What is SOC 2?

SOC 2 is a security standard developed by the American Institute of Certified Public Accountants (AICPA). With the full title of Service Organization Control 2, this certification provides a data security framework for organizations that use customer data as a part of the business model. Although SOC 2 is not mandatory, it is essential to SaaS companies, cloud services, and organizations that handle personally identifiable information (PII) in general.

In early 2024, cybercriminals breached a major data broker, National Public Data, stealing 2.9 billion records, including name, address, social security and phone numbers, and date of birth. The SOC 2 compliance helps to minimize data-leak risks by strengthening organizations' cybersecurity controls. It also informs clients of data safety protocols, solidifying public brand perception.

In this article, I'll focus on what SOC 2 compliance is and the meaning of SOC 2 for business information safety.

What does SOC 2 stand for?

SOC 2 stands for Service Organization Control 2. It is a part of AICPA's System and Organization Controls framework used to evaluate a chosen service’s capability of protecting customer data.

The SOC 2 focuses on an organization's data security, confidentiality, privacy, availability, and processing integrity controls. These five are collectively called the SOC 2 Trust Services Criteria, which an organization must achieve to be SOC 2 compliant.

What is SOC 2 Compliance?

Service Organization Control 2, or SOC 2, compliance means that the selected organization adheres to AICPA's security framework. It must undergo a third-party audit (typically performed by certified public accountants or an expert firm licensed by AICPA) and receive a report that stands as a SOC 2 certification if successful. At the core are the five Trust Service Criteria, which I explain in more detail below.

Benefits of SOC 2 audits

SOC 2-compliant organizations benefit in several ways compared to the ones that aren't. First, SOC 2 is particularly widespread among B2B services that collect, store, and share customer data. For example, cloud server renting companies undergo the SOC 2 audit to guarantee future partners their data safety.

In turn, users who trust data with a SOC 2-compliant organization know that contemporary and efficient information safety protocols safeguard their PII. It extends the B2B trust bond to consumers who are becoming more and more aware of online privacy and cybersecurity issues.

Another major benefit of SOC 2 audits is enhanced customer trust. Businesses can build confidence among existing and prospective or potential clients by clearly demonstrating a commitment to data security. This enhanced customer trust can lead to improved or lower-cost customer acquisition as well as improved customer retention. As a clear marker of trustworthiness and security, SOC 2 can also differentiate companies from their non-compliant competitors, offering a clear advantage in the marketplace.

Lastly, SOC 2 helps achieve other regulatory requirements. For example, the European General Data Protection Regulation (GDPR) has strict data collection and retention rules, similar to SOC 2 recommended practices. Financial and healthcare industries often turn to SOC 2 to ensure international law compliance, as they collect and store the most sensitive personal details.

SOC 2 Type I vs. Type II

The essential difference between SOC 2 Type 1 and SOC 2 Type 2 is audit durations. The SOC 2 Type 1 verifies that the selected organization adheres to its recommendations and meets the five trust service criteria requirements at a specific point in time. In other words, it inspects established security measures and evaluates whether they are sufficient for this security standard.

The SOC 2 Type 2 includes the discussed security standard analysis but also inspects how it performs over time. The time period may vary from 3 to 9 months, during which the system's operating effectiveness is closely monitored. Type 2 is more elaborate and shows that existing security measures are not only sufficient but also perform according to trust criteria over time.

SOC 1, SOC 2 and SOC3: what are the main differences?

SOC 1, 2, and 3 are different report types. The numbers are sequential but do not indicate ranking or hierarchy, which means that type 3 is not in any way better than 1 in this standard naming convention.

The SOC 1 focuses on financial reporting. It verifies to customers that the selected organization provides accurate and reliable financial information. It also has Type 1 and Type 2, which are identical to SOC 2 types; that is, the Type 2 report evaluates financial reporting over time.

A SOC 3 is a public-faced summary of SOC 2. The SOC 2 report is usually meant for the organization itself and its customers, which is often another business. Meanwhile, a SOC 3 audience is the public, which consists of consumers who use the services. SOC 3 can be used for marketing and public relations purposes to inform the audience that the organization is dedicated to its data security and provides SOC 2 compliance as proof.

Who needs a SOC 2 report?

The SOC 2 compliance can be beneficial to all businesses that handle customer data, but it is prevalent among B2B SaaS services. For example, cloud service providers often undergo the SOC 2 audit to prove to the customers that information on their cloud servers is sufficiently protected.

Healthcare, financial institutions, and payment processors also often turn to SOC 2 to strengthen cybersecurity policies. Because they handle extremely sensitive personal information, it is paramount to ensure customer data safety. To summarize, any business that collects, stores, processes, and shares personal information should consider SOC 2 compliance to avoid unnecessary risks.

Conclusion

With so many data leaks from insecure services, it is evident that organizations that handle personal information must put extra effort into securing it. SOC 2 compliance is an efficient way of doing so, which benefits the company itself, its clients, and service consumers simultaneously.

However, adhering to its strict principles can be challenging. The five Trust Service Criteria encompass software vulnerability assessment, corporate computer network security, server security, data encryption, and more. Businesses that lack sufficient experience to secure all weak points can consult a service like CyberUpgrade for assistance.

These services employ experienced legal and cybersecurity professionals who will analyze the organization's readiness for SOC 2. After implementing recommendations, the company can look for SOC 2 auditing services and ask for a SOC 3 report if it wants to publicize dedication to information security standards.

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