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Which industries are most likely to ask for a SOC 2 report?
It’s common for startups to work towards a SOC 2 report only when requested by a potential client. At that point, it might be too late (but not always). By the time you begin the process of proving your company’s security credentials, the prospect may find another vendor who can produce a SOC 2 report. To avoid getting blindsided, it’s important to know what kind of clients or vendors your startup is likely to encounter.
Doing business in these four industries? Prioritize a SOC 2 report
Industries with more regulation are the most likely to request a SOC 2. Each of these industries is subject to its own regulations. However, prospective partners or vendors will need to demonstrate responsible security as well. To scale in one of these four industries, it’s prudent to obtain a SOC 2 report well before you draw up a contract.
Technology and SaaS
In today’s tech-driven economy, businesses need to know that their data, and their customers’ data, will be safe wherever it goes. In recent years, data privacy has taken the regulatory spotlight which prompted some of the largest U.S. tech companies to double down on security.
In 2018, the California Consumer Privacy Act (CCPA) was enacted to protect the personal data of consumers. The CCPA applies to almost every private company that conducts business with California residents. In a similar fashion, Google also changed its policy regarding third-party cookies which disrupted marketing and advertising for almost every online company.
Tech and SaaS companies will have to continue to abide by data privacy laws. A SOC 2 report is a very common standard among U.S. businesses that want to ensure data security and privacy. SOC 2 specifically addresses data privacy in the fifth portion of the Trust Services Criteria. If your startup intends on storing or exchanging consumer data, it makes sense to plan for SOC 2 compliance.
Healthcare
The healthcare industry is in a state of massive flux when it comes to data and technology. There’s a significant transition from compartmentalized, legacy data structures to modern cloud-based capabilities such as data lakes. As healthcare and hospital systems migrate large amounts of data from warehouse servers to the cloud, security and compliance will become even more important.
So where does a SOC 2 report come into play? Any company that handles protected health information (PHI) should comply with HIPAA standards. While HIPAA is specifically concerned with PHI, SOC 2 is a more general report that assesses consumer data practices and procedures. With the rise of mobile apps, IoT, and remote health services, customer data, as well as patient data, needs to be secured. If your startup plans to provide services to healthcare businesses, you may need both HIPAA and SOC 2.
Financial, banking, and crypto
FinTech companies have entered the marketplace as software providers instead of financial institutions, enabling them to sidestep many regulations. But that may not last long, especially for crypto businesses. As this sector becomes increasingly volatile, state and federal legislature may become more stringent in an effort to protect consumers’ financial data.
Disruptors and innovators aside, the primary financial players still face basic compliance challenges such as record keeping. The SEC reports that in 2021, J.P. Morgan “agreed to pay a $125 million penalty and implement robust improvements to its compliance policies and procedures…” If your startup wants to throw its hat in the financial ring, compliance standards, such as a SOC 2 report, will be a cornerstone of security, growth, and innovation.
Education
EdTech was already embracing virtual technologies, but the pandemic put that initiative in the fast lane overnight. With this shift comes more room for SaaS, PaaS, and other digital products. As young students spend more time online than prior generations, more of their personal data becomes subject to risk.
Regulations like Family Educational Rights and Privacy Act (FERPA) and the Children's Online Privacy Protection Act (COPPA) are in place to protect student information. Although standards like SOC 2 are not required for educational institutions, companies that want to provide digital products, especially in the K-12 bracket, will greatly benefit from demonstrating data security.
In recent years, EdTech companies are gaining a competitive advantage by prioritizing the security of student data with a SOC 2 report. Cloud-based software management providers like Frontline have leveraged a SOC 2 certification in order to help safely serve thousands of educational organizations.
The benefits of compliance automation
Suppose your startup has a stellar product that you can sell to each of the above industries. You might have to do more than get a SOC 2 report, especially when it comes to international business. All of a sudden you’re trying to ensure compliance with HIPAA, PCI DSS, and ISO 27001.
Keeping track of compliance alongside each regulatory change can drain your startup of precious resources. As your company grows, spreadsheets and documents will quickly become obsolete methods of maintaining security procedures. You’ll have to pay someone a lot of money to do that and you’ll still have to worry about human error.
An automated compliance platform takes the guesswork out of compliance by monitoring every corner of your startup’s business at all times. When it comes to an audit, simply turn to your platform for an up to date status on all things compliance. As the world moves forward, more data and more regulations are certainly on the horizon.
Learn more about SOC 2 reports
The ultimate guide to SOC 2 certification
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