According to a Hyperproof Survey, more than 60% of businesses fail their IT compliance audit. Companies that fail can face consequences such as fines that can exceed $100,000, legal fees and operational disruptions.
But even more sobering is that companies that fail a compliance audit are 10 times more likely to suffer a cyberattack, placing their entire business at risk. (Techopedia). The financial and reputational risks can be overwhelming, especially as regulations evolve and become increasingly complex.
It’s possible that some companies aren’t compliant simply because they didn’t know which regulations applied to them. This is particularly common in small businesses or startups that may not have access to legal expertise. A lack of awareness or misunderstanding of the laws can lead to significant non-compliance issues.
The good news is that by working with a Managed Service Provider (MSP) like Element Four, you can streamline your compliance processes, avoid costly mistakes, and focus on growing your business instead of dedicating a resource to compliance. In addition to ensuring you pass audits, an MSP helps safeguard your systems by implementing the right cybersecurity measures—minimizing the effectiveness of ransomware and other cyber threats that often follow failed audits (Techopedia).
However, some companies manage compliance independently, and if you’re one that is and aren’t sure where to start, or maybe preparing for an upcoming audit, what follows is our advice.
Steps to Ensure a Smooth Compliance Audit
Understand the Regulations That Apply to You
Determining which compliance regulations apply to a business depends on several factors, such as the industry you’re in, the type of data you handle, and your geographic location. The first and most crucial step in preparing for a compliance audit is identifying the specific regulations your business must follow. Whether you’re in healthcare (HIPAA), retail (PCI-DSS), or finance (SOX), each industry has its own set of standards. Global companies may also need to comply with regulations like GDPR, making compliance even more complex (F5, Inc.) (Techopedia).
Additionally, industry associations can be valuable resources for understanding compliance obligations specific to your sector. Many associations provide guidelines, tools, and updates on new regulations, helping companies stay compliant.
Here are some key compliance points to consider:
1. Industry: Different industries are subject to different regulations. For example:
- Healthcare must comply with HIPAA to protect patient data.
- Retailers accepting card payments need to meet PCI-DSS standards to protect cardholder data.
- Financial institutions are typically subject to SOX (Sarbanes-Oxley Act) or similar financial reporting regulations.
- Educational Institutions must comply with many regulations including HIPAA and FERPA. See Ransomware Attacks on Educational Institutions for more information.
2. Data Sensitivity: If your company handles personal or sensitive data (such as health information, credit card details, or financial records), you’ll likely be required to comply with regulations designed to protect that data, even if you’re not in a heavily regulated industry.
3. Geographic Location: Global companies or those handling data from international customers may need to comply with laws like the GDPR (General Data Protection Regulation) if they deal with customers in the European Union. Similarly, many states or countries have local privacy laws, such as CCPA in California, that businesses need to be aware of.
4. Customer Contracts: Sometimes, the need for compliance isn’t driven by laws but by customer or vendor contracts. For instance, a company may be required to comply with certain standards (like SOC 2) if it provides services to another company that demands those protections in its vendor agreements.
If you are still unsure:
- Consult with legal or compliance experts: A specialized attorney or compliance consultant can help you navigate this complex space.
- Perform a data audit: Understanding what types of data you collect, store, and process will help identify which regulations are relevant.
- Review industry standards: Many industries have compliance frameworks, like NIST in the technology sector, that guide companies on best practices for data security and regulatory adherence.
Document Everything
One of the most frequent reasons businesses fail compliance audits is insufficient documentation (F5, Inc.). From policies to performance records, it’s important to create a “paper trail” that shows your adherence to compliance standards over time.
Tip: Automating certain tasks, such as system logging and user authentication, can help reduce human error and ensure that you’re consistently meeting compliance standard.
Conduct Regular Risk Assessments
Compliance isn’t a one-time effort. To stay ahead of potential risks, it’s important to continuously assess your vulnerabilities. A thorough risk assessment ensures that your controls are focused on the highest-risk areas (F5, Inc.). This process is often complex, involving collaboration across departments to gather relevant data.
Tip: Many companies find that outsourcing their risk assessments to an MSP provides a fresh, independent perspective, further reducing the chance of audit failure. (F5, Inc.).
Prepare Your Team Ensuring that everyone in your organization understands their role in maintaining compliance is essential. This includes training employees on regulatory requirements and implementing regular updates as policies change.
Tip: A compliance management tool can help track training and policy updates, so nothing is missed before the audit.
Conduct an Internal Pre-Audit Before your official audit, performing an internal audit is key to identifying potential gaps in your compliance. This involves assessing your internal processes and controls, such as data security protocols, system logs, and employee training . It’s a time-consuming task that requires extensive documentation and careful analysis.
Each of above steps requires meticulous attention to detail and consumes significant internal resources. If that seems overwhelming to your small team, Element Four can mitigate much of this burden, ensuring you remain compliant without dedicating disproportionate time and effort. Element Four is SOC 2 Type II certified, ensuring the highest standards of security, confidentiality, and privacy for your data. This certification reflects our commitment to safeguarding your sensitive information through rigorous, ongoing compliance with industry-leading practices.
While you focus on your business, Element Four ensures that your compliance needs are met efficiently and effectively.
