In this case, SOC stands for Systems and Organization Controls. SOC 2 is a standard designed for non-financial reporting (i.e., not directly tied to revenue) for stakeholders and regulatory compliance. Within SOC 2 there are two types of reports that describe a service organization’s system (including security, availability, processing integrity, confidentiality, and privacy). Type 1 reports describe whether the controls’ designs are suitable whereas Type 2 reports describe whether the controls in place are effective.
It’s important to understand that SOC 2 is voluntary, therefore nobody is required to pursue SOC 2. With that said, completing a SOC 2 can be very advantageous to businesses, as it gives proof to potential clients that your company can safely and securely handle data while following best practices.
SOC 2 reports are generally performed for organizations that offer technology-based service organizations, such as data centers, managed services providers, software-as-a-service (SaaS) vendors, and cloud-based service providers.
Which SOC 2 type to pursue depends on your goals, timeline, existing SOC 2 status, scope, and the client targets that you are setting.
The type 1 report is less thorough than the type 2 report. Type 1 carries less weight, but it generally takes less time to perform (although the initial SOC 2 type 1 report can take up to a year). If you have moderate sized client targets, a type 1 may be acceptable.
Type 2 reports typically require more time and resources but it’s also more attractive to large clients because they know you can both set up and follow through on proper data security measures. Also, if you already have a type 1 in place, you have a head start towards the type 2.
In both cases, scope can affect the amount of time to execute. If your organization offers multiple services, it could complicate the process and add to the timeline. It’s a good idea to limit scope where you can to help you meet deadlines.
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