In today’s business, we build success based on trust. Trust is important since the organizations depend on it to establish interactions with clients and stakeholders and when it comes to this then they are expected to be transparent, accountable and reliable. In case of businesses that outsource the services, this trust is even more important to prove. The first such reports are the SOC 1 reports (System and Organization Controls reports) which are the first reports to provide a solid framework for the building and maintaining of trust through evidenced verified control systems.

This article will cover what are SOC 1 reports, how they are used to prove accountability, the benefits to clients and stakeholders, and real life examples of how they help foster trust.

1. Trust in Business

Trust isn’t a value, it’s a currency that enables long term business success. Sharing sensitive data (of which there is much) takes place in industries like financing, IT, and healthcare; therefore, trust is not negotiable in the operations of these industries. The security of their data management and the reliability of their service need to be reassured to customers and stakeholders.

However, verbal reassurance isn’t enough to build trust. Organisations are now required to prove to the world with concrete evidence that the systems, processes and controls used in their operations are in line with industry standards. Frameworks such as SOC 1 are where that comes to play. The American Institute of Certified Public Accountants (AICPA) develops SOC 1 reports that evaluate an organization’s internal controls over financial reporting effectiveness.

Businesses use SOC 1 reports as a way to assure their clients and stakeholders that their systems are not only efficient, but secure, reliable and transparent as well.

2. Why SOC 1 is an Indication of Accountability

Basically, a SOC 1 report is a proof of responsibility of an organization. Of special interest to those organizations that outsource financial services (such as payroll processing, fund management and accounting services) the standard is designed to determine and verify that an organization has controls in place that will lead to accurate financial reporting.

Here’s how SOC 1 reports demonstrate accountability:

Independent Verification

SOC 1 audit is done by an independent third party auditor to assess an organisation’s internal controls. It’s an impartial verification, which provides clients and stakeholders with unbiased assurance of credibility.

Transparency in Operations

SOC 1 reports break down the processes and controls an organization has in place in great detail, allowing you to see exactly how the organization operates. The transparency reduces trust and uncertainty’s degree, particularly in high stakes industries.

Risk Mitigation

SOC 1 audits assist organizations in identifying potential control weaknesses and then proactively correcting them. This further demonstrates commitment to continuous improvement and risk management and also improves operational efficiency.

A SOC 1 report is, basically, a badge of accountability: an organization that cares enough about its integrity and trustworthiness will get one.

3. It’s good for Clients and Stakeholders

SOC 1 reports benefit clients and stakeholders with multiple benefits adding to building the trust and the basis for the long term relationships.

For Clients

• Assurance of Control: A SOC 1 report would confirm to a client that the client’s financial data is protected by effective controls.
• Compliance Support: SOC 1 reports give clients the ability to meet their own regulatory or audit requirements without spending time or resources.
• Risk Reduction: As a SOC 1 certified provider we reduce your risk of error, security breach and the damage this could cause to your reputation and finances.

For Stakeholders

• Improved Decision-Making: Stakeholders can rely on SOC 1 reports to make decisions using verified data about the organization’s reliability and process of controls.
• Increased Confidence: The independent validation from a SOC 1 Audit tells stakeholders that the organization is serious about excellence and transparency.
• Enhanced Reputation: An organization with SOC 1 certification puts them in a good position over its competitors as stakeholders consider them to be a trustworthy and credible entity.

SOC 1 reports therefore create a win-win situation for service providers, and its clients and stakeholders; where smooth, secure and reliable operations are carried out.

Case Studies/Examples

To illustrate how SOC 1 reports can help you in the real world, let us look at a few examples of organizations that used SOC 1 reports to establish credibility and success.

Example 1: Payroll Service Provider

A global payroll service provider had a multinational client who wanted assurance that employees were being paid in the right way, and in compliance with local regulations. The provider had systems and processes in place and proved it with a SOC 1 report showing it was in compliance with robust control standards. But this helped not only cement client relationships, but also secure contracts with larger enterprises that needed to be compliant.

Example 2: Financial Management Firm

Stakeholders at a mid size financial management firm managing portfolios of high net worth individuals were starting to become concerned about data security and reporting accuracy. A SOC 1 report proved the strength of the firm’s financial reporting controls, which in turn improved the reputation of the firm and the firm’s ability to acquire new clients.

Example 3: IT Outsourcing Company

A SOC 1 report can be used by an IT outsourcing company to demonstrate that its internal controls were functioning and were used to implement financial applications for its clients. This was a key report in allowing us to keep a key client who was in the process of evaluating other vendors. The client had the transparency the outsourcing firm’s operations gave them through the SOC 1 report.

These examples demonstrate how the SOC 1 reports can be used as tools to transform challenges into opportunities to build trust and relationships.

Conclusion

With trust and accountability more important than ever, SOC 1 reports offer a strong way organizations can demonstrate their commitment to transparency and reliability. SOC 1 reports are important for clients and stakeholders to receive independent verification that the data they are managing is secure and that the financial reporting that they need is accurate.

Long term success can be achieved through the use of SOC 1 reports to improve compliance and manage risks, forge stronger client relationships and stakeholder confidence. They are an invaluable resource for any industry that demands exceptional reliability and security, because of their ability to build trust.

For an organization seeking to build and sustain trust, the road to obtaining the SOC 1 report can be easy if you choose to partner with an expert such as IRQS (Indian Register Quality Systems). IRQS has decades of experience in quality assurance and certification, helping organisations meet international standards, so that it can be possible for organisations to develop better, more reliable relationships with clients and other stakeholders.