How Cybersecurity Risks Impacts SOX Compliance?

How Cybersecurity Risks Impacts SOX Compliance?
Cyber security network concept. Business Man using smartphone with master key icon popup mobile screen and binary coded with flare light effect. Earth furnished by NASA

Last Updated on March 19, 2024 by Nasir Hanif

In the large and versatile business arena, cybersecurity plays an essential but highly complex role. The SOX (The Sarbanes Oxley Act of 2002), a federal law, provides the business investors standard protection from enterprises’ fraudulent financial reports and records. This act supervises the essential transparency in financial audits, governance, control assessments,disclosures, etc. While the matter comes in the IT industry, SOX directs the corporate firms to execute certain policies for detecting, disclosing, and preventing cybersecurity threats.

Today, the business world is entirely driven by digital technologies, from essential communications to transactions. And the day-by-day workflow is also supervised and monitored by digital technologies. So, corporate enterprises are taking initiatives to implement technology advancements for supporting business operations. In terms of evolving technology implementation, the management of business enterprises needs to confront the risks of cybersecurity.

The reasons for cybersecurity risk factors lie in the technological vulnerabilities or procedural errors by a human. Therefore, businesses require sustainable, secured, and consistent digital services with competitive edges.

Why does SOX Compliance Require Cybersecurity?

Business enterprises must have robust data management architecture with security edges because consistency and security are the major factors, which save business operations from unauthorized access. Thus, data management compatibility strengthens the security measures for backups. Essential algorithm of security edges enhances the systems to detect data breaching easily. Based on this next-gen security compatibility, organizations plan their communication strategy as their investors can remain aware of breaches. In an enterprise, reporting and annual audits are crucial business operations that require these proven technologies to ensure risk-free internal controls.

In the Wall Street Journal, 90% of cyber cases show that businesses cannot avoid their responsibility for these data breaching cases. Because if they maintain the culture of disclosing the cyber security threat before the annual audit and regular reporting, the cyber incidents can be prevented.

These are the reasons why SOX needs to involve signing officers or financial officers for serving clear evidence that the enterprises have a particular risk-free internal control infrastructure to represent accurate financial reports. So, the investors can get authenticated statements along with actual cybersecurity material information. As a part of the SOX compliance checklist, the financial executive officers need to check proper documentation to demonstrate the fact that the organization can work as SOX compliant. In these crucial cases, representation of reports with false statements only leads to non-compliance, which invites criminal penalties along with highly expensive fines.

Do Risk Factors Weaken SOX Compliance?

Is there any way to know about cyber security risk material, which can lead to non-compliance incidents? How can the executives understand that they are experiencing a breach? They need to review the alerts regularly because the lack of focus on these alerts makes them unaware of the crucial context of the cybersecurity threats. If the IT team can not reflect their expertise to analyze the risks, they will not be able to find out the correlations, which indicate the cybersecurity material risk.

The businesses should not neglect the security threats deeming the alerts about major cybersecurity material. There are always big changes, which leads to smaller threats towards crucial problems. If the IT executives avoid the connections between relevant events, an organization can miss the scopes to detect the cybersecurity threats and to mention them in their reporting. And continued negligence to the correlation between alerts must lead to data hacking, damages due to vital security breaches.

So, for taking care of the potential risks, you must arrange a strict monitoring protocol for the system evaluations. And the expertise of the IT team executes risk assessment. And after the assessments, the business enterprises can disclose the cyber security risk materials to the investors.

All these reasons make cooperation with the compliance process critical but corporations are essential to detect and assess the crucial threats across the networks. So, while the business enterprises are adopting the digital transformation culture, dependence on periodic reviews can’t meet the standard of security analysis. So, clockwise monitoring across the network is the best pathway to identify threats and neutralize them easily.

Standard Monitoring For Cybersecurity Threats

Cybersecurity monitoring is far different from performance monitoring. You can experience easily if the performance monitoring system is working efficiently or not. But it will never notify about the existing security threats. So, in the remote working culture, occasional cybersecurity scans will never let you know about malicious cyber attacks. You must need a 24x7x365 consistent monitoring protocol along with robust systems along with a managed detection and response service facility.

Can Comprehensive Cybersecurity Meet The Compliance Requirements?

Any business organization needs to prefer the latest tools, rapid testing procedures, and a high level of expertise to detect breaching. Because cybersecurity threat factors invite tremendous financial costs, as well as permanent data damage. And both of these incidents can lead to closure. To be SOX compliant an organization needs to implement robust internal controls to establish consistent security postures. Therefore, boosting the cybersecurity level ensures the overall IT compliance of a digital enterprise.