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Home » Blogs » Think Tank » Is Your Supply Chain Software SOC-2 Compliant? Here's Why It Matters

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Data Management (Big Data/IoT/Blockchain) / Cloud & On-Demand Systems / Technology / Supply Chain Security & Risk Mgmt

Is Your Supply Chain Software SOC-2 Compliant? Here's Why It Matters

data
Network cables in a data center. Photo: Getty Images.
February 2, 2022
Scott Evans, SCB Contributor

When researching security frameworks, the alphabet soup that is SOC-1, SOC-2, HITRUST, ISO 27001, ISO 27701, ISO 22301, FedRAMP 3PAO, CMMC 3PAO, QSAC and CSA STAR may leave your head spinning. 

SOC-2, however, should be top of mind for supply chain software users.

Developed by the American Institute of CPAs (AICPA), SOC-2 — pronounced “sock two” — defines criteria for managing customer data based on five principles: security, availability, processing integrity, confidentiality and privacy. It's a rigorous audit framework, and has become a gold standard to ensure software providers handle data responsibly and securely.  

As more manufacturers, distributors and other supply chain stakeholders embrace digital transformation, security audits are becoming increasingly critical. The cost of data breaches, privacy violations or system downtime far outweighs the cost of a SOC-2 certification.

Digital threats and attacks are continuing to evolve, and successful companies in the supply chain industry will be those that recalibrate their security strategies. Those that fail to put security first will be at a severe disadvantage. When a company undergoes a SOC-2 audit, it demonstrates to key stakeholders its commitment to providing safe and secure services and ensuring that their clients’ information and assets remain tightly protected. 

Here’s a breakdown of the audit’s five core principles:

Security. Systems should be well protected, and uncompromising in their access and permissions architectures. Unauthorized disclosure of information and vulnerable systems cannot be tolerated. As raw materials supply chains become more digitized, it's key to secure them with the same intentionality we might secure physical premises.

Availability. Information systems should be accessible internally and externally when they need to be. It's not a specific measure of server uptime, but an assessment of whether the proper systems are in place to operate, maintain, and monitor a system. Supply chains, more than ever, are worth monitoring 24/7, and modern systems should enable that.

Processing integrity. Systems must run with the utmost efficiency, achieve specific aims without unnecessary delays or data manipulation, and process in a valid and accurate manner. Poorly handled data hinders reporting and decision making based off of that data.

Confidentiality. Sensitive information must be stored and processed in a way that makes sure unauthorized parties are never able to view it. This is especially important for supply chain platforms where many parties may access a certain piece of software, but should only see certain information, not that of their counterparties. 

Privacy. In the same vein as confidentiality, the AICPA outlines requirements for the privacy notices and disclosures for the personal information that an organization collects.

SOC-2 is rigorous, but it’s important to remember that certification does not equal a “perfect system.” 

The cybersecurity landscape evolves quicker than almost any other field of computing or engineering. Daily software updates, patches, and constant discussions aim to address issues with software underlying systems that we use every day — and this requires an organization paying great attention to the criteria outlined above. 

SOC-2 should not be viewed as just another compliance issue or legal requirement — it is a very tangible strategic framework for how to approach secure system design in large-scale platforms. And as supply chains digitally transform, companies should require that the software vendors they work with are also SOC-2 compliant.

Scott Evans is co-founder and chief executive officer of Waybridge.

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