It’s what’s NOT in the report that matters . . .

Five Suggestions to Learn What Controls to Expect Another  one of those Dan’s New Leaf Posts, meant to inspire thought about IT Governance . . . . 

We’ve discussed the difference between a SOC1 and a SOC2 report in a previous article.  As a result of that article, many of you are now using our SSAE-16 Review Checklist, which is a steal at $25.  Those of you who are Clients, let us know if you want one, they are still free for you! But how do we go about using the checklist?  The key question in the checklist, aptly numbered #13, is “what controls would you EXPECT to be in place for this type of service.” Much more easily asked than answered, I agree.

But if the need for a control is obvious, and it isn’t represented in the SOC, then your vendor may have issues!  

The feedback we’re getting on the checklist is “how are we supposed to know what controls should be in place.”  And our initial reaction is, “do you have an auditor?”  But I realize that some of you are afraid to ask your auditor, lest they make the question the subject of a future finding.  (And that’s the subject of a different article.) Whoever is coordinating your vendor due diligence review MUST learn what controls to expect for each of the vendors, products, services . . . . information assets . . . . that are at risk.  That’s the whole point of a vendor due diligence review. Simplified, the vendor due diligence process should answer three questions:

1) What should I expect?

2) Where are you NOT meeting those expectations?

3) What can we do to fix that?

Allow me to appeal to your sense of curiosity, and hopefully encourage you to spend some of your valuable time learning the answer to Question #1.  For if you do not know what controls to expect for a particular service, the quest to answer that question is EXACTLY what auditors and examiners are asking for out of your vendor due diligence process. And it’s okay to not know.  It is a good thing, to admit that you do not know.  Get that out of the way.  Shout it out to the entire world (or at least your committee).  Say it aloud now, as you read these words:  “I don’t know.” It’s the not-knowing that is driving the need for the process in the first place.  You don’t have to try to hide that you do not know . . . . that’s fighting the need.  Instead, you have to find out . . . Five Ways to Learn What to Expect: So . . . . ways to learn what controls to expect for a particular vendor:

1. Ask your auditor.  Say, “hey I”m reviewing xyz as a vendor, what controls would you expect them to have in place?”  You’ll be happy you got the answer!
2. Good old Google.  (I really need to buy stock in Google.)  By Google-ing the product, service, etc. you can learn which types of controls to expect.
3. Where are the assets stored?  What controls would YOU have to have in place if you were providing this service yourself?  (This is also a great exercise in “why-are-we-outsourcing-in-the-first-place?”
4. What are you seeing in other SOC2 reports?  And  why are you not seeing these controls in this vendor’s report?
5. Sure, ask your vendor.  But also ask your vendor’s competitor.  Many of the questions we get from our Clients often arise when they are talking to our competitors.

And of course, if you are so positioned to be an early majority adapter, consider utilizing an application-based approach to vendor management, where expected controls are queued up by the professionals publishing the software. We will be discussing this and much more in the Vendor Management Workshop coming up on August 21st, 2014, at the Indiana Bankers Association’s training center. But always remember, even if you are using the best of applications to manage vendor risk, you still need to understand:

1) What to expect.

2) How the vendor delivers on those expectations (and where is the vendor failing to meet expectations).

3) What can we do about it?

To summarize:  you can not escape the fundamental nature of vendor due diligence.  Regardless of the size of your organization, who your regulator is, whether you use an application or are still slugging it out the spreadsheet-way . . . . you must answer the three above questions!

Original article by Dan Hadaway CRISC CISA CISM. Founder and Managing Partner, infotex

“Dan’s New Leaf” is a “fun blog to inspire thought in the area of IT Governance.”