Designed to test and provide a detailed report regarding an organization’s security controls, SOC 2 (System and Organization Controls 2) is an auditing framework that service providers go through in order to prove that proper data and privacy protections regarding sensitive data are in place. Upon successfully completing a 3rd party audit, an organization will receive a valid SOC 2 report (or certification) that can be provided to potential clients, partners, and other third parties, as proof of a robust security program.
Since large enterprises often require vendors to have up-to-date security measures in place, startups, software companies, and SaaS businesses that work with regulated industries rely on SOC 2 certification as proof that they have implemented the latest security practices.
Why Should Startups Care About SOC 2?
A SOC 2 report is a good way to impress potential clients and prove the validity of your security controls. Without a SOC 2 report, potential clients will gladly pass on your organization, opting instead for a partnership with a startup that has taken the time to prove its dedication. SOC 2 is more than a document to impress potential clients, SOC 2 certification can benefit a startup in a variety of ways, including:
Establishing Credibility with Clients and Investors
Did you know that 83% of organizations experienced a third-party security incident in the past three years? (Deloitte). With all of these growing security concerns on the rise, organizations can not afford to onboard new software solutions and vendors without taking proper precautions.
SOC 2 certification is one of the best ways to prove the effectiveness of your security controls and ease the concerns of Fortune 500s and regulated industries such as financial services and healthcare, and many other potential investors. Upon the successful completion of a SOC 2 audit, you’ll be ready to address any security and compliance-related questions from clients and security risk assessments (SRAs).
Providing a Competitive Advantage
Security breaches can affect all companies, large and small. Taking the initiative to undergo a SOC 2 audit demonstrates your organization’s dedication to a strong security posture. A SOC 2 report proves that your company has all of the necessary controls in place to reliably secure confidential data and Personally Identifiable Information (PII). This will allow your company to stand out from the competition and quickly build trust in the marketplace.
Assisting in the Development of Strong Policies and Procedures
As a SOC 2 audit involves rigorous testing and standards, upon completion, your organization will emerge with formally defined policies and procedures, making it easier for your team to approach large enterprise clients. These policies and procedures not only provide a foundation for your company’s security program but also mitigate potential security risks. These standards enable your team to easily build on its security program in the future.
SOC 2 is Easier to Achieve in the Startup Stage
As you’ll no doubt be busy in the infancy of your company, the desire to procrastinate and put off a SOC 2 audit is understandable. Startups often have limited resources and spend most of their time on product development and innovative patient outcomes rather than security and regulation. Although the desire to push it aside is understandable, putting off the inevitable will only make things much more complicated in the future. It’s best to bite the bullet and get it out of the way quickly.
SOC 2 Lowers Your Risk Profile
According to IBM, the average cost of a data breach for an organization is $3.62 million. Even more astounding, a staggering 44% of enterprises have reported having experienced a data breach caused by a vendor. Based on these statistics, it’s no wonder large enterprises do everything possible to ensure that potential vendors and/or software solutions have up-to-date security measures in place. If your organization can’t prove that its security is in line with the regulations and best security practices, then your solution may be considered a security risk. Having a current SOC 2 report alleviates client security concerns and lowers your company’s overall risk profile.
Types Of SOC 2 Reports
There are two types of SOC 2 reports organizations can be evaluated for: SOC 2 Type 1 and SOC 2 Type 2. Upon completion, your company will receive one of two types of reports. Carefully study the differences between the following reports and consider your overall report and certification objectives when preparing for an audit.
A SOC 2 Type 1 report evaluates an organization’s system and implementation of security controls related to the Trust Services Criteria (TSC) at a single point in time.
- Audit is conducted at a single point in time
- Evaluates one or more of the five Trust Services Criteria (TSC)
- Recommended for initial security validation
A SOC 2 Type 2 report evaluates the same set of security controls and Criteria as a Type 1 report, but also evaluates an organization on its operating effectiveness of controls over time.
- Audit is typically conducted over a 3-6 months period
- Evaluates one or more of the five Trust Services Criteria (TSC)
- More widely accepted as security validation by large companies and enterprises
Which Type of SOC 2 Report Do Startups And Software Companies Need?
In order to prove that you’re serious about developing your security program, startups should consider a Type 1 report as initial validation for clients. Type 1 reports are typically more affordable than their counterpart and are a great way to show that your company is on-track, headed towards a more robust security program.
As a Type 1 report is conducted at a single point in time, they are a little limited as they can quickly become outdated, rendering the report less meaningful as time passes.
A Type 2 report is considered the gold standard when it comes to security assessment and validation. As this type of audit evaluates an organization’s security controls over 3-6 months (roughly), it provides a more reliable form of security validation. Type 2 reports are often more useful when it comes to demonstrating your company’s security posture, making it easier to pass any client procurement procedures.
Note: It is up to your team to determine the type of SOC 2 report that is right for your organization. Make sure to research and determine the SOC 2 criteria and report type most relevant to your organization and the needs from potential clients before making any decisions.
SOC 2 Compliance For Startups In 3 Steps
In order to prepare for and achieve SOC 2 certification, teams must establish security controls, consult with a reputable auditing firm, and validate the effectiveness of their security standards through a security audit.
Prepare, prepare, then prepare some more…
In order to achieve SOC 2 certification quickly and effectively, you must be properly prepared before the formal auditing process begins. Be sure to gather and provide the appropriate SOC 2 evidence, including administrative policies, and technical security standards.
Note: A company that is fully-prepared will deal with less scrutiny and achieve certification much faster than those who don’t take the time to properly prepare.
For best results, carefully read over the following:
1. Ensure that your security policies are up to date
The following policies are an essential component of any security program. Your policies should reflect your employee structure, technology, and everyday workflow. These are not legal documents — simplify them as much as possible. Write them in plain English so all staff members can easily read and understand them.
Outline how your security controls are implemented across your applications and infrastructure. Make certain you have highlighted and defined all of the necessary steps for managing security. Be sure to include the following topics:
System Access: How user access to sensitive data is both granted and revoked.
Disaster Recovery: How both backup and DR standards are implemented, tested, and managed.
Incident Response: How security incidents are reported, investigated, and resolved.
Risk Assessment and Analysis: How your organization assesses, manages, and resolves security issues and security risks.
Security Roles: How security staff roles and responsibilities are delegated within your organization.
Security Training: How security awareness training is implemented throughout your organization.
As these policies can be presented to auditors as proof that safeguards are in place,
once your administrative policies are up to date — review, assess, and continually update them as your procedures gradually change.
2. Set Technical Security Controls
Aa auditors ensure compliance standards are met via one or more of the AICPA Trust Services Criteria (TSC), if you wish to achieve SOC 2 certification, the following data security and privacy protections regarding sensitive data must be in place.
Security: network/application firewalls — two-factor authentication — intrusion detection
Privacy: access control — two-factor authentication — encryption
Confidentiality: confidentiality agreements — access controls — encryption
Processing Integrity: quality assurance — processing monitoring
Availability: performance monitoring — disaster recovery — security incident handling
If your startup company operates in the public cloud (AWS, Azure), it is recommended that you configure all necessary cloud security safeguards within your IT services to meet SOC 2 internal controls.
Take a closer look at SOC 2 compliance automation. This type of automation solution can be used to effectively establish security settings including access control, encryption, network and firewalls, disaster recovery. Download a list of the latest security controls to make sure that your security controls are implemented to meet the latest SOC 2 Trust Standards Criteria.
3. Perform a Formal SOC 2 Audit
Once all of the necessary SOC 2 security controls have been implemented and tested to meet the Trust Services Criteria (TSC), you’re ready to schedule a SOC 2 security audit. As is standard procedure, during the auditing process, your team will be asked to answer relevant security questions and provide policies and evidence relating to their security controls.
While your security controls are being evaluated, there’s a good chance you’ll be asked for specific evidence involving your infrastructure and systems. For example, you could be asked to prove that your servers/instances utilize encrypted volumes or that backups are being created relating to your production services.
Once your team has gone through SOC 2 readiness process, look for an audit firm/assessor with the following qualities:
Experience: Look for a firm that has considerable experience conducting SOC 2 audits. A firm that has performed numerous assessments on the latest SOC 2 criteria is highly recommended.
Project Fit: For best results, consider an auditing firm that has worked with similar types of organizations in the past. Auditors that have worked with other startups, SaaS companies, or companies within your industry will be better able to provide guidance to your team.
Excellent Communication: Only work with an auditing firm that has a reliable track record in communication, that responds to concerns and inquiries within a 24-hour period. A good communication loop allows teams to better address issues and progress through the assessment process with ease.
Note: Dash ComplyOps was designed to help teams prepare for, and achieve SOC 2 compliance. Dash works closely with startups and SaaS companies to create custom administrative policies, establish cloud security controls, and enforce SOC 2 internal controls through continuous compliance monitoring.
Maintaining SOC 2 Compliance
Once you receive a SOC 2 Type 2 report, it is not enough to simply prove your security measures one-time — you must continually prove the ongoing effectiveness of your security controls.Your company must continue to validate and provide evidence that your team is properly managing user access, creating backups, encrypting data, etc, and that your new security controls remain firmly in place.
As most SOC 2 reports only cover a 12-month period, your organization must complete a SOC 2 audit once a year in order to remain in compliance with your SOC 2 report.
For assistance relating to the auditing process, consider Dash ComplyOps. Dash’s solution streamlines the collection of security evidence, creates security policies, and ensures SOC 2 internal controls remain in-place through continuous compliance monitoring.
Visit Dash to learn more about how your startup can streamline SOC 2 compliance to achieve SOC 2 certification quickly and effortlessly.