Meeting SOC2 Compliance Requirements: Checklist to Make This Journey Easy

According to IBM's Cost of a Data Breach Report 2023, data security breaches cost almost $220,000 more on average in cases when noncompliance with regulations was indicated as a factor in the event. So, everyone has to pay attention to regulations.

We know how challenging SOC2 compliance can be, but achieving it is possible. Today, we will discuss SOC2 aspects, requirements, and compliance checklist to make the process easier.

What is SOC 2?

SOC2, created by the American Institute of CPAs (AICPA), is a framework that sets criteria for managing customer data. It focuses on five fundamental trust service principles, or Trust Services Criteria: data security, availability, processing integrity, confidentiality, and privacy. They help ensure that businesses handle data responsibly and transparently.

The Trust Services Criteria are the guidelines to assess an organization’s data management environment. Every SOC2 report must have the Security category. Each criterion has Points of Focus that help design data management controls.

These are not mandatory but provide guidance to service organizations on how to achieve security in software development. Together with their auditors, businesses decide which points are applicable to their services and financial reporting. So, SOC 2 allows scoping flexibility so you can include only the criteria that apply to your services. This way SOC 2 reports are specific to your business and customer expectations.

For businesses, especially those that offer cloud services, SOC 2 compliance is a must. It is a trust badge for clients and partners that the company follows best practices in data management. It is important to note that SOC 2 is a voluntary compliance standard and does not mean 100% security; it means the organization follows its own policies.

SOC 2 Compliance

In short words, the SOC 2 journey starts by creating your own data management policies and defining what will be audited. These policies are tailored to your business and then validated by an auditor.

After the audit, you get a detailed report that shows how well your controls are working. You can share this audit report with your customers to prove your commitment to data protection. There are two types of such reports:

• SOC 2 Type I report evaluates your systems at a point in time to see if they meet the relevant trust principles.
• SOC 2 Type II is more detailed and extensive. It assesses your systems over a period of time with thorough testing and reviews. This is the industry standard for businesses that handle sensitive data.

You also get an attestation icon and a URL to put on your website that you have been through and passed the SOC 2 audit.

Why SOC 2 Compliance Matters

SOC2 compliance plays a key role for companies that deal with user data (i.e., almost all companies). This system ensures companies manage and protect customer data in a responsible and open way, which helps build trust with clients and partners.

However, there are more benefits of SOC 2 compliance.

• Building trust-based relationships with clients. Getting SOC 2 compliance shows your clients you do care about data integrity and security. It works like a stamp of approval, telling people your company follows the best data management practices.
• Boosting safety measures. SOC 2 certification requires companies to establish and adhere to their own safety rules. This not only helps them meet standards but also strengthens their overall defense against threats. Regular security testing services, combined with frequent checks and assessments, keep their methods current and ready to tackle new risks.
• 73% of organization leaders believe that privacy and cybersecurity regulations effectively reduce their companies’ cyber risks. To compare, in 2022, only 39% of them agreed with the same statement.
• Staying on the top of the market. Obviously, your clients worry a lot about data security. Customers tend to pick service providers who can show they follow well-known information security rules.

Risks and consequences of non-compliance

First things first, if you don't get SOC 2 compliance, you might lose your clients' trust. Without this stamp of approval, clients might doubt how serious you are about keeping data safe. This could push them to choose your competitors who have SOC 2 compliance.

Second, not meeting SOC 2 standards can lead to legal troubles and money losses if someone hacks your data. These penalties can be harsh and can affect your service organization's finances and reputation.

Finally, companies without SOC 2 compliance might not have well-organized rules and steps to manage data. This can make their work less productive and boost the chances of data leaks or misuse.

SOC 2 Compliance Requirements

Finally, we can move towards SOC 2 compliance requirements, specifically the security principle. This principle is the only mandatory SOC 2 audit criterion, underscoring its importance. Let's start with it.

The security criteria, also known as common criteria, overlap with the other four Trust Services Criteria (TSCs): availability, confidentiality, processing integrity, and privacy.

Security TSC

The Security principle is one of the most important Trust Services Criteria that aims to shield system resources from unwanted access. This may involve implementing different controls to prevent data leaks, theft, or misuse.

Security TSC has nine criteria (security controls), five of which are based on the COSO framework – a widely used framework for designing, implementing, and evaluating internal controls within an organization.

COSO-based criteria look like this.

Control Environment (CC1 series)

1. Integrity and ethical values – show you are committed to ethical behavior.
2. Board independence and oversight – ensure the board is independent of management.
3. Structured reporting – establish clear lines of reporting and accountability.
4. Competent staff – the commitment to developing and retaining competent staff.
5. Culture of accountability – hold staff accountable for internal control responsibilities.

Communication and Information (CC2 series)

1. Relevant information – use information that supports internal controls.
2. Clear objectives – communicate control objectives and responsibilities.
3. External communication – communicate with external parties about internal controls.

Risk (CC3 series)

1. Risk assessment objectives – define what to assess risks against.
2. Fraud in risk assessment – consider fraud risks in all threats.
3. Risk identification and analysis – analyze risks that impact objectives.
4. Change control – evaluate changes that impact risk management.

Control Monitoring (CC4 series)

1. Ongoing control evaluations – evaluate controls regularly to determine they are operating effectively.
2. Timely deficiency reporting – report control deficiencies as soon as possible and accurately.

Control Design and Implementation (CC5 series)

1. Risk mitigation controls – develop controls to mitigate risks.
2. Technological controls – implement technological controls to meet objectives.
3. Policy and protocol adherence – ensure controls align with defined policies and protocols.

Additional CC series

SOC 2 compliance includes additional CC series beyond the core security criteria. These CC series cover various aspects of the system, data integrity, and overall security and operational efficiency. They are also especially important for cyber security in banking.

Logical and physical access controls

This criterion covers controlling and monitoring logical (digital) and physical access to systems and data to prevent unauthorized access. Key components include access control policies, authentication, and physical security.

Systems and operations

This criterion covers systems being managed and operated securely and efficiently. It covers system configuration and maintenance, operational procedures (SOPs to guide the secure operation of systems), and incident management.

SOC 2 change management

This criterion covers changes to systems, software and processes being managed and documented to further maintain compliance, security and operational integrity. These are procedures for requesting, reviewing, and approving changes, as well as impact analysis and change implementation and testing.

SOC 2 risk mitigation controls

This criterion is all about identifying and mitigating risks that impact the security, availability, and integrity of systems and data. Its key components are risk identification, assessment, and mitigation.

Availability TSC

Availability criteria mean that users can reach systems, products, or services as promised in service agreements. This idea makes sure systems are ready to use when needed.

Key availability controls

• Performance monitoring: Continuously check system performance.
• Disaster recovery: Implement failover systems to ensure business continuity.
• Incident handling: Respond swiftly to security incidents to minimize downtime.

These steps help keep services running without breaks, which is vital to meet business goals.

Processing integrity TSC

The principle of processing integrity ensures that systems accomplish what they are designed to do by delivering accurate and timely information. It involves checking that data processing is complete, correct and has been authorized.

Regular monitoring and quality assurance procedures are crucial for preserving processing integrity so as to ensure that the output is compliant with the necessary standards and requirements.

Key controls for processing integrity

• Data validation: Ensure inputs have the right content and completeness.
• Quality assurance: This checks the accuracy of data processing on a regular basis.
• Timely processing: Ensure information is treated and delivered on time.

Confidentiality TSC

The Confidentiality principle ensures that sensitive information is safeguarded against unauthorized disclosure.

Key confidentiality organization controls

• Access controls: Restrict access to confidential data to authorized users.
• Encryption: Protect data at rest and in transit from unauthorized access.
• Data loss prevention: Monitor and control the transfer of sensitive information.

Privacy TSC

The Privacy principle covers the management of personal data, including collection, use, retention, and disposal. This principle ensures personal identifiable information (PII) is handled in accordance with privacy policies and regulations.

According to IBM’s Cost of a Data Breach Report, 52% of all the data breaches involved some form of customer PII. In 2023, user PII such as names and Social Security numbers cost organizations $183 per record. Employee PII cost $181 per record. Companies invest a lot in AI anomaly detection and other systems to prevent breaches. So its safety is an essential part of compliance and data security measures.

Key controls notify users about data collection, ensure data is accurate, and have procedures for data breach notification. You should implement security and physical access controls, to protect the client's privacy rights.

Key privacy controls

• Data collection notice: Tell individuals about data collection.
• Data accuracy: Keep personal info up to date.
• Breach notification: Have a process for notifying individuals in case of a breach.

Focus Areas

Each of the Trust Services Criteria has one or more focus areas. They are instructions given to auditors and service organizations for creating the right controls that meet the requirements. While it is not necessary to follow all Points of Focus, they assist in appraising the effectiveness of the controls being tested. The SOC 2 framework contains points aligned with COSO principles and specific ones related to SOC 2 report thoroughness.

This should be done together with the auditors, who will guide them on which points are relevant depending on their services.

Common Challenges in Achieving SOC 2 Compliance

Every business faces its own challenges, but there are some common issues we should discuss.

Identifying relevant systems and processes

Many organizations struggle to identify what systems and processes are in scope for SOC 2. This can lead to incomplete audits and vulnerabilities.

How to deal with it?

Review all systems and processes that handle and store customer data. Create detailed documentation and charts to map out data flow and storage. It is important to get all departments involved to ensure nothing gets missed.

Continuous compliance

SOC 2 is not a one-time thing. Continuous compliance means ongoing monitoring, updating of internal controls and regular audits. And sometimes it is difficult to do.

How to deal with it?

You can create a compliance team or assign a compliance officer to monitor and update. It is also a good option to schedule internal audits and assessments regularly to catch issues before they become problems. You can also use compliance automation software to make this easier.

Corrective actions

Fixing issues found in the SOC 2 audit can be a long and painful process. Often, organizations struggle to implement corrective actions.

How to deal with it?

We can assist you in creating an action plan to address audit findings. We will also help to prioritise based on security and compliance impact. Engage with your auditor to fully understand their recommendations and get their guidance on how to fix.

Big financial outlay

SOC 2 compliance can be expensive. Consultants, security upgrades and audits cost money and it is often hard to find the budget for it.

How to deal with it?

Plan your budget carefully and prioritize the most critical security solutions first. Spread costs over time and look for cost-effective options like automation tools to simplify compliance.

Time and resource constraints

SOC 2 compliance requires a lot of time and dedicated people, which can be scarce especially for small businesses. Your IT team is already busy with day to day operations and may not have the capacity to handle compliance tasks.

How to deal with it?

Allocate resources strategically by identifying key team members to oversee compliance. Consider outsourcing to supplement your team’s expertise and take some of the load off. This may be third-party auditor or certified public accountants.

SOC 2 Compliance Best Practices

Of course, every company may have very specific issues with SOC 2 compliance. However, in most cases, it is much easier to handle challenges using best practices.

• Train regularly. Train employees on SOC 2 requirements and best practices. This way, everyone in the company knows their part in compliance and protecting customer data.

76% of risk and compliance professionals claim that ensuring their organization builds and maintains an ethical culture of compliance is a very important or absolutely essential consideration in its decision-making processes.

• Stay updated with standards. SOC 2 standards and requirements may change over time. Stay up to date on SOC 2 compliance and cybersecurity so your controls and policies remain relevant.
• Conduct regular penetration testing. Professional penetration testing services remain the most effective way to assess dynamic security vulnerabilities that no automated tool can detect. Combined with a vulnerability assessment, this will help identify and address weaknesses in your security posture and ensure compliance with regulatory requirements.
• Create clear and complete policies. Your policies and procedures should be clear, complete, and aligned with SOC 2. These should cover all aspects of Trust Service Criteria. Use industry templates to create your policies and review and update them as your company changes or the regulatory environment changes.
• Implement strong access controls. Access to sensitive data is key to SOC 2 compliance. Implement strong access controls so only authorized people can access systems and data. Use multi-factor authentication (MFA) and role-based access controls (RBAC) to secure and minimize unauthorized access.
• Monitor and log. Monitoring and logging of system activity helps you detect and respond to security incidents quickly. These logs give you valuable insights into system performance and security events. You can use automated monitoring tools that alert your team to suspicious activity and generate logs for audit purposes.
• Perform internal audits. Internal audits are key to compliance and finding areas to improve. These audits should test your controls, policies and procedures against SOC 2. Do internal audits annually or semi-annually and document the findings and actions taken to remediate any issues found.

And finally, get help from outside experts. You can always use external consultants or experts with SOC 2 experience. They can help you with tough issues and keep you on course.

Here, you can read more about our SOC 2 consulting & readiness services. We will be pleased to assist you in this matter.

Tools and Resources for SOC 2 Compliance

SOC 2 can be tricky, but with the right tools and resources, you can make this process easier. Of course, the main resource and guideline is the website of the American Institute of CPAs (AICPA). However, there are some other tools and platforms to help you along your SOC 2 journey.

Security information and event management systems

SIEM systems collect security data from multiple sources, such as endpoint security and intrusion detection systems. They produce reports for your security team to review.

Key features include user and entity behavior analytics to detect unusual behavior and security orchestration, automation, and response (SOAR) to automate incident response.

Examples: SolarWinds, Exabeam, Wazuh.

Mobile device management (MDM)

Mobile Device Management (MDM) tools enable IT administrators to centrally manage and secure mobile devices. This is critical for companies where different devices have access to their network and helps to ensure compliance with security policies.

Examples: MobileIron, VMware Workspace ONE

Data loss prevention systems

DLP systems protect sensitive data by monitoring network activity. They alert your security team to suspicious activity and prevent data exfiltration. These are critical for sensitive information like credit card numbers and health records.

Examples: BetterCloud, Forcepoint.

Identity and access management systems

IAM systems ensure all users are authenticated and authorized only for particular purposes. They enforce the principle of least privilege and maintain audit trails to monitor activity. IAM has become more important with remote work.

Examples: Okta, JumpCloud.

Malware protection

As the name implies, malware protection solutions are critical for defending against malicious software threats that can compromise organizational data and disrupt operations. These solutions employ advanced detection techniques and real-time monitoring to identify and mitigate malware risks effectively.

Examples: CrowdStrike Falcon, Symantec Endpoint Protection

Vulnerability management tools

These tools scan networks, servers, and applications to find and report vulnerabilities, highlighting them for review. Regular vulnerability scans are key to security.

The main example is Nessus. This scanning tool is known for its thoroughness.

Network segmentation solutions

Network segmentation divides your network into smaller sections to stop cyber attacks from spreading. It secures by isolating threats and can also improve network performance.

Examples: CloudGuard, Zscaler.

Business continuity and disaster recovery plans

BCDR plans outline what service organization has to do to minimize damage, get back up and run after an emergency like a natural disaster or cyber attack. These are critical to business resilience.

An example is Archer Business Resiliency.

Endpoint detection and response (EDR)

Such tools focus on detecting and responding to advanced threats targeting endpoints within corporate networks. They provide visibility into endpoint activities, enabling rapid detection, investigation, and mitigation of security incidents.

Examples: Carbon Black, FireEye Endpoint Security

Using the right tools and resources can make the process of achieving SOC 2 compliance much easier. However, preparation for the audit still requires specific expertise. We will be happy to help you with this and define the main points of preparation for your business specifically.

Final Thoughts

Achieving SOC 2 compliance standards is not just about regulatory compliance; it's about building trust and demonstrating a commitment to data security. In a world where information is so important, this is critical.

As you can already see, by following the five main principles of SOC 2, you can protect confidential data, improve your reputation, and definitely outperform the competition. And while the path to compliance may seem difficult, the benefits far outweigh the effort.

Of course, it is much easier to move towards compliance with the help of knowledgeable consultants. We will be happy to help you prepare for the audit to highlight all the issues that need attention.

FAQs

1. Why is SOC 2 compliance important?

   SOC 2 compliance is key as it shows you care about data security and privacy. It builds trust with clients and stakeholders by showing you have controls in place to protect sensitive and confidential information. This can give you an edge over competitors, especially if you are a service provider that handles or stores clients' data.

2. What are the key SOC 2 compliance requirements?

   The list of requirements for SOC 2 compliance includes activities related to security, availability, integrity processing, configuration management, security incident handling, logical and physical access, confidentiality, and privacy of customers' data.

3. How long does it take to get SOC 2 compliant?

   Getting SOC 2 compliant typically takes 3 to 12 months. This includes the initial risk assessment, addressing the gaps, implementing the controls, and the audit process. The timeframe depends on your organization's size and existing information security program.

4. Which industries need SOC 2 compliance?

   Industries that handle users' data, especially technology and cloud computing sectors, need SOC 2 compliance. This includes SaaS providers, data centers, managed service providers, financial services, healthcare and legal services.

5. How much does SOC 2 compliance cost?

   The cost depends on your organization's size, system complexity, and audit scope.

6. Can SOC 2 compliance help with other regulations?

   Yes, getting SOC 2 compliant can help with other regulations like HIPAA, GDPR, and ISO 27001. The controls and processes for SOC 2 often overlap with these frameworks, so it’s easier to comply with multiple regulations and have overall data protection.

7. What is the difference between SOC 2 Type 1 and SOC 2 Type 2 reports?

   SOC 2 Type 1 reports evaluate the design of an organization's controls at a specific point in time. SOC 2 Type 2 reports, on the other hand, assess the effectiveness of these controls over a longer period.

   Type 1 provides limited assurance that controls are in place, while Type 2 offers higher assurance of ongoing operational effectiveness. Organizations typically start with a Type 1 report and follow up with SOC 2 Type 2 compliance requirements for comprehensive evaluation.