Why Do You Need a SOC 2® Report?

SOC 2® reports are probably coming up in a lot of conversations among your industry peers and key partners. But do you need to get a SOC 2® report? The process represents a significant investment of both money and time (about 18 months to complete a typical SOC 2® Type II reporting process). As you weigh whether the investment is worth it for your business today and in the future, consider these factors. (And if you need a summary of how SOC 2® works, jump to the bottom of this post.)

Why You May Need a SOC 2® Report

• Retain/create opportunities with larger clients – Many big companies have strengthened their cybersecurity programs by dramatically tightening requirements for their third-party vendors. If you can’t produce proof that you have a mature security program, you may lose deals or never even get invited to bid. We’ve heard many stories about companies that caught their big break with a large client because they had a SOC 2® report ready to go while their competitors scrambled to satisfy the customer’s requests. That’s why many firms have recognized that SOC 2® gives them a competitive advantage.
• Efficiently answer clients’ security questions – Many organizations have found themselves overwhelmed with constant security questionnaires from clients and partners doing their due diligence on the companies they rely upon. In many cases, you can avoid wading through dozens of custom client questions by giving them a copy of your SOC 2® report. After a few of those situations, the SOC 2® process pays for itself in terms of time savings for your staff.
• Improve your overall security – Don’t overlook the core purpose of the SOC 2® process: improving how you handle data security. During the prep process, you’ll surely clean up a lot of your controls and processes—and probably find some surprises in the way your team is doing things. During the process, you may be notified of additional ways you can make improvements. All of those improvements mean you should experience fewer business interruptions and costs from data breaches. Again, the SOC 2® process will probably pay for itself by helping you avoid costly incidents.
• Accelerate your progress on compliance requirements –SOC 2®’s requirements overlap with standards and frameworks such as HIPAA and ISO 27001. That means going through the SOC 2® process will also help you take big steps toward meeting other compliance requirements you may have.
• Increased operational efficiency – During the process, you’ll uncover areas where you can improve things like how you share information, how you process change requests, etc. So while a SOC 2® report focuses on security, pursuing it will help tune your overall operations.
• Secure better cybersecurity insurance rates – Insurance rates have skyrocketed in the last year as insurance companies try to get a handle on all the ransomware claims they’ve been paying out.  To get the best available premium, you’ll have to demonstrate the maturity of your program. A SOC 2® report can help make that case.

SOC 2® Defined

Companies use the widely accepted SOC 2® compliance model to confirm that their vendors/partners handle information securely. Rather than simply trusting vendors who declare themselves secure, companies can demand a SOC 2® report as third-party proof of the vendor’s security. In a SOC 2® audit, a firm recognized by the American Institute of CPAs (AICPA) reviews a company’s controls over a specific period of time and issues an opinion on its compliance with the standard.

Companies can seek either SOC 2® Type I or Type II. Type I examines the design of controls at a specific point in time. Type II evaluates the operating effectiveness of those controls over a period of time. While a Type I report can be completed fairly quickly, a Type II audit can take up to 18 months, including the readiness and audit periods. Retaining SOC 2® validation requires repeating the audit on a regular basis (usually annually).

HBS consultants help numerous companies each year determine whether they would benefit from a SOC 2 report and then prepare for the SOC 2 process if they move forward. To learn more about how HBS can help simplify the journey for you, contact us.