen SOC 2 principles
- Effectiveness of internal controls as reported by the external auditor
- An assessment of how current service organizations are interacting with your business
- A summary report of relevant company operations- including infrastructure and resource allocation practices
- Analysis of how risk assessment was carried out, as well as the controls in place to detect and prevent threats
- Assessing the performance of company controls in the face of your daily working environment
As a small business that will be handling sensitive data, SOC 2 reporting will be a critical part of your operations. SOC 2 compliance and reporting ensure that you improve data security controls, maintain confidence in partner organizations, and establish a robust framework for risk management.
Furthermore, these reports enable you to develop detailed document chains that can be assessed for performance down the road. And by ingraining compliance into the company culture, your business will grow in the right direction while reducing the likelihood of data breaches.