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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.
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.
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
Determine whether the GDPR applies to you and if so, if you are a processor or controller (or both)
Do you sell goods or service in the EU or UK?
Do you sell goods or services to EU businesses, consumers, or both?
Do you have employees in the EU or UK?
Do persons from the EU or UK visit your website?
Do you monitor the behavior of persons within the EU?
Create a Data Map by taking the following actions
Identify and document every system (i.e. database, application, or vendor) which stores or processes EU or UK based personally identifiable information (PII)
Document the retention periods for PII in each system
Determine whether you collect, store, or process “special categories” of data
Determine whether your Data Map meets the requirements for Records of Processing Activities (Art. 30)
Determine whether your Data Map includes the following information about processing activities carried out by vendors on your behalf
Determine your grounds for processing data
For each category of data and system/application have you determined the lawful basis for processing based on one of the following conditions?
Take inventory of current customer and vendor contracts to confirm new GDPR-required flow-down provisions are included
Review all customer contracts to determine that they have appropriate contract language (i.e. Data Protection Addendums with Standard Contractual Clauses)
Review all in-scope vendor contracts to determine that they have appropriate contract language (i.e. Data Protection Addendums with Standard Contractual Clauses)
Have you performed a risk assessment on vendors who are processing your PII?
Determine if you need to do a Data Protection Impact Assessment
Is your data processing taking into account the nature, scope, context, and purposes of the processing, likely to result in a high risk to the rights and freedoms of natural persons?
Review product and service design (including your website or app) to ensure privacy notice links, marketing consents, and other requirements are integrated
Does the notice to the data subject include the following items?
Does the notice also include the following items?
Do you have a mechanism for persons to change or withdraw consent?
Update internal privacy policies to comply with notification obligations
Update internal privacy notices for EU employees
Determine if you need to appoint a Data Protection Officer, and appoint one if needed
Have you determined whether or not you must designate a Data Protection Officer (DPO) based on one of the following conditions (Art. 37)?
If you export data from the EU, consider if you need a compliance mechanism to cover the data transfer, such as model clauses
If you transfer, store, or process data outside the EU or UK, have you identified your legal basis for the data transfer (note: most likely covered by the Standard Contractual Clauses)
Have you performed and documented a Transfer Impact Assessment (TIA)?
Confirm you are complying with other data subject rights (i.e. aside from notification)
Do you have a defined process for timely response to Data Subject Access Requests (DSAR) (i.e. requests for information, modification or deletion of PII)?
Are you able to provide the subject information in a concise, transparent, intelligible and easily accessible form, using clear and plain language?
Do you have a process for correcting or deleting data when requested?
Do you have an internal policy regarding a Compelled Disclosure from Law Enforcement?
Determine if you need to appoint an EU-based representative, and appoint one if needed
Have you appointed an EU Representative or determined that an EU Representative is not needed based on one of the following conditions?
If operating in more than one EU state, identify a lead Data Protection Authority (DPA)
Do you operate in more than one EU state?
If so, have you designated the Supervisory Authority of the main establishment to act as your Lead Supervisory Authority?
Implement Employee Trainings to Demonstrate Compliance with GDPR Principles and Data Subject Rights
Have you provided appropriate Security Awareness and Privacy training to your staff?
Update internal procedures and policies to ensure you can comply with data breach response requirements
Have you created and implemented an Incident Response Plan which included procedures for reporting a breach to EU and UK Data Subjects as well as appropriate Data Authorities?
Do breach reporting policies comply with all prescribed timelines and include all recipients i.e. authorities, controllers, and data subjects?
Implement appropriate technical and organizational measures to ensure a level of security appropriate to the risk
Have you implemented encryption of PII at rest and in transit?
Have you implemented pseudonymization?
Have you implemented appropriate physical security controls?
Have you implemented information security policies and procedures?
Can you access EU or UK PII data in the clear?
Do your technical and organizational measure ensure that, by default, only personal data which are necessary for each specific purpose of the processing are processed?
Develop a roadmap for successful implementation of an ISMS and ISO 27001 certification
Implement Plan, Do, Check, Act (PDCA) process to recognize challenges and identify gaps for remediation
Consider ISO 27001 certification costs relative to org size and number of employees
Clearly define scope of work to plan certification time to completion
Select an ISO 27001 auditor
Set the scope of your organization’s ISMS
Decide which business areas are covered by the ISMS and which are out of scope
Consider additional security controls for business processes that are required to pass ISMS-protected information across the trust boundary
Inform stakeholders regarding scope of the ISMS
Establish an ISMS governing body
Build a governance team with management oversight
Incorporate key members of top management, e.g. senior leadership and executive management with responsibility for strategy and resource allocation
Conduct an inventory of information assets
Consider all assets where information is stored, processed, and accessible
- Record information assets: data and people
- Record physical assets: laptops, servers, and physical building locations
- Record intangible assets: intellectual property, brand, and reputation
Assign to each asset a classification and owner responsible for ensuring the asset is appropriately inventoried, classified, protected, and handled
Execute a risk assessment
Establish and document a risk-management framework to ensure consistency
Identify scenarios in which information, systems, or services could be compromised
Determine likelihood or frequency with which these scenarios could occur
Evaluate potential impact of each scenario on confidentiality, integrity, or availability of information, systems, and services
Rank risk scenarios based on overall risk to the organization’s objectives
Develop a risk register
Record and manage your organization’s risks
Summarize each identified risk
Indicate the impact and likelihood of each risk
Document a risk treatment plan
Design a response for each risk (Risk Treatment)
Assign an accountable owner to each identified risk
Assign risk mitigation activity owners
Establish target dates for completion of risk treatment activities
Complete the Statement of Applicability worksheet
Review 114 controls of Annex A of ISO 27001 standard
Select controls to address identified risks
Complete the Statement of Applicability listing all Annex A controls, justifying inclusion or exclusion of each control in the ISMS implementation
Continuously assess and manage risk
Build a framework for establishing, implementing, maintaining, and continually improving the ISMS
Include information or references to supporting documentation regarding:
- Information Security Objectives
- Leadership and Commitment
- Roles, Responsibilities, and Authorities
- Approach to Assessing and Treating Risk
- Control of Documented Information
- Internal Audit
- Management Review
- Corrective Action and Continual Improvement
- Policy Violations
Assemble required documents and records
Review ISO 27001 Required Documents and Records list
Customize policy templates with organization-specific policies, process, and language
Establish employee training and awareness programs
Conduct regular trainings to ensure awareness of new policies and procedures
Define expectations for personnel regarding their role in ISMS maintenance
Train personnel on common threats facing your organization and how to respond
Establish disciplinary or sanctions policies or processes for personnel found out of compliance with information security requirements
Perform an internal audit
Allocate internal resources with necessary competencies who are independent of ISMS development and maintenance, or engage an independent third party
Verify conformance with requirements from Annex A deemed applicable in your ISMS's Statement of Applicability
Share internal audit results, including nonconformities, with the ISMS governing body and senior management
Address identified issues before proceeding with the external audit
Undergo external audit of ISMS to obtain ISO 27001 certification
Engage an independent ISO 27001 auditor
Conduct Stage 1 Audit consisting of an extensive documentation review; obtain feedback regarding readiness to move to Stage 2 Audit
Conduct Stage 2 Audit consisting of tests performed on the ISMS to ensure proper design, implementation, and ongoing functionality; evaluate fairness, suitability, and effective implementation and operation of controls
Address any nonconformities
Ensure that all requirements of the ISO 27001 standard are being addressed
Ensure org is following processes that it has specified and documented
Ensure org is upholding contractual requirements with third parties
Address specific nonconformities identified by the ISO 27001 auditor
Receive auditor’s formal validation following resolution of nonconformities
Conduct regular management reviews
Plan reviews at least once per year; consider a quarterly review cycle
Ensure the ISMS and its objectives continue to remain appropriate and effective
Ensure that senior management remains informed
Ensure adjustments to address risks or deficiencies can be promptly implemented
Calendar ISO 27001 audit schedule and surveillance audit schedules
Perform a full ISO 27001 audit once every three years
Prepare to perform surveillance audits in the second and third years of the Certification Cycle
Consider streamlining ISO 27001 certification with automation
Transform manual data collection and observation processes into automated and continuous system monitoring
Identify and close any gaps in ISMS implementation in a timely manner
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Determine which annual audits and assessments are required for your company
Perform a readiness assessment and evaluate your security against HIPAA requirements
Review the U.S. Dept of Health and Human Services Office for Civil Rights Audit Protocol
Conduct required HIPAA compliance audits and assessments
Perform and document ongoing technical and non-technical evaluations, internally or in partnership with a third-party security and compliance team like Vanta
Document your plans and put them into action
Document every step of building, implementing, and assessing your compliance program
Vanta’s automated compliance reporting can streamline planning and documentation
Appoint a security and compliance point person in your company
Designate an employee as your HIPAA Compliance Officer
Schedule annual HIPAA training for all employees
Distribute HIPAA policies and procedures and ensure staff read and attest to their review
Document employee trainings and other compliance activities
Thoroughly document employee training processes, activities, and attestations
Establish and communicate clear breach report processes
to all employees
Ensure that staff understand what constitutes a HIPAA breach, and how to report a breach
Implement systems to track security incidents, and to document and report all breaches
Institute an annual review process
Annually assess compliance activities against theHIPAA Rules and updates to HIPAA
Continuously assess and manage risk
Build a year-round risk management program and integrate continuous monitoring
Understand the ins and outs of HIPAA compliance— and the costs of noncompliance
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