Third Party Reporting
SOC for Supply Chain
November 30, 2020 • Jacob Nix
The digital revolution has granted unparalleled access to increasingly better technology, while empowering businesses and consumers alike. These technological advancements have bridged traditional gaps between entities, vendors, and consumers, bringing them closer together than ever before. As this interconnectivity grows, so does the potential for supply chain risk.
In March, a new SOC for Supply Chain standard was issued by the AICPA to support the growing need to address and prevent such risks. This guidance is pivotal for any organization seeking to protect themselves and any business relationships from cyberattacks, data breaches, or hijacking, in addition to providing those same relationships with transparency and assurance that the controls and processes in place are secure.
Why is this important?
As the interdependence with external parties for an organization’s Supply Chain continues to increase and the risk landscape evolves, there is a need to not only address potential risks and liabilities, but also to provide evidence that you are protecting your partners that rely on you.
Similar to what SOC 1 did for Internal Controls over Financial Reporting and SOC 2 did for Cybersecurity, a SOC for Supply Chain report will become critical in the coming years and will move from being a prudent risk mitigation step, to a strategic differentiator to a requirement and barrier to entry in an extremely competitive landscape. Obtaining the expertise and guidance to understand and successfully implement these measures will be a key component of any organization that is vital in the supply chain.
What is it?
Like the SOC 2 report, SOC for Supply Chain examinations must describe the supplier’s system and processes, including one or more of the five trust service categories. However, SOC for Supply Chain reports must adhere to a new set of criteria, the DC300, which details descriptions of the system used to produce, manufacture, or distribute products, as well as how the system was designed and executed. This outlines the controls used to achieve the system’s objectives, in addition to test procedures and results. Once completed, they may be distributed to any parties inquiring about security controls and processing integrity.
A SOC for Supply Chain report not only grants suppliers a strategic competitive advantage, but it also allows them to streamline processes. Like other SOC reports, the SOC for Supply Chain leverages the “assess once, report many” model, and may ultimately reduce the number of requests and inquiries received from user entities, allowing suppliers to pivot time, attention, and resources to other components of the business.
As the risk landscape continues to evolve and adapt, so will regulations and requirements on the part of suppliers and consumers. However, because the criteria established for all SOC reporting are mapped to key compliance frameworks, organizations can be confident these criteria will continue to accurately guide risk management and processes.
For entities seeking to bolster their risk management throughout the manufacturing process, the SOC for Supply Chain is an effective solution for assessing systems, reporting on controls, and mitigating risk. This can be readily incorporated whether you have an existing RISCPoint Enterprise Control Framework, or can be streamlined into your existing compliance program through our proprietary approach.