SOC 2 reports evaluate internal controls to see how well a company identifies, assesses, mitigates, and monitors risks. In the context of third party risk management (TPRM), a SOC 2 can give you confidence that your critical vendors are following best practices to protect your data.
If you’re getting started with SOC 2 for third party risk management or need an update, this blog has got you covered.
What Is A SOC 2 Report?
A SOC 2 report (short for Service Organization Control) is a standard to provide assurance that an organizations’ systems are set up to cover five core subject areas:
- Security
- Availability
- Processing Integrity
- Confidentiality
- Privacy
The purpose of this audit is for an organization to detail the operational effectiveness of their systems, based on the Trust Service Criteria.
In order to comply, organizations must develop and document clear security policies, procedures, and supporting evidence.
Unlike a SOC 1, which focuses on financials, a SOC 2 is all about compliance. There are two types of reports:
- SOC 2 Type 1 reports: Test controls at one specific point in time.
- SOC 2 Type 2 reports: Test controls repeatedly over a period of time to reveal trends.
SOC 2 Type 2 reports are generally preferred in third party risk assessments because they cover a longer period of time.
Using SOC 2 Reports in Due Diligence and Vendor Management
SOC 2 type 2 audits are essential in regulatory oversight, vendor management programs, internal governance, and risk management.
They are used for auditing service organizations (or third party vendors) such as cloud service providers, software providers and developers, and financial services organizations. They cover nearly everything you need to know about how a vendor protects your data—from security and privacy to business continuity and internal procedures.
They also show how exceptions are —or aren’t— corrected to determine vendor reliability. This is why they are a key component of vendor due diligence and third party risk assessments.
The controls assessed include:
- Risk assessment practices – How effectively is your vendor detecting and identifying potential threats to your data?
- Cybersecurity controls – What controls need to be put in place to mitigate those risks, and how effective are they?
- Internal & external communication – How well does your vendor communicate when it comes to security?
- Monitoring, prevention & maintenance – Are cyber controls continuously monitored to ensure they continue to perform as expected?
Some vendors share SOC 2 reports of their data centers, but ideally you need one that covers their own business operation, end-to-end. If a critical or high-risk vendor does not have a SOC report, it’s still necessary to engage in due diligence to address their inherent risk and ensure your data is protected.
Addressing SOC 2 Compliance with ThirdPartyTrust
As a leader in third party risk and vendor management, ThirdPartyTrust recognizes the burden that risk assessments and due diligence work puts on organizations.
With our TPRM automation tool, you can address SOC 2 third party risk management requirements by:
- Assessing third party vendors with a comprehensive questionnaire based on the Trust Service Criteria.
- Keeping an audit trail that maps security documentation and evidence to risks and vendors.
- Reporting against compliance to your board of directors.
- Implementing a formal risk management process that specifies risk tolerances and the process for evaluating risks based on identified threats.
- Centralizing NDAs, contracts, and supporting evidence around your third party vendors’ security and privacy procedures.
The ThirdPartyTrust third party risk management platform provides a central repository for vendor management, with capabilities such as rule-based access management, and tiering logic for prioritizing vendor risk assessments.
It can help you automate the end-to-end vendor risk assessment process, including setting risk and impact scoring based on risk acceptance and tolerance levels.
The ThirdPartyTrust risk management tool is backed by a stellar Customer Success team and managed services that can help you set up, optimize, or even handle the risk management process for you. SOC 2 compliance doesn’t have to be painful.
Watch us explain how to simplify risk assessments and due diligence with ThirdPartyTrust:
Let us show you how to make TPRM easier. Talk to an expert today.
TPRM Checklist: How secure is your third party network?
Your TPRM program was funded and is now fully operational. Did you make sure it covers all the bases?
The end of the year is the right time to give your third party risk management strategy a quick checkup. Get ready for the year ahead with these 10 tips to detect gaps or areas for improvement.
