BACKGROUND
In 2005, I.S. Partners launched their business committed to security and compliance. They are a specialized CPA firm that prides itself with hands-on experience working closely with clients to keep their systems secure and improve any issues or concerns they may have with digital and physical security. To I.S. Partners, security means protecting all confidential data without sacrificing performance given to a client. I.S. Partners’ Senior Auditor John Zuk and SOC Manager Joe Ciancimino sat down with MK’s Marketing team to teach us about the importance of security and compliance.
CASE STUDY
Startup Achieves SOC 2 Compliance, Guided by I.S. Partners Auditors
As an up-and-coming FinTech, MK Decision (MK) entered the industry ready to strengthen local economies with the help of our technology. When studying the obstacles community financial institutions face with online financial services, it was abundantly clear that cybersecurity was one of the biggest barriers preventing these financial institutions (FI) from going digital. Community FIs are hesitant about switching their processes from paper due to the risk of a data breach. According to Varonis, “the average cost of a financial services data breach is $5.85 million” (2021 Data Risk Report Financial Services, 2021). While keeping processes on paper might seem like a good idea, FIs still pose a major security risk for improper file storage and employee access permissions. In a 2019 report, Varonis found that, “17% of all sensitive files are accessible to all employees” (2019 Varonis Global Data Risk Report, 2019). Paper-based FIs could fall short of compliance standards while continuing to lose their clientele to competing FIs with online financial services.
To solve this problem, MK built our digital account opening and loan origination platform to ensure security for our customers and end-users. By incorporating regular audits as a business practice, MK is helping FIs secure their data, guarantee compliance, and compete in the marketplace against megabanks. Recently, MK successfully completed a SOC 2 Type 1 compliance audit with the help of I.S. Partners.
IMPLICATIONS
Importance of Security & Compliance for Stratups
Working with clients within the FinTech industry has allowed us to tackle the challenge of helping our clients identify and mitigate risks related to new emerging financial technologies.
With the emergence of new technologies in the financial sector, regulatory risk and risk to consumer data is at an all-time high. Ensuring adequate cybersecurity controls are in place to mitigate these risks will allow community financial institutions to benefit from the technology. In addition, as regulators continue to increase their focus on vendor and third-party risk management, compliance and third-party attestation reports help ensure that controls are in place to mitigate the risks to consumer data.
SOC auditing will become more important in the future since an enormous amount of financial data is calculated through algorithms, and financial information will need to be audited. We continue to see an increase in demand of third-party attestation and assurance reports, with more companies requiring defined security controls and third-party assurance reports in their contractual requirements.
Through compliance with the SOC 2 Type 1 attestation standards, MK reinforces to our customers and industry at large the seriousness of cybersecurity and compliance. With the help of I.S. Partners, MK is strengthening our internal processes and ensuring that our customers’ data is always protected. As the FinTech landscape continues to change, MK’s commitment to security stands unwavering. Through the introduction of new security measures, testing, and company policies, the MK team’s focus is on the reputation of our security posture and our customers’ continued success.
ADVANTAGES
Value of SOC 2 Compliance for Startups
Startups in today’s digital landscape face increasing security concerns and the need to establish trust with clients and investors. One effective way to address these challenges is by pursuing SOC 2 compliance. SOC 2 reports serve as a comprehensive measure of an organization’s security profile, demonstrating the effectiveness of its security controls. By obtaining SOC 2 certification, startups can establish credibility with clients and investors, develop strong policies and procedures, lower their risk profile, foster a security-first culture, build stakeholder confidence, streamline internal processes, save time, reduce disruptions, and contribute to business growth. In this highly competitive business environment, SOC 2 compliance proves to be a valuable asset for startups looking to thrive and succeed.
Why Startups Should Pursue SOC 2 Compliance
- Establishes credibility with clients and investors
- Assists in developing strong policies and procedures
- Lowers the risk profile of the startup
- Builds a security-first culture within the organization
- Builds stakeholder confidence and attracts investors
- Streamlines internal processes and prepares for expansion
- Saves time and reduces disruption, contributing to business growth
Types of Startups that Benefit the Most from SOC 2 Compliance
Startups that benefit the most from SOC 2 compliance are those that are entering the growth stage or beyond. If a startup has plans for significant expansion, SOC 2 should be a top priority. The industry in which the startup operates also plays a role, particularly in sectors such as healthcare, finance, pharmaceuticals, and technology, where data breaches are a significant concern. Compliance is crucial for startups offering e-commerce services or working with big data, as clients and customers are likely to request a SOC 2 compliance report. Regardless of whether the startup operates in a B2B or B2C model, compliance is essential for maintaining trust and attracting clients and customers.
How Startups Should Approach SOC 2
Preparing for a SOC 2 audit is a critical milestone for startups seeking to demonstrate their commitment to data security and compliance. To ensure a successful audit, startups should follow key steps and best practices. This includes updating administrative security policies, implementing technical security controls aligned with the AICPA Trust Service Criteria (TSC), gathering relevant security evidence, establishing clear policies, designating control owners, and considering an internal audit. By taking these proactive measures, startups can position themselves for a smooth and successful SOC 2 audit, reinforcing their commitment to maintaining robust security practices and meeting industry standards.
- Ensure administrative security policies are up-to-date and written in plain language, outlining standard security processes.
- Implement technical security controls aligned with the AICPA Trust Service Criteria (TSC) categories, such as network firewalls, encryption, and access controls.
- Gather security and SOC 2 control evidence, including documentation of cloud security, access controls, encryption, backups, logs, and vendor agreements.
- Establish clear, documented policies for data handling, incident response, system/data access, disaster recovery, and security training.
- Designate control owners and responsibilities to ensure accountability and mitigate security risks.
- Consider conducting an internal audit to identify any gaps or areas for improvement before the official audit.
Benefits of Third-Party Auditors and SOC 2 Compliance for Startups
Working with third-party auditors allows a company to improve its security posture. The process of performing the audit will help identify security controls that may not currently be in place and incorporate their implementation on the company’s security roadmap. Auditors give the company a different perspective of how a control occurs and how to strengthen it internally. Additionally, working with a third party will help deter any issues with internal fraud or collusion that might occur.
How Startups Should Maintain SOC 2 Compliance
Maintaining SOC 2 compliance requires ongoing efforts to ensure the effectiveness of security controls. To maintain a SOC 2 Type 2 Report, startups must demonstrate continuous validation and provide evidence that security controls are consistently implemented. This entails managing user access, performing regular backups, encrypting data, and other relevant security measures. It is important to note that SOC 2 reports typically cover a 12-month period, indicating the need for annual SOC 2 audits to maintain a current report and uphold compliance. By regularly assessing and validating security controls, startups can ensure the sustained security and trustworthiness of their operations.
GET STARTED
SOC 2 Compliance for Startups
I.S. Partners supports a variety of clients in different industries, including healthcare, financial services, utilities and energy companies, businesses in the telecommunications industry, insurance, software development, FinTech, technology services, banking, and utility services among others. Use the form below to get started on your SOC 2 compliance journey.
Read More Client Testimonials
>> Testimonials
