The Cost of Compliance

When it comes to IT compliance, the landscape seems to be constantly shifting as innovation and rapidly changing technologies are dictating the need for strong compliance to help combat cyber threats and to protect consumer information. There have been numerous large data breaches in the news in recent years, and often, the victims of these cyber-attacks were 100% compliant at the time of the attack.

Cybercriminals are constantly finding new ways to infiltrate the networks of small and large companies to mine consumer information, implement ransom attacks for money, and steal trade secrets and sensitive information. Because of this, it may be hard to keep up with new regulations as they become law, however, as a business owner, it is part of your responsibility.  

Most recently, we saw companies change their focus from their competition, regulations, and investment risks to things like the pandemic, climate change, and supply chain risk. This quick pivot had and continues to have some major impact on today’s cost of compliance.  


Regulatory security compliance costs $3.5 million each year on average 
The cost of non-compliance is 2.71 times higher than the cost of compliance 
A proactive approach eliminates unexpected costs, increases efficiency, and promotes growth 

How Regulatory Compliance Actually Saves Your Company Money

Regulatory compliance is not just another business requirement to check off the list; it can also positively impact your bottom line. Saving money through regulatory compliance is possible when organizations take the time to review their regulatory requirements and implement appropriate solutions. By spending the time now to ensure regulatory compliance, businesses can benefit from cost savings in the long run. 

Modernizing a company’s security compliance program can reduce risk levels, lower costs and provide long-term profitability. By taking the time now to ensure regulatory compliance, businesses can reap significant savings both now and into the future. 

Eliminating Unexpected Costs 

For example, regulatory compliance can help minimize fines and other costs associated with regulatory violations. Because monetary fines and penalties are widely used forms of punishment for noncompliance, especially in industries like finance, tech, manufacturing, and healthcare. 

Furthermore, developing and maintaining a comprehensive regulatory compliance plan may spare businesses from costly legal fees resulting from non-compliance issues. Businesses can also benefit financially by avoiding the disruption to their operations caused by regulatory violations, which could involve significant time and monetary investments to bring the organization back into regulatory compliance. 

Supporting Sales & Loyalty 

Finally, regulatory compliance can help businesses to increase their competitive edge by positioning them as trusted and reliable partners in their industry. Customers often prefer to work with companies known for their regulatory compliance, as they provide a sense of security that the business is following appropriate guidelines and standards. This can increase customer loyalty and trust, increasing sales in the long run. 

Increasing Efficiency Over Time 

With experience implementing compliance practices and the utilization of automation, your team will lighten the workload of maintaining compliance. In the past, compliance teams using a manual procedure had to provide auditors tons of documentation.

Now, auditors can connect to an automated software platform that compiles data in one, central spot. Additionally, automation enables a corporation to reuse the data for multiple frameworks without having to redo that documentation each time. 

Compliance auditing and preparation is made simpler by cloud-based automation technologies and the capacity to integrate with other systems. When used to its fullest, organizations can save significantly on the time and effort demands on employees. 

There Are Fewer Compliance Issues than There Are Compliance Training Costs 

You could be thinking that while the advantages outlined here sound excellent, training appears to be pricey. You may have even undertaken compliance training in the past and spent a lot of money on locations and travel to guarantee that everyone received the same instruction. 

But what if there’s another option? one in which printed training materials, walls, and instructors are not necessary for compliance training. a strategy that enables you to reap the ROI of compliance training without incurring significant costs. 

Why Are Compliance Costs Rising? 

In recent years, IT compliance, and compliance in general, has become an increasingly larger portion of every company’s operating budget. From hiring additional employees like compliance officers and more IT professionals to purchasing vulnerability scanning software and other network security tools, the costs seem to be going up with no end in sight.

So how do you balance trimming compliance expenses without reducing oversight and protection? 

“There are several factors in the economic environment right now that are driving up costs. One of those, for example, is the recovery following two years of shutdowns that had a major impact on industries and now they are getting slammed with additional regulations – some at the federal level and some at the state level. The risk assessment process has been almost entirely revamped and businesses now must consider things they would have never imagined happening during their lifetimes.”  

– David Dunkelberger, partner at I.S. Partners and specialized in fraud detection, SOC audits, financial controls and process enhancements, strategic planning and development

An average annual expense of $3.5 million is incurred by organizations to meet regulatory security compliance, according to a study by Ponemon Institute and Tripwire. The survey incorporated insights from IT, privacy, and audit leaders from 46 multinational organizations.

Non-compliant organizations face costs nearly 3 times as high, averaging at $9.4 million, due to issues like business disruption and legal settlements. Regulations range from U.S. state data breach laws to EU’s Privacy Directive, however, numerous respondents also highlighted the PCI-DSS as crucial and challenging.

Major budget items include specialized technologies, incident management, and audit assessments, with the corporate IT, business, and legal divisions accounting for significant portions of the expenditure. 

“The pandemic was one major event; now we have rising inflation, the global economy is not doing very well, there are widespread supply chain issues and supply insecurity…All of these are increasing costs to doing business in just providing goods and services. These external and internal factors are affecting the environment as far as compliance is concerned.” 

We’re seeing a large drive in aversion to technology risk so many companies are sharing data these days that maybe your customer data it may be internal data it may be confidential data or non-confidential data there’s still an increased sense of transition of data from one place to another between B to B organizations as a result of that we’ve seen a rise in monitoring of that date of that transferring some data and as a result demand for you know mitigating factors such as like let’s say sock two compliance having increased severely as a result that’s definitely driving demand of those goods and services so in that that is increasingly general increasing monitoring of that technology risk.  

Another factor is the increased investment that organizations are making as the aversion to technology risk grows. If you look at companies that handle PHI, for example, there are so many fees and penalties that could be incurred if that data falls into the wrong hands. If an organization doesn’t have the appropriate mitigating controls or techniques to stop that data from being breached, it is subject to millions of dollars in fines. Because of this, many organizations are anticipating the possible costs of a data breach.  

So, in response, the effort of compliance is increasing as organizations implement more monitoring techniques and take on greater engagements, and this influences the SOC 2 compliance cost, as well as an internal audit, or HITRUST assessment, in order to strengthen their cybersecurity posture. The same is true for all the organizations’ third-party relationships; each organization wants to make sure that the vendors they work with have the same level of security. 

Reasons for the Rising Cost of Compliance 

  • Extensive regulatory requirements: Organizations have to comply with a wide range of regulations, increasing the complexity, and thus, the cost of compliance. 
  • Technology requirements: Implementing necessary technology for data compliance is a major expense. 
  • Incident management: Handling and preventing data breaches and other incidents consume substantial financial resources. 
  • Audit and assessment: Regular monitoring and inspection of compliance measures and processes is another significant expense. 
  • Pandemic recovery: The aftermath of industry shutdowns and new regulations due to the pandemic have driven up costs. 
  • Technology risk: The increased sharing and transfer of data between organizations have led to a rise in monitoring and mitigating actions, thus increasing costs. 
  • Investment in cybersecurity: Companies are putting more money into preventing data breaches to avoid potential fines, which includes costs for conducting internal audits or HITRUST assessments and ensuring third-party vendors uphold the same security standards. 

What Is the Cost of Compliance? Really?

You may not love the answer, but the cost of compliance depends on multiple factors, but we’ve provided a general range of estimated costs for compliance.

SOC 1 Readiness $15,000 – $21,000 
SOC 1 Type 1$23,000 – $35,000
SOC 1 Type 2$29,000 – $44,000 
SOC 2 Readiness $18,000 – $25,000 
SOC 2 Type 1$25,000 – $39,000 
SOC 2 Type 2 $30,000 – $55,000 
ISO 27001$50,000 – $100,000
PCI DSS $70,000 – $100,000 

SOC 1 Compliance Cost 

Depending on your goal for the compliance report, either Type 1 or Type 2, the compliance costs vary due to the effort required. Type 2 audits demand more investment from both auditors and you, making them more expensive. These audits extend over a longer period, involving regular control testing, greater planning and preparation efforts. Type 1 exams focus on controls at a specific date.  

The number of control objectives also influences costs since more objectives require more auditor time and effort. Incorporating third-party controls or excluding them (carve-out method) impacts expenses. 

Complexity is another cost determinant. Factors like multiple locations, various applications/services, and diverse technology architectures increase audit complexity and costs. Uniform processes reduce expenses. Operating in multiple cloud environments requires additional auditing. Overall, the chosen examination type, control objectives, complexity, and technology play roles in SOC 1 compliance costs. 

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SOC 2 Compliance Cost 

SOC 2 compliance costs encompass expenses related to time, resources, and technology investments undertaken by an organization to enhance its security position. These costs can be broken down into the following categories: 

  • Auditor Fees: Organizations pay third-party auditors to evaluate their security controls. 
  • Resources: This involves dedicating time, effort, and funds to establish protocols, create action plans, train staff, monitor activities, and document processes. 
  • Technological Investments: Adjustments to the IT infrastructure, such as installing firewalls, implementing data encryption, conducting penetration testing, setting up backups, etc. 
  • Remedial Expenditure: Costs associated with addressing identified gaps during readiness assessment or the final audit. 

For SOC 2 Type 2 reports, the compliance cost typically falls within the range of $7000 to $50000. However, the actual expenses depend on factors like the organization’s size, system complexity, audit readiness, chosen Trust Service Criteria, and the selected auditor. Additional costs are incurred for readiness assessments and other related expenses. 

Estimated Cost of SOC 2 Compliance Depends on Several Factors: 

  • Type of Attestation Required: SOC 2 Type 1, SOC 2 Type 2, or both. 
  • Organization Size: Costs increase as the company’s size grows. 
  • Audit Scope: More Trust Service Criteria chosen lead to higher costs. 
  • Complexity of Organization: Greater complexity of systems and controls results in higher expenses. 
  • Auditor Choice: Different Certified Public Accountants (CPAs) or firms have varying pricing. 
  • Security Tools: Expenses for necessary SOC 2 tools and software contribute to the overall cost. 
  • Readiness Assessment: Costs differ based on the chosen auditor and may be optional. 

ISO Compliance Cost 

 ISO 27001 compliance involves specific stages and costs that vary depending on your organization’s size and choices. The ISO 27001 certification process consists of two primary stages: the documentation audit and the certification audit, which together cost around $14,000 to $16,000 for a small start-up. 

The overall ISO compliance cost usually ranges from $50,000 and $100,000, influenced by factors like organization size, audit partners, and current security infrastructure. 

Estimated Cost of ISO Compliance Depends on Several Factors: 

  • Gap Analysis: Evaluating your security posture costs around $5,700 for cloud-hosted companies with 250 employees and one location, but the expense can reach $7,500 with other options. 
  • Penetration Test and Vulnerability Assessment: Penetration tests can range from $5,000 to $20,000, while vulnerability tests cost between $2,000 and $2,500, potentially more for CREST-accredited testers. 
  • Implementation Expenses: Implementation expenses vary depending on the chosen certification route. 
  • Employee Training: Costs for formal security training range from $25 per user to $15,000 per training session, with alternatives based on content and trainer quality. 
  • Security Software and Tools: Costs will arise from enhancing security measures based on gap assessment results. 
  • Continuous Monitoring: Ongoing security compliance costs depend on your preferred operational approach. 
  • Audit Costs: Initial certification audits cost between $10,000 and $50,000, with recurring surveillance audits typically around half that price, spanning $5,000 to $40,000.  

In sum, ISO 27001 compliance costs vary due to stages, organizational choices, and the scope of activities. It’s essential to consider these factors when planning for ISO 27001 certification. 

PCI Compliance Cost 

PCI compliance costs are contingent on your organization’s scale, type, security outlook, and infrastructure design. Here is a rundown of the expenses that contribute to the overall cost of PCI compliance for large enterprises.

  • Onsite Audit: around $40,000 
  • Vulnerability Scans: around $1,000 
  • Penetration Testing: around $15,000 
  • Training and Policy: around $5,000 
  • Remediation: $10,000 to $500,000 (varies based on requirements) 
  • Total Large Enterprise Costs: $70,000+ (adjusting with environment) 

Estimated Cost of PCI Compliance Depends on Several Factors: 

  • Business Type: The category of your business (e.g., Level 1 merchant, service provider, etc.) determines requirements due to varying data, risk, and environment setups. 
  • Organization Size: Larger organizations often face more compliance gaps due to expanded operations, staff, and departments, thus incurring higher costs. 
  • Security Culture: A strong security focus from management can align with security costs, while reluctance may hinder budget allocation. 
  • Environment Design: Network setup, system types, mobile devices, and tech choices all impact PCI costs. 
  • Dedicated Staff: External consultation often augments an internal team for comprehensive PCI understanding. 
  • Acquirer Pre-Payment: Some banks cover small merchant PCI costs, albeit infrequently. 

Strategies for Optimizing Compliance Costs 

Here are a few things you may want to consider about your approach to reducing compliance expenses without increasing the risk of operating outside the law or exposing yourself to some of the dangers that compliance is there to protect you and your customers from.  

1. Process Automation is Key. 

We’re seeing a great push for automated platforms in the market that help centralize various types of GRC programs. There is definitely some gain to be made from centralizing the location of the information. 

Additionally, when particular risk management assessments and task processing become automated, the likelihood of error decreases as the human element is removed from the equation. Not only will these processes then be less labor-intensive, but they will also be more accurate.  

Another positive aspect of automation is when risk assessment, task processing, and workflows become more automated, scaling is much easier. As a company grows, so does its IT infrastructure, workforce, and its scope of compliance. If automation is being fully utilized, it is much easier to adjust. 

2. Combine Compliance Efforts. 

Another solution that can optimize costs is the consolidation of compliance services. “When organizations need three or four different types of attestations or certifications, their compliance team should work to bring those efforts together. This saves costs by saving time; cutting out repeat tasks and eliminating duplicate work,” said David. 

This also makes the compliance process less stressful by combining the information-gathering efforts into one time period, rather than trying to find the information needed for three or four different sets of requirements.  

3. Invest in Compliance Resources and Personnel. 

The best way to optimize compliance costs, the approach that is going to deliver the most ROI, is having the internal dedicated resources needed to really understand your contractual requirements, regulatory requirements, and commitments to customers in protecting their data. Having the internal staff or outsourcing will provide the guidance and tools needed to ensure that your organization can go through an external or internal audit in a streamlined fashion. 

We see so many failed efforts by clients seeking a particular compliance certification. It’s a challenge when they don’t have the resources needed to actually get the audit done and then the audit ends up taking much longer. The whole process becomes much more strenuous and ultimately the implementation goals aren’t reached because of the lack of resources available. 

Having a skilled internal or outsourced compliance officer can save you money in the long run. By having someone onboard who understands the various costs of compliance and the challenges that are particular to ISO 27001 versus PCI, for example, is invaluable in terms of time and avoiding headaches.  

As hiring a compliance officer or investing in a compliance department can be expensive, it is even more expensive if you are caught operating outside of the law. Just remember that, on average, the cost of non-compliance is 2.65 times higher than the cost of compliance. Operating in non-compliance can result in heavy fines, restitution, or even put your business in jeopardy through the suspension of licenses or even expulsion from the industry itself.  

4. Constantly Address Any, and all Cyber Security Risks. 

As we discussed before, a major part of a business’s compliance efforts has to do with IT regulation. Regulators have consistently updated and added new IT regulations to help combat the rising threat of cyber-attacks and data breaches. Because of this, a responsible business should take a proactive approach to cyber security rather than a reactive approach. A company should prepare for when an attack occurs rather than if.  

Part of that preparation should include going above and beyond current regulations to help ensure the security of the data and privacy of your customers, employees, and intellectual property. For example, if current regulations mandate a vulnerability scan of your entire network once every 90-days, maybe you should perform scans once a month. Additionally, if a cyber-attack or data breach should happen to your company, you should have procedures in place that spells out how to respond to incidents and how to prepare for regulatory reporting.  

Cybersecurity is one of the biggest investments a company may make when it comes to compliance, however, there is the risk of even higher costs for a company that is not proactive about cybersecurity. Not only could a company be subject to fines if operating in non-compliance, but the consequences of a successful cyber-attack could be even costlier.   

How I.S. Partners Helps Your Organization to Decrease the Costs of Compliance 

“First of all, as a CPA audit firm, I.S. Partners must address those risks for our clients and then modify our audit approach to consider events like the COVID-19 pandemic, the cost of the a shutdown, and other regulatory factors.” 

David Dunkelberger

Our company also feels responsible for understanding our clients’ growing aversion to technology risk and the potential monetary impacts of a data breach. At the same time, we know that our clients often have multiple industry standards and regulatory obligations that need to be addressed. That’s why we package compliance efforts into one service and map the controls across all the different attestations that need to be done. 

Our automated client portal is a tool we currently use to help consolidate multiple efforts and streamline the compliance process. Our application simplifies that auditing by aligning similar types of requests and controls across multiple engagements. When we have a client dealing with multiple requirements for compliance–such as PCI, SOC, and ISO all at the same time– we can streamline that process on our client side. If they upload something that’s going to be necessary for all three engagements, we make sure that it’s added to all three of those engagements at the same time. 

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