Get Started with SOC 2 for Vendor Risk Management

soc 2 for third party risk management

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:

  1. Security
  2. Availability
  3. Processing Integrity
  4. Confidentiality
  5. 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 and verify documentation at one specific point in time.
  • SOC 2 Type 2 reports: Test controls repeatedly over a period of time to reveal trends, collecting evidence about the implementation of said controls.

SOC 2 Type 2 reports are generally preferred in vendor risk assessments because they are evidence based.

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 cybersecurity 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 Bitsight Vendor Risk Management

As a leader in cyber risk management, Bitsight recognizes the burden that risk assessments and due diligence efforts put on organizations.

With Bitsight VRM, you can address SOC 2 requirements related to third-party risk controls 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

Bitsight VRM provides a central repository for vendor management, with capabilities such as rule-based access management, and tiering logic for prioritizing vendor risk assessments and mitigation efforts. The tool automates the end-to-end vendor risk assessment process, including setting risk and impact scoring based on risk acceptance and tolerance levels.

Backed by a stellar Customer Success team and Professional Services, Bitsight facilitates setting up and optimizing your vendor management program. SOC 2 compliance doesn’t have to be painful. Talk to an expert today.