SOC 2 Compliance: Basics, Benefits, Types & Next Steps

Matt Maiers | April 3, 2023
The Basics of SOC Compliance Blog

Reliable, safe, trustworthy. These are all words that companies strive to fulfill and uphold for their clients. If your company or a third party you work with is responsible for handling and storing customer data, how do you ensure your clients’ data will be kept safe?

SOC 2 is a framework applicable to all technology service or SaaS companies that store customer data in the cloud — which is most, if not all, of them these days — to ensure that organizational controls and practices effectively safeguard the privacy and security of customer and client data.

Clients and customers alike want to know that their information is safe and secure. They want to be sure that their data is not going to be leaked or hacked. It has become common for companies to use compliance and security frameworks like SOC 2 to prove that they are trustworthy for their clients, and doing so has been proven to work.

Let's dig a little deeper into SOC 2 compliance.

What is SOC 2 compliance?

SOC 2 (System and Organization Controls 2) is a framework applicable to all technology service or SaaS companies that store customer data in the cloud to ensure that your organization continues to mitigate the risk of data exposure. It outlines five trust service principles of security, availability, processing integrity, confidentiality, and privacy of customer data as a framework for safeguarding data.

SOC 2 compliance is part of the American Institute of CPAs’ Service Organization Control reporting platform. Its intent is to ensure the safety and privacy of your customers’ data, that the company will comply with regulations, and that it has the processes in place to mitigate risk.

SOC 2 is not a prescriptive list of controls, tools, or processes. Rather, it cites the criteria required to maintain robust information security, allowing each company to adopt the practices and processes relevant to their own objectives and operations.

The five trust services criteria are detailed below:

  • Security refers to the protection of information and systems from unauthorized access. This may be through the use of IT security infrastructures such as firewalls, two-factor authentication, and other measures to keep your data safe from unauthorized access.
  • Availability is whether the infrastructure, software, or information is maintained and has controls for operation, monitoring, and maintenance. This criteria also gauges whether your company maintains minimal acceptable network performance levels and assesses and mitigates potential external threats.
  • Processing integrity ensures that systems perform their functions as intended and are free from error, delay, omission, and unauthorized or inadvertent manipulation. This means that data processing operations work as they should and are authorized, complete, and accurate.
  • Confidentiality addresses the company’s ability to protect data that should be restricted to a specified set of persons or organizations. This includes client data intended only for company personnel, confidential company information such as business plans or intellectual property, or any other information required to be protected by law, regulations, contracts, or agreements.
  • Privacy criteria speaks to an organization’s ability to safeguard personally identifiable information from unauthorized access. This information generally takes the form of name, social security, or address information or other identifiers such as race, ethnicity, or health information.

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The two types of SOC 2 reports

  • Type I reports contain descriptions of the service organization's system(s) and the suitability of the design of controls.
  • Type II reports cover everything in Type I plus descriptions of the operating effectiveness of those controls.

Not sure which is the right one for your organization? If your company is required to demonstrate its SOC 2 compliance on an ongoing basis, it may be beneficial to explore a SOC 2 Type II report. The Type II report is considered the stronger of the two because it demonstrates that the security processes and procedures are in place and effective over a period of time.

If there’s some urgency to show SOC 2 compliance — for example, there’s a timeline in place — a Type I report can be achieved faster so it can be a good starting point prior to moving to a Type II report in the future.

Who does SOC 2 apply to?

SOC 2 applies to any technology service provider or SaaS company that handles or stores customer data. Third-party vendors, other partners, or support organizations that those firms work with should also maintain SOC 2 compliance to ensure the integrity of their data systems and safeguards.

How are SOC and SOX compliance different?

We compared these two in detail in our post on SOC vs SOX compliance, but the high-level distinction is that SOX, short for the Sarbanes-Oxley Act of 2002, is a federal law that organizations must demonstrate compliance with, while SOC 2 is not a legal requirement and is completely voluntary.

For example, SOC 1 compliance allows service providers to show customers they have the appropriate internal controls. SOC 2 compliance is specific to SaaS companies and technology service providers.

SOX compliance is mandated by federal law and necessary for any publicly-traded company in the U.S. to protect investors from fraudulent financial reporting.

5 benefits of SOC 2 compliance

SOC 2 compliance is determined by a technical audit from an outside party. It mandates that organizations establish and adhere to specified information security policies and procedures, in line with their objectives.

SOC 2 compliance can cover a six to 12-month timeframe, to ensure that a company’s information security measures are in line with the evolving requirements of data protection in the cloud.

Being SOC 2 compliant assures your customers and clients that you have the infrastructure, tools, and processes to protect their information from unauthorized access both from within and outside the firm.

In practice, the benefits of SOC 2 Compliance are pretty simple.

Operational visibility

SOC 2 compliance means your firm will know what normal operations look like and is regularly monitoring for malicious or unrecognized activity, documenting system configuration changes, and monitoring user access levels.

If there are security incidents, you have the visibility and processes to identify, assess, and mitigate the threat through tight security controls. It's key to maintaining strong operational risk management.

Greater protection

You’ll have tools in place to recognize threats and alert the appropriate parties so they can evaluate the threat and take necessary action to protect data and systems from unauthorized access or use.

For SaaS companies, remaining SOC 2 compliant is an important aspect of both risk management and risk mitigation. It should be an essential piece to your compliance framework.

Improved security posture

Implementing new security or compliance methodologies and processes opens up discussions into many areas of your business. Deploying SOC 2 and its accompanying platform will give your company valuable insights and spur more conversations on how and where to improve your operations and reduce the risk of security breaches.

Data breaches are becoming increasingly common and with the average cost of a data breach approaching $9.44 million in the U.S.

By going through the SOC 2 certification process, your organization can understand where your sensitive data lives and implement controls, risk assessment processes, and policies to protect this data and, ultimately, your organization and customers.

Third-party appeal and building trust

SOC 2 is the most sought-after report for companies dealing with third parties storing customer data in the cloud in the US market.

SOC 2 also makes it easier to demonstrate your security standards to external stakeholders. Suppose a potential customer, auditor, or third party requests a report. In that case, you can easily provide them with this as long as you are SOC 2 certified, have processes in place, and have an efficient platform to execute.

With all three of those in place, you can easily distribute SOC 2 reports in no time to ensure you have adequate protection controls to protect them from third-party risk.

Are there alternatives to SOC 2?

You might see SOC 2 and ISO 27001 compared when researching security certifications. While each is well-regarded, they are different in simple ways.

The main focus of SOC 2 is to show that you have the internal security controls in place to protect customer data. ISO 27001 ensures organizations have Information Security Management Systems implemented to manage information security.

SOC 2 is also more widely accepted in the U.S., while your international customers will be more familiar with ISO 27001 since it is primarily a globally-focused standard. These security frameworks both work toward the end-goal of consumer and third-party protection.

If you want to get into more nuance, we’ve written about the the differences between SOC 2 and ISO 27001 in the past.

How can a GRC platform help with SOC 2 certification?

A modern GRC platform can help your organization automate compliance audits with the SOC 2 Trust Services Criteria, which enables you to map your business processes, audit your infrastructure and security practices, and identify and correct any gaps or vulnerabilities.

If you are a company that handles or stores customer data, complying with the SOC 2 criteria will ensure your firm complies with industry standards, giving your customers the confidence that you have the right processes and practices to safeguard their data.

We previously covered the recommended next steps for preparing for a SOC 2 audit. Still, to put things into perspective, you need a partner who knows what it takes to comply with the SOC 2 Trust Services Criteria successfully.

Learn more about LogicGate's SOC 2 Compliance Application to see how it can help your organization prepare for and achieve a SOC 2 attestation report.


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