Which companies should comply with SOC2?

Understanding SOC 2 Compliance: A Quick Overview

SOC 2 compliance is for your clients’ assurance, not for you. The companies we’ve helped comply with SOC2 usually come to us with the request to help them build the right technical controls before they go for an audit by a CPA firm. 

So the question of which companies should comply with SOC2 is easily answered by “the ones who want to reassure their B2B and B2C clients their data is safe”.

But we will be more specific here. 

The key criteria of SOC 2: Security, Availability, Processing Integrity, Confidentiality, and Privacy, focus on ensuring client data you store is safe and will remain safe and available.

SOC 2 is not a legal requirement but a widely recognized framework that builds trust with clients and partners.

Types of Companies SOC 2 Compliance Applies To

• Technology Companies and SaaS Providers:
  • If you handle sensitive customer data, then, given the rise of cloud-based services, SOC 2 certification might be something your clients often ask you about. The key here is that almost every company offering any type of online service (SaaS) is a technology company. 
  • SOC 2 demonstrates that your company has the appropriate data protection protocols in place, which can be crucial for customer trust. 
• Managed Service Providers (MSPs):
  • MSPs often work with sensitive client data and systems, making SOC 2 compliance a major factor in maintaining business relationships. Not only do you have your client’s data, as an MSSP you most likely also hold access to their most critical systems. Customers know that there are many breaches originating from hacked MSSPs. If they ask for your SOC2 certificate, you better have one, or they might choose someone else. 
• Data Centers and Hosting Providers:
  • You hold and manage vast amounts of data, making your company a prime candidate for SOC 2 compliance (from your clients and partners point of view).
  • Ensuring the physical security of systems and infrastructure is a major component of SOC 2 for organizations like yours.
• Fintech Companies:
  • Fintech organizations deal with highly sensitive financial information and must prioritize security controls. SOC 2 is essential for gaining and maintaining user trust. Not only that, it gets worse if you get hacked, and all financial transactions you process get redirected to some money laundering network for a day or a week or two. We’ve seen cases of banks who lost upwards of $750 000 000 (yes, that’s 750 million US dollars) from a breach of their transaction processing systems. SOC2 does not ensure you will not get hacked – but is a great start on the path to practical defense and security. 
• Healthcare Tech Companies:
  • While HIPAA applies to healthcare providers, healthcare tech companies processing medical records may also need SOC 2 compliance to assure clients that they can handle sensitive information securely. We’ve seen medical testing facilities and organizations testing medicine on people and animals being required to comply with SOC2 by their clients and partners. We’ve helped such organizations get certified. 

Legal and Industry Requirements Pushing SOC 2 Adoption

• Contracts and Vendor Requirements:
  • SOC 2 compliance is frequently required in contracts with larger enterprises or clients from regulated industries like healthcare, finance, and government. If it is not required in your current contract, expect more and more potential and existing clients and partners to ask for SOC2. 
  • Large corporations or governments may mandate SOC 2 compliance for any vendor handling customer data, regardless of size. This usually happens if they trust you, the vendor, with the data of their employees/clients. 
• Regulatory Pressures:
  • Although SOC 2 is not a legal requirement in the same way as GDPR or HIPAA, increasing scrutiny from regulatory bodies means that SOC 2 compliance can serve as a strong baseline for demonstrating data protection in industries without prescriptive laws. It can and will save you lots of time in explanations and filling security questionnaires if you can just present them with your SOC2 certificate. 
• Customer Demands:
  • Customers, particularly in B2B environments, are becoming more sophisticated and cautious about where their data is stored and how it is processed. SOC 2 compliance is increasingly seen as a baseline standard to win customer trust.

Companies Scaling Rapidly or Entering New Markets 

• Startups and High-Growth Tech Companies:
  • Rapidly growing companies may not initially prioritize compliance, but as they scale, SOC 2 certification can become essential for gaining contracts and building trust. This is especially valid if you are trying to sell in the USA and are based elsewhere. But even if your company is based in the US, SOC2 is mostly asked for and recognized in the United States, and you will most likely be asked for it. 
  • For startups aiming to enter enterprise markets, SOC 2 can be a requirement that separates them from competitors.
• Companies Expanding into International Markets:
  • Expanding into different regions may expose companies to new data protection laws and customer expectations. SOC 2 compliance helps ensure readiness for some of these challenges.
  • Being SOC 2 compliant signals that your company has mature internal processes and can handle international business needs securely.

Companies Handling Sensitive or Personally Identifiable Information (PII) 

• Data Processors and Data Analytics Firms:
  • Any company that processes sensitive customer data on behalf of another company needs to prove that its data management practices meet industry standards.
  • Explain how SOC 2 addresses concerns related to data privacy, integrity, and confidentiality, making it particularly relevant for organizations handling PII.
• Advertising and Marketing Firms Using Consumer Data:
  • With increased concerns around privacy laws (e.g., CCPA, GDPR), marketing agencies using consumer data for targeted advertising benefit from SOC 2 compliance to demonstrate secure data practices.
• HR and Recruitment Companies:
  • HR companies deal with sensitive employee data, and SOC 2 compliance reassures clients that this data is being protected adequately.
  • Highlight that recruitment companies processing large amounts of PII from job applicants can face significant reputational risks without proper data handling controls, which SOC 2 addresses.

Companies Looking to Differentiate Themselves in Competitive Markets

• Competitive Edge:
  • For many companies, SOC 2 compliance can serve as a competitive differentiator, especially in markets saturated with providers offering similar services.
  • SOC 2 provides a stamp of trustworthiness, giving compliant companies an edge when it comes to B2B sales, particularly in industries like financial services, healthcare, or tech.
• Building Client Confidence:
  • Companies with SOC 2 certification show they are serious about security, which helps reduce the concerns prospective clients may have when entrusting their data to a new partner.
  • Emphasize that SOC 2 compliance can shorten sales cycles, particularly for businesses selling to security-conscious customers, as many contracts and deals hinge on the vendor’s ability to demonstrate data protection and reliability.
• Insurance and Risk Management:
  • Many insurance companies provide lower premiums or improved terms for companies that can demonstrate SOC 2 compliance, reducing the cost of insuring against data breaches or other security incidents.

When SOC 2 May Not Be Required: Key Exceptions

• Small Businesses Not Handling Client Data:
  • For smaller businesses that don’t handle sensitive customer data, SOC 2 may not be necessary.
  • However, discuss why even small companies working with large clients might need to comply in the future as part of contractual obligations.
• B2C Companies with Minimal Data Handling:
  • Retailers or small B2C businesses that don’t store or process sensitive personal data may not require SOC 2. Point out, however, that as customer expectations for security rise, even these businesses might eventually be nudged towards compliance.
• Internal-Facing Companies:
  • Companies that don’t process external customer data but instead focus on internal operations, like infrastructure management or local service providers, may not need SOC 2, as the framework is specifically designed around external customer data handling.

How Companies Can Begin Preparing for SOC 2 Compliance

Perform a Readiness Assessment:

• • First, assess whether your internal systems, policies, and procedures align with SOC 2 criteria. Most likely, you won’t have the necessary security controls, and at this time, you should start building them, following the advice of a cybersecurity expert.

Develop a Data Protection Strategy:

• • Outline the steps companies should take to implement proper data management, encryption, and security controls, focusing on protecting sensitive data from internal and external threats.

Leverage Automation and SOC 2 Tools:

• • There are various automated tools and platforms that help streamline SOC 2 preparation, including monitoring software, security management systems, and policy management platforms. We can guide you in using one of them, but remember: those platforms know how to get you the certificate. They have no clue or wisdom or knowledge of which security controls are effective against real hacking attacks. The platform may guide you to enable 2-factor authentication as a requirement, but it won’t care if your chosen method is easy to bypass.

Employee Training and Awareness:

• • Building internal training programs is critical in helping employees understand the requirements of SOC 2 and how they play a role in maintaining compliance.

If your company wants to prepare for SOC2 rapidly, contact us, and let’s see if we can help!