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Summing It Up

Keeping you ahead of the curve with timely news & updates.


Dave Hansen

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SOC for Cybersecurity: What you Need to Know

IAICPA's SOC for CybersecurityA New Form of Assurance for the Ever Increasing Cyber Threats

2017 security breaches.pngCybersecurity breaches across the country and around the world have heightened the awareness and attention of business executives, financial investors, boards of directors and the general public. With the number of breaches on the rise many experts are saying it’s a matter of when, not if, a breach will occur at any organization.

Although no one form of control can guarantee 100 percent security, a well-defined and implemented cybersecurity risk management framework will substantially reduce the likelihood of a breach.  

With the implementation of the System and Organization Control (SOC) Report for Cybersecurity, the AICPA recognized the need to help organizations report on the effectiveness of their internal controls designed to prevent, detect, and respond to cybersecurity threats. Their objective is to provide a mechanism for providing corporate directors, senior management, and other constituents of organizations information on an organization’s cybersecurity program through the use of a common reporting framework of criteria designed specifically for evaluating cybersecurity risk.  

The new SOC for Cybersecurity is designed to be a reporting mechanism for any organization, not just service organizations (i.e. organization that provide services to other organizations), which is how all other SOC reporting options are currently designed by the AICPA (SOC 1, 2, and 3 examinations). This reporting option was constructed with the mindset to provide a consistent reporting mechanism for any company looking for assurance over its cybersecurity controls.

Differences Between the SOC for Cybersecurity and the AICPA’s SOC 2 Examination Option - A Supplement, Not a Replacement

This new SOC report supplements the AIPCA’s SOC 2 reports on an organization’s controls designed to meet the Trust Services Framework, which currently does not include criteria for an organization to report on its controls specifically designed for cybersecurity risk.  

With the increased scrutiny and evaluation of third and fourth-party service provider risk as part of comprehensive vendor management programs mandated by various regulators, the SOC 2 was considered inadequate in many ways with respect to addressing cybersecurity controls. The new SOC for Cybersecurity will help organizations bridge that gap.

Other noteworthy differences  between the SOC for Cybersecurity and SOC 2 reports:

  • The SOC for Cybersecurity is not restricted to service organizations and can be a reporting mechanism for any company’s cybersecurity framework. The SOC 2 is designed to report on controls over a service organization’s security, availability, processing integrity, confidentiality 
  • SOC 2 reports can be issued under two types, one of which includes an evaluation of the design and operation of controls over a period of time, thus providing greater assurance to users of the report that the controls are in place and operating within a service organization’s control environment. The SOC for Cybersecurity report does not include information on control design and operating effectiveness over a period of time, potentially providing less assurance that the controls for the entity’s cybersecurity program are indeed in place and operational on a continuing basis.  
  • Many organizations use third-party service providers to operate various aspects of their business, commonly resulting in reliance on those subservice providers to have controls of their own. SOC 2 reports enable a service organization to identify the controls they expect their third-party providers to have implemented and allows them to carve-out those control responsibilities from their control environment. However, the SOC for Cybersecurity does not offer an option to delegate any related control responsibilities to third-parties. Instead organizations are responsible for having all controls required to meet the cybersecurity framework requirements outlined by the AICPA.

What SOC Report Should You Consider?

Regardless if you are a user of reports or a service provider with the objective of providing your customers with some degree of assurance, chances are no single SOC report will meet all the needs of your organization.  

There are several considerations that may make one report more applicable than another, however increasing demands for greater clarity and reassurance may mean more than one report is required.

The broader needs of most user entities will largely be covered by a SOC 2 examination, including the relevant scope of services and trust service principles that relate to its commitments and requirements to customers. That said, the increased attention and focus on cybersecurity may still require completion of a separate SOC for Cybersecurity.  

Cybersecurity for New York State Water Supply AuthorityAs seen within the new regulation over cybersecurity issued by New York State’s Department of Financial Regulators, regulators are putting increased pressure on their constituents and adding requirements for vendor management programs to be more comprehensive, specifically to include due diligence measures that cover cybersecurity.  

And to provide the necessary assurance being sought by an organization’s leadership and investors, the SOC for Cybersecurity provides an opportunity to answer the questions being asked by so many.

If in doubt, or to learn more about SOC reporting options for your company, contact our dedicated team of professionals that focus and provide SOC services on a national basis. Click here or call Dave Hansen, Principal, at 585.360.1481 to connect.

More Insights and Guidance on Cybersecurity Issues - Click here.

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New York’s Cybersecurity Regulation: 10 Ways it Will Make the Life of Third-Party Providers Harder

10-ways-new-york-cybersecurity-regulation-.jpgIf you are a third-party provider of cyber services to a “covered entity” in New York State, the Department of Financial Services just made your life harder.

The New York cybersecurity legislation that went into effect on March 1, 2017 (23 NYCRR Part 500) imposes new cyber security requirements on financial institutions, insurance agencies, and other covered entities which pass down and through to you.


NY-state-cybersecurity-regulations.pngHighlights of the New York Cybersecurity Requirements

Here are a few highlights of the legislation that could have an impact on your policies, processes and cyber security practices:

  • Each Covered Entity will do an assessment of you based on the services you provide and your access to information systems and/or nonpublic information belonging to them.  
  • Based on the assessment, each Covered Entity you work with will define the minimum cybersecurity practices required for you to implement and operate to do business with them. 
  • The regulation outlines specific sections of the regulation (e.g. encryption, multi-factor authentication) you must implement if you have access to any information deemed non-public, or access systems that store such information.
  • There will likely be uncertainties and a lack of consistency in the way each Covered Entity deals with you as the regulation leaves the definition of acceptable minimum cybersecurity practices by third party providers up to each Covered Entity. However, since their evaluation of you will be reviewed and assessed by the DFS, we anticipate the requirements will vastly mirror what they are required to comply with as part of the regulation.
  • It’s likely that if a Covered Entity you work with as cybersecurity policies and practices in place that address the following areas, so too will you:
(a) information security;
(b) data governance and classification;
(c) asset inventory and device management;
(d) access controls and identity management;
(e) business continuity and disaster recovery planning and resources;
(f) systems operations and availability concerns;
(g) systems and network security;
(h) systems and network monitoring;
(i) systems and application development and quality assurance;
(j) physical security and environmental controls;
(k) customer data privacy;
(l) vendor and Third Party Service Provider management;
(m) risk assessment; and
(n) incident response.
  • From time to time, each Covered Entity you do business with will need to conduct a due diligence assessment of your cybersecurity policies and practices to see if they are compliant with their policies and practices, and the new regulation.  We believe that a standard SOC 1 or 2 report will lack the specific attributes required to provide adequate assurance that your cybersecurity program is sufficient.
  • You will be required to implement Multi-Factor Authentication or Risk-Based Authentication to protect against unauthorized access to Nonpublic Information or Information Systems.
  • With certain exceptions, you will be required to implement encryption to protect Nonpublic Information in transit and at rest, which could be cumbersome and expensive.   
  • You will be required to provide notice of any cybersecurity event directly impacting your Information Systems or your Nonpublic Information affecting Covered Entities you do business with. This requirement may seem straight forward, but there is uncertainty as to what constitutes a cybersecurity event that warrants notification, and how quickly notification must be provided.
  • All contracts with you have with third party providers will need to include “representations and warranties addressing the Third Party Service Provider’s cybersecurity policies and procedures.”

Will Your Customers Require You to Do a Cybersecurity Audit?

The possibility exists that a Covered Entity you’re doing with will require you to conduct and report on a comprehensive audit. However, this may be VERY difficult and problematic for both you and the Covered Entities you do business with.

We believe, however, that the best option for compliance purposes (and our recommendation) is that that you have a specific examination performed by an independent CPA firm to attest to your cybersecurity practices in place.  

In fact, the AICPA recently released a Cybersecurity Risk Management Reporting Framework and a System and Organization Controls (SOC) reporting option specifically designed to provide a robust, consistent mechanism for reporting on the cybersecurity programs of companies as a means of providing assurance to users of the company.  

Where to start?  

We suggest that the first step in the process of getting into compliance with the 2017 New York State Cybersecurity Regulations and the requirements of the Covered Entities you do business with be a comprehensive assessment of your current cybersecurity program and controls against these regulations and other leading frameworks to validate its design and operation.  

New York’s Cybersecurity Regulation Requires Covered Entities to Oversee Their Third-Party Providers The experts in Freed Maxick’ s Risk and Technology Advisory and Assurance Practice can help you to this end, as well as assisting in development and implementation of a remediation plan.  

Our thorough assessment includes investigations of your policies, processes and practices governing your relationship with all relevant Covered Entities, as well as an assessment of their programs to provide assurances of you compliance with their requirements.

To schedule an initial consultation, click here or call Dave Hansen, Principal, at 585.360.1481. Or you can download our full New York Cybersecurity Regulation whitepaper here. 

More Insights and Guidance on Cybersecurity Issues - Click here.

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Requirements for New York’s Department of Financial Services 2017 Cybersecurity Regulation for Managing Third-Party Providers

New York’s New Cybersecurity Regulation If you are a “Covered Entity” regulated by the New York State Department of Financial Services you must be compliant with the newly issued cybersecurity legislation that went into effect on March 1, 2017 (23 NYCRR Part 500), and you are also responsible for compliance by your third-party providers.   

Third Party Cybersecurity Compliance Requirements in New York

Relative to how you employ and manage third party providers, here are a few highlights of the legislation that could have an impact on your policies, processes and cyber security practices:

  1. For the third party providers you work with, you will need to define the minimum cybersecurity practices required for them to do business with you.
  1. For the third party providers you work with, you will need to inform them of the sections of the regulation (e.g. encryption, multi-factor authentication) they must implement.
  1. You must do an assessment of each third-party provider’s cybersecurity program, policies and practices based on their access to your information systems and/or nonpublic information.
  1. You will be responsible for defining and communicating your acceptable minimum cybersecurity practices with each third-party provider you do business with.
  1. The cybersecurity policies and practices you have in place will likely need to be mirrored by each third-party provider you do business with.
  1. From time to time, you will need to conduct a due diligence assessment of your third-party providers’ cyber security policies and practices to see if they are compliance with your policies and practices, and the new regulation.  
  1. Your third-party providers will be required to implement Multi-Factor Authentication or Risk-Based Authentication to protect against unauthorized access to your Nonpublic Information or Information Systems.   
  1. With certain exceptions, your third-party providers will be required to implement encryption to protect Nonpublic Information in transit and at rest.
  1. Your third-party providers will be required to provide notice of any cybersecurity event directly impacting your Information Systems or your Nonpublic Information.
All contracts you have with third party providers will need to include “representations and warranties addressing the Third-Party Service Provider’s cybersecurity policies and procedures”

Do Covered Entities Need to Require a Comprehensive a Cybersecurity Audit from Their Third-Party Providers?

Having all your third-party providers conduct an audit of their cyber security program may be VERY difficult and problematic for both you and them.

One alternative for compliance purposes for compliance purposes (and our recommendation) is that that you have a specific examination performed by an independent CPA firm to attest the cybersecurity practices they have in place.  

Comply with New York's 2017 Cybersecurity Regulations: Start Here.

New York’s Cybersecurity Regulation Requires Covered Entities to Oversee Their Third-Party Providers The process of getting into compliance with the New York State Cybersecurity Regulations and their “pass through” to your third-party providers should start with a comprehensive assessment of your current cybersecurity program and controls against the new regulations and other leading frameworks to validate its design and operation.  

The experts in Freed Maxick’ s Risk and Technology Advisory and Assurance Practice can help you to this end, as well as assisting in development and implementation of a remediation plan.  

Our thorough assessment includes investigations of your policies, processes and practices governing your relationship with all relevant third party providers, as well as an assessment of their programs to provide assurances of their compliance with your requirements.

You can download our full New York Cybersecurity Regulation whitepaper here. To schedule an initial consultation, click here or call Dave Hansen, Principal at 585.360.1481.

More Insights and Guidance on Cybersecurity Issues - Click here.

View full article