Elevating data security: Why SOC 2 compliance matters for modern companies

Systems and Organisation Controls 2 (SOC 2) is a compliance standard developed by the American Institute of CPAs (AICPA) to guide auditors in evaluating the effectiveness of an organisation’s data security measures.

It focuses on how companies handle customer data stored in the cloud and aims to establish trust between service providers and their customers. The standard is based on Trust Services Criteria, which are security, availability, processing integrity, confidentiality, and privacy.

Each organisation tailors its SOC 2 report to its specific needs, providing valuable insights into data management for regulators, business partners, and suppliers.

Industries that require SOC 2 compliance

SOC 2 compliance is required by many businesses and sectors as a condition of doing business or as a common practice to safeguard data security and privacy. Here are some examples of sectors where SOC 2 compliance is frequently required:

  • Financial Services and Banking: To maintain the confidentiality, integrity, and availability of financial data, financial organisations, such as banks, insurance companies, and credit unions, frequently demand SOC 2 compliance from their service providers. Major financial institutions like JPMorgan Chase, Citibank, and Bank of America are a few examples.
  • Technology and Software-as-a-Service (SaaS) Companies: To reassure their clients of the security and privacy of their data, many SaaS providers and technology companies that handle sensitive customer data, such as cloud storage, software platforms, or data processing services, frequently require SOC 2 compliance. Salesforce, Dropbox, and Box are some examples.
  • Legal and professional services: To fulfil their own legal and ethical requirements, law firms, accounting companies, and other professional service providers that handle sensitive client data may request SOC 2 compliance from their technology partners or vendors. Deloitte, Ernst & Young, and KPMG are a few examples.
  • Healthcare and Life Sciences: To safeguard sensitive patient data and guarantee data integrity, businesses operating in the healthcare and life sciences sectors, such as electronic health record (EHR) providers, healthcare software platforms, and pharmaceutical firms, frequently need to be SOC 2 compliant. Examples include Pfizer, Cerner Corporation, and Epic Systems Corporation.
  • Data centre operators and cloud service providers who host and manage client infrastructure or store customer data often get SOC 2 compliance to show that their infrastructure and services are secure and readily available. Examples include Equinix, Google Cloud Platform, and Microsoft Azure.
  • E-commerce and retail: To reassure their customers about the security of their transactions and data, online merchants, e-commerce platforms, and payment processors that handle client financial information and personal data frequently need SOC 2 compliance. PayPal, eBay, and Amazon are a few examples.

Although these industries frequently demand SOC 2 compliance, it’s important to keep in mind that the precise specifications and focus areas under SOC 2 may differ depending on their particular requirements and risk profiles. Additionally, as organisations realise the significance of third-party attestation in confirming the efficacy of security measures and data protection practices, the demand for SOC 2 compliance is rising across a variety of industries.

SOC 2 is increasingly becoming a requirement in Australia

In Australia, SOC 2 is gradually becoming a necessity.

While ISO 27001 has long been accepted and used as a comprehensive information security standard across the globe, including in Australia, SOC 2 is becoming more popular as a must for businesses operating in a variety of sectors. SOC 2 is largely linked with the United States as it was developed by the AICPA, although it is also being used elsewhere.

The need for SOC 2 is rising in Australia due to several factors, including:

  1. Globalisation and cloud services: As cloud services become more widely used and company operations become more international, organisations frequently depend on service providers, especially those situated in the United States, to manage crucial data and procedures. In these situations, clients or consumers could need reassurances regarding the security and integrity of their data, which would prompt them to ask their service providers for SOC 2 reports.
  2. Due Diligence of Suppliers: Australian businesses are increasingly performing extensive supplier and service provider due diligence. They could ask for SOC 2 reports as part of this process to assess how well the service provider is controlling security, availability, processing integrity, confidentiality, and privacy. SOC 2 reports give clients and consumers transparency and assurance by establishing a standardised framework for evaluating these areas.
  3. Regulatory Compliance: SOC 2 can help organisations show that they are in compliance with rules or laws that are relevant to their industry, even though it was not created to meet any specific regulatory requirements. Organisations may be required to abide by particular laws in Australia, such as the Australian Privacy Principles (APP) or the rules set forth by the Australian Prudential Regulation Authority (APRA). SOC 2 reports can show that the security controls are sufficient to meet these demands.
  4. Alignment with Industry Standards: Especially in industries like finance, healthcare, and technology, many Australian organisations are realising how closely SOC 2 adheres to their industry standards and best practices. SOC 2 is more focused and applicable for assessing the security and privacy measures put in place by service organisations because it addresses certain areas of concern.

While SOC 2 is becoming more well-known and a preferred option for some Australian organisations, it’s important to remember that it does not completely replace ISO 27001. The comprehensive information security standard ISO 27001 is still applicable to businesses of all sizes and sectors. Some businesses can decide to go after both certifications to fulfil various compliance and security needs.

The choice to pursue SOC 2, ISO 27001, or both ultimately depends on elements including industry standards, client needs, and the organisation’s own aims and objectives. Working with information security experts and consultants can assist organisations in analysing their requirements and selecting the best frameworks to accomplish their compliance and security goals. 

The differences between SOC 2 and ISO 27001

Scope is the first significant distinction between ISO 27001 and SOC 2. These frameworks look at a few different security controls even though they cover a lot of the same subjects. The primary goal of ISO 27001 is to create and maintain an Information Security Management System (ISMS), which is an organisation’s overall system for managing data protection. SOC 2, on the other hand, is more intent on demonstrating that a company has adopted fundamental data security procedures.

Aspect ISO 27001 SOC 2
Purpose Establishes an ISMS Provides assurance on controls and processes related to data security
Scope ISO 27001 focuses on developing and maintaining an ISMS: the overarching system for managing data protection within an organisation (for any business) SOC 2 focuses more narrowly on proving that an organisation has implemented essential data security controls (primarily for Service organisations)
Framework Based on the ISO/IEC 27001 standard Developed by the American Institute of CPAs (AICPA)
Key Areas Risk assessment, security controls, continual improvement Security, availability, processing integrity, confidentiality, privacy
Compliance Voluntary standard Voluntary, but often required by clients/customers
Certification ISO 27001 certification is available SOC 2 (Service Organisation Control 2) is a type of certification that assesses the security, availability, processing integrity, confidentiality, and privacy of a service organisation’s systems and data. SOC 2 certification is issued by outside auditors
Rigor Rigorous and comprehensive Rigorous, but with more focus on controls and service organisations
International Standard Widely recognised and used globally Primarily used in the United States
Regulatory Requirements Can help meet regulatory requirements (e.g. GDPR, APRA) Not specifically designed to meet regulatory requirements
Third-Party Assessments Can be conducted by independent auditors Requires an independent CPA firm for SOC 2 attestation
Coverage of Controls Covers a broad range of information security controls Focuses on controls related to security, availability, processing
Industry Applicability Applicable to various industries and sectors Mainly used by service organisations, particularly cloud providers

It’s also important to note that, in contrast to SOC 2, which is largely used in the United States, ISO 27001 is generally accepted and used throughout the world, including in Australia.

SOC 2 may nevertheless be pertinent to Australian businesses whose clients or consumers want SOC 2 reports as part of their due diligence procedure.

At Integrated Compliance Solutions, our consultants are available Australia-wide and have extensive experience helping businesses in a wide range of industries develop lean, low-burden systems. To find out more about SOC 2 or ISO 27001 compliance, contact us today.

Alternatively, ask about our compliance softwarelegislative updates, or integrated management system development services.

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