Tag: Standards

Outsourcing trends

Organizations are continually in pursuit of opportunities to leverage their competitive advantages, expand into new markets, and bolster their profits. An emerging trend in the corporate landscape involves the outsourcing of non-core business functions. However, even with this outsourcing, it remains the responsibility of management to oversee risk management and the effective implementation of a robust control framework. Consequently, there has been a rising demand for control assurance, often evaluated through standards such as ISAE 3402 or ISAE 3000, especially for activities carried out by third parties.

Historical Background For most of the 20th century, the dominant business model revolved around large integrated companies that had complete ownership, management, and control over their assets. These corporations emphasized diversification to broaden their corporate foundations and capitalize on economies of scale. As the century unfolded, a shift occurred, compelling many large enterprises to adopt a strategy that focused on their core business areas. This approach aimed to enhance flexibility and creativity by identifying critical processes and determining which could be entrusted to external service providers.

The World of Outsourcing Globalization, heightened competition, and cost pressures have driven organizations to outsource a broader range of vital business functions to external service providers. This extends beyond traditional back-office tasks, impacting an organization’s financial statements and essential business processes. As a result, there is a growing need to instill confidence in outsourced business processes. How can an organization regain control and assurance over processes that are no longer directly managed?

Expanding outsourcing practices and entrusting critical business data to external entities inevitably heightens security concerns and risks. Potential consequences include operational disruptions, financial setbacks, or damage to an organization’s reputation, all due to security deficiencies within the realm of outsourced services. To mitigate these risks and regain assurance over outsourced operations, organizations are increasingly turning to independent assessments of the critical processes that have been delegated to external service providers, particularly concerning IT systems.

Common Motivations for Outsourcing Include:

  1. Control and cost reduction
  2. Enhanced focus on core business processes
  3. Access to world-class capabilities
  4. Optimizing internal resources for alternative uses
  5. Increased efficiency in specific functions
  6. Insufficient internal resources
  7. Risk-sharing with other organizations

The Current Landscape: Strategic Partnerships In the ongoing evolution of outsourcing, a significant shift has occurred, challenging the earlier notion that organizations could not outsource their core competencies. This paradigm shift has made standards such as ISAE 3402 | SOC1 and ISAE 3000 | SOC2 common practice, facilitating organizations’ engagement in strategic partnerships.

Enterprise Risk Management

To achieve its organizational objectives, an entity must effectively address and manage the risks that pose a threat to those objectives. COSO provides a structured framework for establishing the various components of an internal control system to facilitate this process.

The COSO model illustrates the direct correlation between:

  1. Organizational objectives,
  2. Control components, and
  3. The specific activities or units that require internal control.

COSO elucidates the interplay between business risks and the internal control system. According to COSO, internal control serves as a dynamic process designed to instill confidence in the accomplishment of objectives within four primary categories:

  • Realizing strategic objectives (Strategic).
  • Enhancing the efficiency and effectiveness of business operations (Operations).
  • Ensuring the reliability of financial information provision (Reporting).
  • Adhering to relevant laws and regulations (Compliance).

Furthermore, organizations must demonstrate their adept handling of uncertainties to investors and stakeholders, in line with requirements like the Code Tabaksblat and the Sarbanes-Oxley Act. In the Securance approach to Enterprise Risk Management (ERM), risks are thoroughly assessed and their potential consequences are meticulously mapped. Securance employs the most current standards, methods, and techniques in the realm of risk management to accomplish this.

What Does an Enterprise Risk Management Offer?

  • Enhanced insight into your organization’s critical risks.
  • Qualitative and quantitative evaluation of identified risks.
  • Guidance and recommendations for the current risk management practices.
  • Clarity regarding the financial implications of risks for your organization.
  • A foundation for designing and implementing risk management strategies.
  • Support in demonstrating accountability for risk management.

About Securance
Securance specializes in governance, risk, and compliance services. As a pioneer in the field since 2004, Securance is the market leader in the Netherlands and remains at the forefront of ISAE 3402 implementation and certification. In addition to ISAE 3402, Securance extends its services to encompass ISAE 3000, GDPR/AVG, ISO 27001, ISO 9001, and COSO ERM.

Benefits High-Level Structure

HLS, or High-Level Structure, is a frequently discussed concept in ISO standards. But what does it entail? What are the requirements for companies, and what advantages does it offer in the context of ISO standards?

The modern ISO standards we encounter today are built upon the framework of the HLS (High-Level Structure). HLS can be described as a universal template for management system standards that facilitates the integration of business operations. Information security holds paramount importance for every company, and ISO 27001 serves as an international framework for information security. ISO 27001 can be employed to establish robust information security practices. The latest iteration of ISO 27001 was released in 2017, and it follows the HLS structure. HLS, short for High-Level Structure, is an initiative aimed at creating a standardized framework for management system standards. This structure is founded on a “plug-in” model, designed by ISO in response to market demands for consistent and logically connected management system standards.

The High-Level Structure significantly eases the process of integrating new ISO standards. What makes HLS especially advantageous is the creation of a foundational system, into which various standards can be seamlessly integrated. Organizations need to meet several requirements to effectively implement HLS, including:

  • Risk management
  • Leadership
  • Compliance management (also essential for ISO standards)
  • Demonstrability
  • Improvement management

The benefits of HLS in an organization are manifold. As mentioned, it streamlines the implementation of different ISO standards within the organization, ensuring that management system standards are coherent and logically structured. This approach places the stakeholders’ needs at the core of the organization’s management, granting a more direct role to management and greater involvement in the implementation of the management system.

SOC 2 vs. SOC 1

ISAE 3000 | SOC 2 reports and ISAE 3402 | SOC 1 Type 2 reports share a similar design, but their distinctive scopes set them apart.

ISAE 3402 | SOC 1 Type 2 Report
An ISAE 3402 | SOC 1 Type 2 report serves as an assurance statement issued to an organization. This report delves into how a service provider manages risks associated with outsourced processes. The assessment framework encompasses both the outsourcing itself and the financial processes, particularly examining any ties to annual accounts. In the financial sector, demonstrating an ISAE 3402 | SOC 1 assurance statement is customary, especially for organizations that purchase services. For instance, a financial institution typically demands an ISAE 3402 | SOC 1 report from suppliers before engaging their services.

The key principle behind ISAE 3402 | SOC 1 is that objectives must align with the needs of the organization acquiring the service. In essence, the control framework, comprising control objectives and measures, can be tailored to the specific needs of the organization. The underlying concept is that the risks associated with outsourcing activities are contingent on the circumstances, making the management objectives and measures a customized effort.

ISAE 3000 | SOC 2 Report
In an ISAE 3000 | SOC 2 report, the assessment framework pivots on information security rather than the act of outsourcing. ISAE 3000 | SOC 2 reports don’t center on financial processes but, instead, focus on Trust Services Criteria, encompassing security, availability, confidentiality, processing integrity, and privacy within a service organization. The scope of an ISAE 3000 | SOC 2 report is determined by predefined management objectives, known as the Trust Service Criteria.

ISAE 3000 | SOC 2 primarily revolves around ensuring that the data processed or hosted does not impact the financial statements of clients. Clients are particularly concerned with the correct handling of information security and privacy. For example, an ISAE 3000 | SOC 2 report is instrumental in providing assurance regarding external Cloud services.

About Securance
Securance offers a spectrum of services in the domains of information security, risk management, and governance. Alongside advisory services and risk sourcing, Securance provides software solutions that empower organizations to independently implement complex standards. This approach has positioned Securance as a trailblazer and market leader in the Netherlands, driving solutions for risk management and the implementation of standards like ISAE 3402 (SOC 1), ISAE 3000 (SOC 2), GDPR/AVG, ISO 27001, ISO 9001, and COSO.