SOC 2 is a security and compliance standard that offers guidelines for service organisations to protect sensitive data from unauthorised access, security incidents, and other vulnerabilities. It is part of the System and Organisation Controls (SOC) suite of services developed by the American Institute of Certified Public Accountants (AICPA). A SOC 2 report is often requested by customers and business partners of outsourced solution providers to provide assurance that those organisations have adequate systems and controls in place to protect critical business information. SOC 2 is a voluntary compliance standard, but many companies and customers consider it a prerequisite for the service providers and business partners they choose to work with. If an organisation’s industry requires SOC 2 compliance, they may lose business to their SOC 2-compliant competitors if they choose to forgo SOC 2 compliance.
Key Takeaways
- SOC 2 is a security and compliance standard that provides guidelines for service organisations to protect sensitive data.
- A SOC 2 report assures customers and partners that an organisation has adequate systems and controls in place to protect critical business information.
- SOC 2 compliance is often considered a prerequisite for service providers and business partners, and non-compliance may result in lost business opportunities.
- The SOC 2 framework is voluntary, but many companies and customers view it as a necessary requirement for their service providers.
- Organisations in industries that require SOC 2 compliance may lose business to their SOC 2-compliant competitors if they choose not to comply.
What is SOC 2 Compliance?
The SOC 2 framework is designed to be used by all types of service organisations, and is currently very popular among SaaS companies. SOC 2 allows the service organisation to define how its cybersecurity controls are implemented, provided they meet the intent of the criteria they satisfy, and address risks sufficiently. SOC 2 is closely aligned to the 17 principles in the COSO framework published in 2013. It uses these principles as the baseline of many of the Common Trust Services Criteria.
Overview of SOC 2 Framework
SOC 2 is made up of five Trust Services Criteria— Security (Common Criteria), Availability, Processing Integrity, Confidentiality, and Privacy. Each SOC 2 report uses the Security Trust Services Criteria as the baseline for each report, meaning that every SOC 2 will include the Common Criteria within the Security category. Each organisation can then opt to add in any of the remaining four Trust Services Criteria (TSCs) — Availability, Confidentiality, Processing Integrity, and/or Privacy — depending on their type of business, organisational goals, or customer/partner demands.
Understanding SOC 2 Requirements
The five Trust Services Criteria in SOC 2 are:
- Security (Common Criteria): Information and systems are protected against unauthorised access, unauthorised disclosure of information, and damage to systems that could compromise the availability, integrity, confidentiality, and privacy of information or systems and affect the entity’s ability to achieve its objectives.
- Availability: Information and systems are available for operation and use to meet the entity’s objectives.
- Processing Integrity: System processing is complete, valid, accurate, timely, and authorised to meet the entity’s objectives.
- Confidentiality: Information designated as confidential is protected to meet the entity’s objectives.
- Privacy: Personal information is collected, used, retained, disclosed, and disposed of to meet the entity’s objectives.
Trust Services Criteria Explained
The SOC 2 framework is designed to be used by all types of service organisations, and is currently very popular among SaaS companies. SOC 2 allows the service organisation to define how its cybersecurity controls are implemented, provided they meet the intent of the criteria they satisfy, and address risks sufficiently. SOC 2 is closely aligned to the 17 principles in the COSO framework published in 2013. It uses these principles as the baseline of many of the SOC 2 Requirements.
Why is SOC 2 Compliance Important?
SOC 2 compliance is crucial for several reasons. Firstly, it helps organisations establish robust internal security controls, laying a foundation of security policies and processes that can support secure scaling. Secondly, it builds trust with customers by demonstrating a commitment to data security and protection. Many customers now require their service providers to have a SOC 2 report, as it provides assurance that sensitive data will be safeguarded.
Additionally, a SOC 2 report can be a key differentiator in the market, unlocking sales opportunities and helping organisations move upmarket. In an era of growing data breaches and cybersecurity threats, SOC 2 compliance is crucial for maintaining best-in-class security standards and protecting an organisation’s reputation.
| Importance of SOC 2 Compliance | Description |
|---|---|
| Data Security | SOC 2 compliance establishes robust security controls to protect sensitive customer data from unauthorised access or breaches. |
| Reputation Management | Achieving and maintaining SOC 2 compliance demonstrates an organisation’s commitment to security and compliance, enhancing its reputation and trustworthiness. |
| Importance of SOC 2 Compliance | SOC 2 compliance is essential for service organisations to meet customer expectations, differentiate themselves in the market, and scale their business securely. |
SOC 2 Type I vs Type II Reports
The SOC 2 framework offers two distinct report types to help organisations demonstrate their security posture and data protection capabilities. Understanding the differences between these report types is crucial when selecting the right option for your business.
Understanding Report Types
SOC 2 Type I reports evaluate a company’s security controls at a specific point in time. These reports answer the question: are the security controls designed properly? Type I assessments provide a snapshot of an organisation’s control environment, offering assurance that the necessary policies, procedures, and safeguards are in place.
In contrast, SOC 2 Type II reports assess how those controls function over a sustained period, typically 3 to 12 months. Type II reports answer the question: do the security controls a company has in place function as intended? These assessments offer a more comprehensive evaluation of an organisation’s ability to effectively implement and maintain its security measures.
Choosing the Right Report
When deciding between a SOC 2 Type I or Type II report, organisations should carefully consider their specific goals, cost constraints, and timeline requirements. A Type I report can be achieved more quickly, making it a suitable option for organisations with pressing deadlines. However, many customers now prefer the more robust assurance provided by a Type II report, as it demonstrates the consistent, long-term effectiveness of an organisation’s security controls.
To strike the right balance, some organisations opt for a SOC 2 Type II report with a shorter review period, such as 3 months. This can save time and resources while still delivering the comprehensive assurance that customers increasingly demand. Ultimately, the choice between a Type I or Type II report should be based on the organisation’s unique needs and the expectations of its client base.
SOC 2 Compliance: Meeting Security and Privacy Standards
Security Trust Services Criteria
The Security (Common Criteria) Trust Services Criteria is the baseline for any SOC 2 report. It ensures that information and systems are protected against unauthorised access, unauthorised disclosure of information, and damage to systems that could compromise the availability, integrity, confidentiality, and privacy of information or systems. Some controls that would fall under the Security TSC are firewall and configuration management, vendor management, identity, access, and authentication management, and if applicable, data security and data centre controls.
Availability Trust Services Criteria
The Availability Trust Services Criteria focuses on ensuring that information and systems are available for operation and use to meet the entity’s objectives. Examinations that include the Availability criteria take a deeper dive into recovery controls, service-level agreements, and capacity planning.
Processing Integrity Trust Services Criteria
The Processing Integrity Trust Services Criteria examines whether system processing is complete, valid, accurate, timely, and authorised to meet the entity’s objectives. This criteria focuses on data inputs and outputs, data quality, data processing timing, and reporting.
Confidentiality Trust Services Criteria
The Confidentiality Trust Services Criteria reviews how information designated as confidential is protected to meet the entity’s objectives. This can include customer data, sensitive data, intellectual property, and contracts.
Privacy Trust Services Criteria
The Privacy Trust Services Criteria deals with how personal information is collected, used, retained, disclosed, and disposed of to meet the entity’s objectives. This criteria overlaps significantly with HIPAA and other privacy-centric frameworks, and includes controls around data breaches and incident disclosure.
Scoping and Application of SOC 2 Framework
The SOC 2 framework is unique from most cybersecurity frameworks in that the approach to scoping is highly flexible. Typically, service organisations will only choose to include the Applicable Trust Services Criteria that are relevant to the service they provide. Most importantly, service organisations should choose the Category or Categories that their customers would expect to see in a SOC 2 report. While the organisation chooses the applicable categories, the inclusion of Security (Common Criteria) is mandatory.
Determining Applicable Trust Services Criteria
The table below shows examples of the types of service or industry that would be relevant to each of the Trust Services Categories. The table is not exhaustive and other examples may be relevant. Once the appropriate Category or Categories are selected, a service organisation must then determine if each of the Trust Services Criteria within the applicable Category or Categories applies to the service being provided.
| Trust Services Category | Relevant Industries and Services |
|---|---|
| Security (Common Criteria) | All service organisations |
| Availability | Cloud computing, hosting, SaaS, IT services |
| Processing Integrity | Financial services, payment processors, transaction processing |
| Confidentiality | Professional services, consulting, legal, accounting |
| Privacy | Healthcare, financial services, HR services, marketing agencies |
By carefully selecting the appropriate SOC 2 Scoping and Applicable Trust Services Criteria, service organisations can ensure their SOC 2 report provides the assurance their customers expect and addresses the specific risks and requirements of their industry and services.
SOC 2 Audit Process
To receive a SOC 2 report, an organisation must go through a third-party audit of their system and organisation controls, providing those auditors with evidence and documentation to demonstrate that internal controls are appropriately represented by management. In order to get ready for a SOC 2 Audit Preparation, an organisation needs to implement policies, procedures, and controls to meet the criteria of the SOC 2. This might involve developing and launching access controls, data protection controls, and considering an internal audit to prepare for the external audit.
Audit Phases and Timeline
The SOC 2 Audit Timeline can take anywhere from 3-12 months to complete. During this period, an organisation will typically spend more time preparing for an audit than it will undergoing the actual SOC 2 audit phase. The timeline can be impacted by many variables, including the size of the company, the nature of its services, the complexity of the project, the resources needed, and the specific Trust Services Criteria included in the audit.
Benefits of SOC 2 Compliance
A SOC 2 report provides a third-party seal of approval that an organisation’s security controls are in place and effective. This can help build customer confidence and assure legal and risk departments that the service is secure. Providing evidence of SOC 2 compliance serves as proof that the organisation is storing and processing customer data in a secure manner, which is a top priority for many customers. Having SOC 2 compliance can also help organisations win deals against non-SOC 2 audited competition.
Streamlining Due Diligence
Investors, partners, and other stakeholders often conduct due diligence before making business decisions. Having a SOC 2 audit report readily available can streamline the due diligence process, making it easier for stakeholders to assess the organisation’s security and compliance posture. SOC 2 reports can satisfy the security assurance needs of customers, partners, and stakeholders, reducing the administrative burden of responding to numerous security questionnaires.
Enhancing Security Posture
Undergoing the SOC 2 compliance process can create a framework for improving security practices and managing security risks across the company. With defined cybersecurity, privacy, and compliance responsibilities and practices in place, security and compliance can become important, clearly defined processes for the entire team. This can help the organisation avoid any surprises later on and build a strong security culture.
SOC 2 Compliance Costs and Timeline
The cost of fulfilling SOC 2 compliance requirements can vary widely, typically ranging from £10,000 to £50,000. The actual cost depends on factors such as the size of the company, the nature of its services, the complexity of the project, the amount of resources needed, and the specific Trust Services Criteria included in the audit.
Similarly, the SOC 2 compliance timeline can also fluctuate significantly. The audit process can take anywhere from 3 to 12 months to complete, with the majority of the time spent on preparation rather than the actual audit phase. The timeline can be influenced by numerous variables, including the organisation’s size, the complexity of its services, the resources available, and the specific Trust Services Criteria being assessed.
Maintaining SOC 2 Compliance
Achieving SOC 2 compliance is not a one-time event. Organisations must maintain ongoing Maintaining SOC 2 Compliance through continuous monitoring and assessments. This includes regularly reviewing and updating policies, procedures, and controls to ensure they continue to meet SOC 2 requirements. Organisations should also conduct periodic internal audits and implement processes for identifying and addressing any changes or deviations from the SOC 2 framework. Maintaining SOC 2 Compliance requires a long-term, dedicated commitment to information security and data protection.
Ongoing Monitoring and Assessments
Maintaining SOC 2 compliance is an ongoing process that requires regular monitoring and assessments. Organisations should establish procedures to continuously review their security controls, policies, and procedures to ensure they remain effective and aligned with the SOC 2 framework. This may involve conducting periodic internal audits, implementing automated monitoring tools, and regularly reviewing and updating documentation.
Continuous Improvement
SOC 2 compliance should be viewed as an ongoing process of Continuous Compliance. Organisations should regularly assess the effectiveness of their security controls and look for ways to enhance their security posture. This may involve implementing new technologies, refining existing processes, or addressing emerging threats and risks. By continuously improving their SOC 2 compliance program, organisations can stay ahead of the curve and maintain the trust of their customers and partners.
SOC 2 and Other Security Standards
While SOC 2 is not a legal requirement like some other security standards, it does overlap significantly with frameworks like ISO 27001. ISO 27001 is a popular international security standard developed by the International Organization for Standardization (ISO) to fulfil a similar need as SOC 2. Both standards focus on establishing robust information security controls, though they differ in their specific requirements and approach.
Relationship to ISO 27001
The ISO 27001 standard provides a comprehensive set of controls that can be used to establish, implement, maintain and continually improve an information security management system (ISMS). Similar to SOC 2, ISO 27001 requires organisations to identify risks, implement appropriate security controls, and undergo regular audits to assess the effectiveness of their security measures. While there are some differences in the specific control requirements, both SOC 2 and ISO 27001 share a common goal of helping organisations protect sensitive data and meet the security expectations of customers and stakeholders.
Mapping to NIST Cybersecurity Framework
In addition to ISO 27001, the SOC 2 framework also aligns closely with the NIST Cybersecurity Framework, which is a widely-used set of guidelines for managing and reducing cybersecurity risk. Many organisations choose to map their SOC 2 controls to the NIST Cybersecurity Framework as well, as this can help streamline compliance efforts and demonstrate a comprehensive approach to information security. The NIST Cybersecurity Framework provides a common language and set of principles for organisations to assess and improve their cybersecurity posture, which complements the control-based approach of the SOC 2 standard.
By understanding the relationships between SOC 2 and other security frameworks like ISO 27001 and the NIST Cybersecurity Framework, organisations can leverage synergies, optimise compliance efforts, and build a stronger, more integrated approach to information security and data protection.
Choosing the Right SOC 2 Auditor
Selecting the right SOC 2 auditor is crucial for ensuring a successful audit and obtaining a high-quality report. Auditors should have the necessary qualifications, experience, and expertise to properly assess an organisation’s SOC 2 controls. This includes being licensed as a Certified Public Accountant (CPA) and having specific training and knowledge of the SOC 2 framework and audit process.
Auditor Qualifications and Experience
When evaluating potential SOC 2 auditors, organisations should carefully review each firm’s proposal to assess their suitability. Factors to consider include the auditor’s understanding of the organisation’s industry and services, their audit approach and methodology, the team that will be assigned to the engagement, and their proposed timeline and costs. Organisations should also request and check references from the auditor’s previous clients to ensure a positive track record of delivering high-quality SOC 2 reports.
Evaluating Auditor Proposals
By thoroughly assessing the qualifications and experience of potential SOC 2 auditors, organisations can ensure they select a firm that is well-equipped to accurately evaluate their security controls and deliver a comprehensive, reliable report. This diligence in the selection process can pay dividends in the long run by securing a trusted partner to support their ongoing compliance efforts.
Common Challenges in SOC 2 Compliance
Achieving and maintaining SOC 2 compliance can present several challenges for organisations. One of the key challenges is managing the scope and complexity of the project. SOC 2 requires organisations to define the appropriate Trust Services Criteria, identify the relevant systems and processes, and implement the necessary controls. This can be a time-consuming and resource-intensive undertaking, particularly for larger or more complex organisations.
Aligning Stakeholders and Resources
Another common challenge is aligning key stakeholders and securing the necessary resources to support the SOC 2 compliance initiative. This requires buy-in and support from across the organisation, including IT, security, legal, and operational teams. Organisations must also ensure they have the right people, processes, and technologies in place to effectively implement and maintain their SOC 2 controls.
SOC 2 Compliance for Cloud Service Providers
SOC 2 compliance is particularly important for cloud service providers, as they are responsible for protecting the sensitive data of their customers. Cloud service providers must address a unique set of risks and challenges when achieving SOC 2 compliance. This includes ensuring the security of their cloud infrastructure, managing third-party service providers, and addressing data residency and sovereignty requirements.
Addressing Cloud-Specific Risks
Cloud service providers must consider the cloud-specific risks that can impact their ability to achieve and maintain SOC 2 compliance. These risks may include unauthorised access to cloud resources, data breaches, loss of control over data, and compliance issues with data residency and sovereignty laws. To address these risks, cloud service providers must implement robust access controls, encryption, and monitoring solutions across their cloud infrastructure.
Shared Responsibility Model
Cloud service providers must also consider the shared responsibility model when implementing SOC 2 controls. Under this model, the cloud provider is responsible for securing the underlying cloud infrastructure, while the customer is responsible for securing their own applications and data within the cloud environment. Cloud service providers must clearly define and communicate the respective security responsibilities to their customers to ensure a comprehensive approach to data protection.
Conclusion
In conclusion, SOC 2 compliance is a critical security framework that helps service organisations, including cloud service providers, protect sensitive customer data and build trust with their clients. By meeting the stringent requirements of the SOC 2 Trust Services Criteria, organisations can demonstrate their commitment to information security, enhance their security posture, and unlock new business opportunities.
While achieving and maintaining SOC 2 compliance can be a complex and resource-intensive undertaking, the benefits far outweigh the challenges. A robust SOC 2 compliance program not only safeguards sensitive data, but also serves as a powerful differentiator in a highly competitive market. As the demand for data security and privacy continues to grow, SOC 2 compliance is increasingly becoming a prerequisite for service providers seeking to maintain their competitive edge and retain the trust of their customers.
Ultimately, the SOC 2 Compliance Summary is clear: organisations that prioritise SOC 2 compliance are better positioned to protect their customers’ data, build long-lasting business relationships, and position themselves as industry leaders in security and compliance. By embracing the Conclusion of this critical framework, service providers can future-proof their operations and stay ahead of the curve in an ever-evolving digital landscape.