As information security has become of paramount importance to every organization, startups have had to deal with compliance earlier than ever before. To be able to sell to other businesses, you must earn their trust, and the Systems and Organization Controls 2 (SOC 2) security framework has become the framework of choice for early-stage companies. 

What Is SOC 2?

SOC 2, which stands for Service Organization Control 2, is a type of audit report developed by the American Institute of Certified Public Accountants (AICPA). It is designed to provide assurance that a service organization has implemented effective controls related to the security, availability, processing integrity, confidentiality and privacy of a system.

However, many startups are over-relying on SOC 2 as a framework, leading to excessive costs with little effectiveness in securing client data

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How Does SOC 2 Work?

The SOC 2 framework includes five Trust Services Criteria: 

  • Security. The system is protected against unauthorized access (both physical and logical).
  • Availability. The system is available for operation and use as committed or agreed.
  • Processing Integrity. System processing is complete, accurate, timely and authorized.
  • Confidentiality. Information designated as confidential is protected as committed or agreed.
  • Privacy. Personal information is collected, used, retained, disclosed and disposed of in conformity with the commitments in the entity’s privacy notice and with the criteria set forth in Generally Accepted Privacy Principles (GAPP).

To obtain a SOC 2 certification, a service organization undergoes an audit conducted by an independent CPA or auditing firm. The audit evaluates the design (Type I) and operational effectiveness (Type II) of the organization's controls based on one or more of the five Trust Services Criteria relevant to the services it provides.

SOC 2 reports are unique to each organization. The controls assessed in the audit depend on the specific services the organization offers and the criteria chosen for review. This makes SOC 2 an adaptable, albeit resource-intensive, way of demonstrating that a company has a strong control environment.

 

Where SOC 2 Can Fall Short

SOC 2 compliance only provides a snapshot of an organization’s controls at a particular point in time, so it does not guarantee that an organization will remain secure in the future, nor does it cover all possible security threats. While SOC 2 can form a valuable part of an organization’s overall cybersecurity strategy, it should not be relied upon as the sole measure of cybersecurity.

3 Main Drawbacks of SOC 2

  1. It is not inherently a risk management framework. It is a control-based audit that looks for specific procedural documentation and controls, without a deep focus on the overall risk management posture of the organization. It does not identify all vulnerabilities and risks an organization might have, so it cannot be relied upon solely to ensure comprehensive security. 
  2. It does not cover all areas of cyber risks. It focuses mainly on operational and compliance aspects, with little attention to areas such as secure code development or advanced threat intelligence. So, while a company might pass a SOC 2 audit with flying colors, it does not mean it has good security practices.
  3. SOC 2 compliance does not automatically equate to a strong security posture. It reflects the control environment of a company at a specific point in time but does not account for the continuous changes and threats in the cyber landscape. For startups, which often operate in highly dynamic environments, this could mean that their SOC 2 compliance is outdated almost as soon as it is achieved.

Most importantly, SOC 2 does not set forth specific guidelines or requirements for security. Instead, companies decide on their own what they do and just assert their controls. A SOC 2 auditor checks to see if the company actually does what it says it does. For example, Bring Your Own Device (BYOD) security, forensic logging of security events from an Endpoint Detection and Response (EDR), or none of those things, and then auditors check against those assertions.

SOC 2 supporters say this makes it very adaptable so it can apply to all kinds of organizations. But SOC 2 skeptics say this makes it useless at face value and requires a detailed review of the report’s assertions and findings. This is why most companies using SOC 2 still have to answer security questionnaires when working with larger companies.  

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What You Need in Addition to SOC 2

While it is true that corporations in heavily regulated industries, like finance or healthcare, often have stringent security requirements, SOC 2 is not universally mandated as a prerequisite for collaboration. 

The market itself has also contributed to the mistaken belief that SOC 2 is a be-all, end-all for security. In highly competitive environments, startups are eager to differentiate themselves and may perceive SOC 2 as a distinct advantage. In reality, businesses prioritize partnerships based on value delivery, innovation and quality of service, with cybersecurity forming part of their overall evaluation but not necessarily via SOC 2 compliance.

Businesses typically look for evidence of strong data security practices and risk management strategies. This can take many forms beyond SOC 2. This usually involves businesses demonstrating that they are following industry best practices along with a robust incident response plan, ongoing security training and effective vulnerability management. 

Startups must go beyond a checkbox mentality when it comes to cybersecurity strategies.

A blend of proven security best practices and compliance with other security frameworks in addition to, or instead of SOC 2, can ensure startups are better protected and positioned for successful business relationships.

The bottom line is that, while SOC 2 can be a valuable part of an organization’s security program, it shouldn’t be the focus and is not a one-size-fits-all solution. An over-reliance on SOC 2 as a standalone security measure may lead to increased vulnerability and create a false sense of security, which can be catastrophic in the event of a breach.

Startups must go beyond a checkbox mentality when it comes to cybersecurity strategies. They need to adopt a risk-based approach, continually evaluating and adapting their security practices to align with the evolving threat landscape.

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