What is SOC 2 & Why is it Important?
What is SOC 2?
It stands for the second of three System and Organization Controls (SOC) audits and reports that are integral to information security. SOC 2 is an auditing procedure that ensures your service providers securely manage your data to protect the interests of your organization and the privacy of its clients. For security-conscious businesses, SOC 2 is a key requirement when considering a SaaS provider. SOC 2 is a component of the American Institute of CPAs (AICPA)’s Service Organization Control reporting platform. The goal is to make sure that systems are set up so they assure security, availability, processing integrity, confidentiality, and privacy of customer data.
Who Needs a SOC 2 report?
If you are a service provider or a service organization which stores, processes, or transmits any kind of consumer or business data and information then you may need to have one if you want to be competitive in the market. Many technology and cloud computing entities now have these reports handy and will provide it to their customers upon request. These reports are issued by independent third-party auditors.
Do You Need SOC 1 or SOC 2?
SOC 2 has two different types like SOC 1. Type 1 reports cover the description of systems and suitability of design of controls., while Type 2 reports have everything in Type 1 reports and the effectiveness of the controls over a period of time. Type 2 SOC 2 reports are considered more useful since the auditor verifies that the controls work in an appropriate manner over a period of time.
What Are the Five SOC 2 Trust Categories & How Does the AICPA Define Them?
The five trust categories are:
- Security – The effectiveness of policies and procedures governing the way organizations protect themselves against unauthorized access and respond to security breaches resulting in unauthorized disclosure of information will be periodically evaluated.
- Confidentiality – Information designated as confidential must be sufficiently protected from unauthorized access to meet organizational effectiveness.
- Processing Integrity – System processing should be complete, valid, accurate, timely, and authorized to meet organizational objectives.
- Availability – Information and systems must be available for operation and use to meet the entity’s objectives.
- Privacy – Personally identifiable information must be collected, used, disclosed, and disposed of in a secure manner.
What Are 6 Important Reasons Why SOC 2 Compliance is Needed?
- Customer Demand – Protecting customer data is top-of-mind for your clients, so without SOC 2 you could lose business.
- Cost Effectiveness – In 2018, a single data breach cost, on average, $3.86 million – and that figure rises every year.
- Competitive Advantage – Obtaining a SOC report will give a company the edge over other competitors who can’t show compliance. This enhances the organization’s reputation as trustworthy.
- Peace of Mind – Passing a SOC 2 audit ensures your systems and networks are secure to your current clients, prospects and internally as well.
- Value – The benefits of a SOC report provide valuable insights into your organization’s risk and security posture, vendor management, internal governance, regulatory oversight, and more.
How Can Software Companies Leverage SOC 2 Compliance?
SOC 2 compliance is more than just an item to check off a to-do list. While many software companies are asked to pursue compliance by clients, proactively pursuing SOC 2 compliance can help lead to more lucrative partnerships. When companies deal with any prospect, whether it’s small or large enterprise, they will get the benefit of the security that is in place. There might be competitors that are a bit cheaper, but they don’t necessarily have the security policies confirmed by a third-party auditor.
This is the competitive advantage that makes pursuing SOC 2 compliance so valuable for software companies. If you can’t prove to prospects and clients that you provide the most secure software that is available on the market, why would they want to work with you? There are plenty of other options out there for software, so the SOC 2 compliance can be used as a leverage against competitors.