Industrial Regulatory Compliance and Frameworks

In 2022, cyberattacks around the world increased by 38%. cybercrime increased by 60.9% from 2022 to 2023 because of advanced technologies like AI.

The growing number and seriousness of these attacks show why cybersecurity is important. To create the right rules and plans to protect your organization, you need to know what kinds of threats you face.

Protecting your organization’s data is essential. There are many regulatory and security compliance frameworks to choose from, so how do you know which ones are right for your business? Why are these frameworks important, and how can they improve your security?

The right framework helps you manage risks and meet legal and contractual obligations. This article will explain the basics of regulatory and security compliance frameworks to help you choose the right ones for your organization.

Why Compliance Frameworks Matter?

Compliance frameworks give clear guidelines and best practices for data security and privacy. Created by industry experts, they help companies manage cybersecurity challenges. Following a trusted framework ensures organizations are protecting sensitive data, reducing security risks, and meeting legal requirements.

Compliance frameworks are important for several reasons:

1. Creating a Secure Environment: They provide a plan to build a secure system suited to your industry, whether it’s healthcare, finance, or retail.
2. Standardizing Security: They help standardize security measures, making it easier for organizations to work together safely.
3. Legal Requirements: Compliance is often mandatory. Not following these frameworks can lead to severe financial penalties, legal issues, and harm to your brand’s reputation.

How to Decide Which Compliance Frameworks to Adopt?

Choosing the right compliance frameworks depends on several factors:

1. Industry Specifics: Some frameworks are specific to certain industries. For example, healthcare organizations in the U.S. must follow HIPAA, while financial institutions need to comply with SOX.
2. Geographical Reach: Your location and where your customers are can dictate which frameworks you need. For instance, EU customers require GDPR compliance, and serving a global market may require ISO 27001 certification.
3. Business Objectives: Your goals can also influence your choice. If you’re targeting a specific market or planning to get acquired, certain frameworks can make you more attractive to investors or buyers.
4. Resource Availability: Implementing a framework takes time, people, and technology. Your resources can affect which frameworks you can adopt and when.

What is Regulatory Compliance Frameworks?

Regulatory frameworks are guidelines and rules set by governments or regulatory bodies to oversee specific activities or industries. These frameworks are legally required and ensure that industries operate safely, fairly, and sustainably.

Major regulatory frameworks used worldwide.

GDPR (General Data Protection Regulation)

The GDPR gives EU citizens more control over their personal data and changes how organizations handle data privacy. It applies to organizations inside and outside the EU that deal with EU residents’ personal information.

What is personal data? Personal data includes any information about an identified or identifiable person, like names, addresses, IP addresses, health info, and financial data.

Key Requirements:

1. Legal Basis: Establish a legal reason for processing data.
2. Consent: Get clear, specific, and informed consent from individuals.
3. Data Subject Rights: Respect rights like the right to delete data (right to erasure).
4. Safeguards: Use technical and organizational measures to secure data.
5. Breach Notification: Notify quickly if there is a data breach.
6. Data Protection Officer: Appoint one if needed.
7. Privacy by Design: Design products and services with privacy in mind.
8. Impact Assessment: Conduct assessments to identify and reduce risks.
9. Data Transfers: Restrict transferring personal data outside the EU.
10. Data Residency: Check if data residency laws apply to you.
11. Training: Complete privacy awareness training at least once a year.

Enforcement: The GDPR is enforced by the European Data Protection Board (EDPB), with authorities from each of the 27 EU member states. Non-compliance can lead to fines up to €20M or 4% of annual revenue, whichever is higher.

The Health Insurance Portability and Accountability Act (HIPAA)

HIPAA is a U.S. federal law that sets standards to protect sensitive patient health information. It applies to healthcare providers (doctors, clinics, hospitals) and their business associates (companies that handle health information for providers).

Key Requirements:

1. Privacy Rule: Protects the privacy of identifiable health information, called Protected Health Information (PHI).
2. Security Rule: Sets administrative, physical, and technical safeguards to ensure the confidentiality, integrity, and availability of electronic PHI.
3. Breach Notification Rule: Requires notifying affected individuals within 60 days of discovering a breach. Notifications must be in writing, and in some cases, must be sent to the media and the Secretary of Health and Human Services (HHS).
4. Minimum Necessary Rule: Limits the disclosure or request of PHI to the minimum needed to achieve the purpose.
5. Omnibus Rule: Incorporates provisions from the HITECH Act, addressing business associate responsibilities and patient rights to electronic health records.

The HHS Office for Civil Rights (OCR) enforces these rules. Penalties for violations range from $100 to $1.5 million per violation, plus potential criminal penalties.

The Sarbanes-Oxley Act (SOX)

The Sarbanes-Oxley Act of 2002 (SOX) is a U.S. federal law that aims to improve corporate governance and accountability. It protects investors from fraudulent financial reporting by corporations and ensures transparency in financial reporting. SOX also holds executives responsible for their companies’ financial disclosures.

Key Requirements:

1. Corporate Responsibility for Financial Reports: Senior management must certify the accuracy of financial statements.
2. Management Assessment of Internal Controls: Management and external auditors must report on the adequacy of internal controls over financial reporting.
3. Recordkeeping: SOX sets rules for the proper handling of records, including prohibiting the destruction, alteration, or falsification of records.
4. Penalties for Wrongful Certifications: Penalties are imposed for certifying false or misleading financial reports.

The Securities and Exchange Commission (SEC) oversees SOX and the audits of public companies. Violations can result in both criminal and civil penalties for willful violations or misrepresentations.

National Institute of Standards and Technology Cybersecurity Framework (NIST CSF)

The NIST Cybersecurity Framework helps organizations manage cybersecurity risk in a flexible and cost-effective way. It can be customized to fit specific risk profiles and business needs.

Core Functions:

1. Identify: Understand risks to systems, people, assets, and data.
2. Protect: Implement safeguards to ensure delivery of critical services.
3. Detect: Develop ways to identify security events and anomalies.
4. Respond: Create a plan to respond to security incidents, including communication and analysis.
5. Recover: Develop a way to restore capabilities or services after an incident.

Note: NIST CSF 2.0, to be released in early 2024, will add Governance as a sixth core function.

Key Security Requirements:

1. Risk Assessment: Understand the organization’s risk posture.
2. Security Controls: Select appropriate controls based on the risk assessment.
3. Implementation: Implement policies, procedures, and technology to achieve the framework’s outcomes.
4. Monitoring: Regularly check the effectiveness of security controls and make adjustments as needed.

National Institute of Standards and Technology Risk Management Framework (NIST RMF)

The National Institute of Standards and Technology (NIST) Risk Management Framework (RMF) outlined in NIST Special Publication 800–37 is designed to help federal agencies and other organizations manage information security risks effectively. Here’s a detailed breakdown of the RMF process and key security requirements:

RMF Process Steps

Prepare:

• Establish the context for the RMF process within the organization.
• Determine priorities and allocate resources.
• Prepare the organization to execute the RMF effectively.

Categorize:

• Identify the types of information the system processes.
• Determine the importance of the information to the organization.
• Categorize the information system based on the impact levels (low, moderate, high) for confidentiality, integrity, and availability.

Select:

• Choose security controls from the NIST SP 800–53 catalog.
• Tailor the controls to the specific categorization of the information system.
• Develop a strategy for control selection, including overlays and baselines.

Implement:

• Put the selected security controls into action within the information system.
• Document how each control is implemented.

Assess:

• Test and evaluate the security controls to ensure they are functioning correctly.
• Determine if the controls are effective in their intended purpose.
• Document the findings of the assessment.

Authorize:

• Decide whether to authorize the system to operate based on the assessment results.
• Prepare an Authorization Package, including the System Security Plan (SSP), Risk Assessment Report, and Plan of Action and Milestones (POAM).
• An authorizing official (AO) reviews the package and makes the authorization decision.

Monitor:

• Continuously monitor the security controls and the system’s risk posture.
• Report any changes in the system or environment that may affect security.
• Conduct ongoing assessments to ensure continued effectiveness of controls.

Key Security Requirements

• Comprehensive Risk Assessment:
• Conduct thorough risk assessments to identify and document potential risks.
• Use the findings to inform the selection of security controls and risk management decisions.
• Appropriate Security Controls:
• Select controls from NIST SP 800–53 that align with the system’s categorization.
• Ensure controls address the specific risks and requirements of the organization.
• Documentation:
• Complete and maintain documentation for each step of the RMF process.
• Key documents include the System Security Plan (SSP), Risk Assessment Report, Authorization Package, and POAM.
• Ongoing Awareness:
• Maintain continuous awareness of the system’s security status, vulnerabilities, and threats.
• Use this information to support risk management decisions and adjust security controls as necessary.

By following the NIST RMF, organizations can integrate security and risk management into their system development life cycle, ensuring a structured and comprehensive approach to managing information security risks.

System and Organization Controls 2 (SOC 2)

SOC 2 provides trust and visibility into a service organization’s data security. Created by the American Institute of Certified Public Accountants (AICPA), SOC 2 focuses on five Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy.

Types of SOC 2 Reports:

1. Type I Report: Evaluates an organization’s controls at a specific point in time.
2. Type II Report: Assesses how an organization’s controls perform over a period of time, usually 3–12 months. Organizations often start with a 3-month audit and then move to 6 or 12 months.

Although SOC 2 reports are not legally required, they are an industry standard for data security and management, especially when partnering with third-party vendors. Compliance requirements vary based on the Trust Services Criteria in scope for the audit.

Key Security Requirements:

Security:

1. Logical and Physical Access Controls: Only authorized individuals can access systems and data.
2. Intrusion Detection: Measures to detect and respond to security incidents.
3. Data Encryption: Encrypt sensitive data in transit and at rest.
4. Firewalls and Network Security: Implement firewalls to block unauthorized access.

Availability:

1. System Monitoring: Regularly monitor system performance and availability.
2. Disaster Recovery and Business Continuity: Maintain a disaster recovery plan.
3. Incident Handling: Procedures for managing incidents affecting availability.
4. Redundancy: Use redundant systems and data centers to maintain service availability.

Processing Integrity:

1. Quality Assurance and Error Checking: Implement quality checks for accurate data processing.
2. Process Monitoring: Monitor systems for incomplete, inaccurate, or unauthorized transactions.
3. Data Verification: Verify data inputs and outputs.
4. Integrity Monitoring Tools: Ensure data integrity during processing and storage.

Confidentiality:

1. Data Classification: Classify data based on sensitivity.
2. Access Restrictions: Restrict access to confidential data.
3. Confidentiality Policies: Policies for handling confidential data.
4. Data Masking and Redaction: Hide portions of sensitive data where necessary.

Privacy:

1. Personal Information Identification: Identify personal information (PII) and treat it with special consideration.
2. Privacy Policies: Develop and communicate privacy policies.
3. User Consent: Obtain consent for collecting, processing, and sharing personal data.
4. Privacy Training: Train staff on privacy requirements and responsibilities.

International Organization for Standardization/International Electrotechnical Commission 27001 (ISO/IEC 27001)

ISO 27001 helps organizations protect their information assets and is respected internationally. It provides guidelines for setting up, maintaining, and improving an Information Security Management System (ISMS).

Certification Process:

1. Stage 1 Audit: Review documentation.
2. Stage 2 Audit: Assess the effectiveness of the ISMS.

Certification is valid for three years, with annual surveillance audits.

Key Security Requirements:

1. ISO 27002:2022 Annex A: Lists 93 security controls grouped into Organizational, People, Physical, and Technological categories.
2. Leadership Commitment: Executive management must support the creation, maintenance, and continuous improvement of the ISMS.
3. Risk Assessment: Identify information assets, threats, vulnerabilities, impacts, likelihoods, and risk levels.
4. Risk Treatment: Define how to manage risks through mitigation, avoidance, transfer, or acceptance, and implement chosen controls.
5. Evaluation and Improvement: Conduct regular internal audits and management reviews to monitor the ISMS’s effectiveness and address any issues for continuous improvement.

Center for Internet Security (CIS) Controls

The CIS Controls are divided into three categories based on their level of implementation:

Basic Controls:

• Fundamental actions that provide essential cybersecurity defenses.
• Designed to protect against common cyber threats.

Foundational Controls:

• More detailed security measures for organizations with mature cybersecurity capabilities.
• Address specific and sophisticated threats.

Organizational Controls:

• Focus on governance, risk management, and compliance.
• Establish policies and procedures to manage cybersecurity effectively.

Key Security Requirements

Inventory Management:

• Maintain lists of all hardware and software assets.
• Prevent unauthorized software from running.

Data Protection:

• Encrypt sensitive data both at rest and in transit.
• Ensure data is secure, intact, and available.

Incident Response:

• Create a plan to respond quickly to security incidents.
• Regularly test and update the plan.

Staff Training and Monitoring:

• Train employees on cybersecurity best practices.
• Monitor compliance and promote security awareness.

Backup and Recovery:

• Regularly back up critical systems and data.
• Test recovery procedures to ensure they work.

Security Configuration Management:

• Keep network devices and systems securely configured.
• Detect and prevent unauthorized changes.

Network Security:

• Control and monitor communications entering and leaving the network.
• Use segmentation and access controls to protect data.

Penetration Testing:

• Regularly test systems for vulnerabilities.
• Verify that security measures are effective against active threats.

Implementing these controls helps organizations strengthen their cybersecurity defenses and mitigate various cyber risks effectively.

Control Objectives for Information and Related Technologies (COBIT)

COBIT (Control Objectives for Information and Related Technologies) is a governance framework developed by ISACA (Information Systems Audit and Control Association) that focuses on aligning IT processes with business goals and ensuring effective management and control over IT resources. Here are the key security requirements emphasized by COBIT:

Key Security Requirements of COBIT

Risk Management:

• Identify, assess, and manage IT risks effectively.
• Implement controls to mitigate identified risks to an acceptable level.

Resource Optimization:

• Ensure optimal utilization of IT resources, including people, information, infrastructure, and applications.
• Align resource allocation with business priorities and requirements.

Compliance Management:

• Meet legal, regulatory, and contractual compliance obligations related to IT operations.
• Establish controls and processes to ensure adherence to applicable laws and regulations.

Strategic Alignment:

• Align IT goals, processes, and investments with the organization’s strategic objectives and business functions.
• Ensure IT activities contribute to business value and support organizational goals.

Performance Measurement:

• Define Key Performance Indicators (KPIs) and metrics to monitor the performance of IT services and processes.
• Track and evaluate IT performance against predefined targets and benchmarks.

Information Security:

• Ensure the confidentiality, integrity, and availability of information assets.
• Implement security controls and measures to protect sensitive information from unauthorized access, alteration, or destruction.

Continuous Improvement:

• Establish processes for continuous improvement and quality assurance in IT operations.
• Regularly review and enhance IT processes to optimize efficiency, effectiveness, and alignment with business needs.

Benefits of COBIT

• Governance and Control: Provides a framework for effective governance and control over IT processes, ensuring transparency and accountability.
• Risk Management: Helps organizations identify and manage IT-related risks proactively.
• Alignment with Business Objectives: Ensures that IT strategies and initiatives are aligned with the organization’s overall business goals.
• Compliance: Facilitates compliance with regulatory requirements and industry standards.
• Performance Monitoring: Enables monitoring and measurement of IT performance to ensure continuous improvement and value delivery.

By adopting COBIT, organizations can enhance their IT governance practices, improve risk management capabilities, and align IT operations with business strategies, thereby maximizing the value of IT investments and enhancing overall business performance.

Payment Card Industry Data Security Standard (PCI DSS)

The Payment Card Industry Data Security Standard (PCI DSS) is crucial for any organization that handles credit card information to ensure a secure environment. Here’s an overview of its structure and key security requirements:

PCI DSS Structure

PCI DSS is organized into six core goals, which encompass twelve key requirements:

Build and Maintain a Secure Network and Systems:

• Requirement 1: Install and maintain a firewall configuration to protect cardholder data.
• Requirement 2: Do not use vendor-supplied defaults for system passwords and other security parameters.

Protect Cardholder Data:

• Requirement 3: Protect stored cardholder data.
• Requirement 4: Encrypt transmission of cardholder data across open, public networks.

Maintain a Vulnerability Management Program:

• Requirement 5: Use and regularly update antivirus software.
• Requirement 6: Develop and maintain secure systems and applications.

Implement Strong Access Control Measures:

• Requirement 7: Restrict access to cardholder data by business need-to-know.
• Requirement 8: Identify and authenticate access to system components.
• Requirement 9: Restrict physical access to cardholder data.

Regularly Monitor and Test Networks:

• Requirement 10: Track and monitor all access to network resources and cardholder data.
• Requirement 11: Regularly test security systems and processes. This includes conducting scans by Approved Scanning Vendors (ASVs).

Maintain an Information Security Policy:

• Requirement 12: Maintain a policy that addresses information security for all personnel.

Compliance and Enforcement

• Compliance Requirements: Depending on the volume of annual transactions, organizations may need to undergo regular security audits by a Qualified Security Assessor (QSA) or complete a Self-Assessment Questionnaire (SAQ).
• Enforcement: PCI DSS compliance is enforced by acquiring banks and card brands. Non-compliance can lead to fines ranging from $5,000 to $100,000 per month, increased transaction fees, or even termination of the ability to accept card payments.

Key Benefits

• Data Security: Ensures protection of cardholder data from theft and unauthorized access.
• Business Continuity: Enhances trust and reliability in payment processing systems.
• Legal and Regulatory Compliance: Helps organizations meet legal and regulatory requirements related to data security.

By adhering to PCI DSS requirements, organizations can mitigate risks associated with handling credit card information and maintain a secure environment that protects both customer data and business operations.

The Cybersecurity Maturity Model Certification (CMMC)

The Cybersecurity Maturity Model Certification (CMMC) is a framework developed to enhance the cybersecurity posture of organizations within the Department of Defense (DoD) supply chain. Here’s an overview of its structure and key regulatory requirements:

CMMC Levels and Requirements

Level 1: Foundational

• Description: Basic safeguarding of Federal Contract Information (FCI).
• Certification: Annual self-assessment.
• Implementation: Ad-hoc implementation of cybersecurity practices without formal documentation.

Level 2: Advanced

• Description: Intermediate safeguarding of Controlled Unclassified Information (CUI).
• Certification: Self-assessment annually or third-party assessment every three years (depending on involvement with national security).
• Implementation: Formal documentation and implementation of cybersecurity processes.

Level 3: Expert

• Description: Good cybersecurity practices to protect CUI and support more advanced cyber defense.
• Certification: Third-party assessment every three years.
• Implementation: Established and managed cybersecurity program, including documented strategies, resources, and training.

Regulatory Compliance and Certification

• Legal Requirement: Starting in 2026, any organization working as a DoD contractor must comply with CMMC standards to handle Federal Contract Information (FCI) and Controlled Unclassified Information (CUI).
• Certification Process: Certified Third-Party Assessment Organizations (C3PAOs) are trained and accredited to conduct assessments based on CMMC standards.
• Impact of Non-Compliance: Organizations not certified to the required CMMC level will be ineligible to bid on or win DoD contracts that stipulate that level of certification.

Key Benefits

• Enhanced Security: Ensures appropriate levels of cybersecurity controls are in place to protect sensitive defense information.
• Regulatory Compliance: Helps organizations meet legal and regulatory requirements imposed by the DoD.
• Competitive Advantage: Certified organizations can participate in and win DoD contracts requiring specific CMMC levels, demonstrating trust and capability in handling sensitive information.

By adhering to CMMC requirements, organizations in the DoD supply chain can strengthen their cybersecurity defenses, protect sensitive information, and maintain eligibility for valuable government contracts.

Federal Risk and Authorization Management Program (FedRAMP)

Purpose: Standardizes security assessment, authorization, and continuous monitoring for cloud services used by U.S. federal agencies.

Applicability: Applies to both commercial and non-commercial cloud services, including those developed internally by federal agencies.

Key Regulatory Requirements:

System Security Plan (SSP):

• Describes system boundaries, environment, operations, security processes, and policies.

Security Controls:

• Derived from NIST SP 800–53, includes access controls, incident response, contingency planning, and system integrity.

Continuous Monitoring:

• Includes regular reporting, change management processes, and vulnerability scanning.

Compliance:

• Adherence to 26 NIST 800–53 control families.

Annual Security Assessments:

• Conducted by a Third-Party Assessment Organization (3PAO).

Management: Managed by the General Services Administration (GSA). Federal agencies grant Authority to Operate (ATO) for cloud services.

Impact of Non-Compliance: Non-compliance may result in denial of ATO, preventing adoption by federal agencies.

Federal Information Security Management Act (FISMA)

Purpose: Improves cybersecurity across U.S. federal agencies and their information systems.

Key Regulatory Requirements:

Risk Assessments:

• Periodic assessments to evaluate likelihood and impact of security breaches.

Security Controls:

• Implementation of appropriate controls based on risk levels from NIST SP 800–53.

Certification and Accreditation (C&A):

• Certification of information systems’ security processes.
• Accreditation by agency officials to operate.

Continuous Monitoring:

• Ongoing monitoring of security controls.
• Regular risk assessments to ensure effectiveness.

Incident Reporting:

• Detection, reporting, and response to security incidents.

Annual Independent Evaluations:

• Independent audits of agency information security programs.

Enforcement: Enforced by the Office of Management and Budget (OMB). Implementation support provided by the Department of Homeland Security (DHS), and standards and guidelines developed by the National Institute of Standards and Technology (NIST).

Both FedRAMP and FISMA play critical roles in ensuring the security and resilience of federal information systems, each focusing on specific aspects such as cloud service security (FedRAMP) and broader agency-wide information security (FISMA).