The phrase ‘regulatory compliance’ may cause you to cringe in this day and age regardless of what industry you are in. After all, the term has become so ubiquitous that it seems our entire lives, both professional and private, are now dictated by some rule or regulation set by a governing body.
Whether it be for good reason or not and despite any reflex action or strong opinions you may have about it, the fact is that there is no avoiding it; regulations are here to stay and compliance with them is a must.
Managed service providers (MSPs) are one group that deal with these issues every day. From internal audits to cybersecurity strategy development, ensuring their clients’ IT infrastructure adheres to the appropriate regulations for their industry is essential. Whether it is HIPAA, PCI DSS, or SOX, MSPs are now expected to be proficient in ensuring their clients’ data is protected and compliant with the latest standards while ensuring compliance themselves, meaning compliance reporting for MSPs should now be non-negotiable.
Why do MSPs need compliance reporting?
Managed services is quickly becoming one of the fastest-growing industries in today’s economy with a predicted $296 billion being spent globally on MSPs by 2023. So far, though, most MSPs have regarded regulatory compliance as an abstract idea rather than a foundational concept for their business model.
The MSP business model is built on the idea that MSPs will deliver value to their customers by providing a service that they would not otherwise have access to. However, this value can only be realized if the MSPs adhere to all applicable laws, regulations, and standards while serving their customers. If an MSP fails to comply with an applicable law, regulation, or industry standard, they are breaking their customers' trust and potentially putting themselves out of business.
In addition, if an MSP fails to meet regulatory compliance requirements (or has not yet started), it may result in adverse action by a regulatory authority against them (e.g., fines). Therefore, compliance reporting is essential for both the MSP and their customers.
Why is compliance important?
Failure to comply with regulations can lead to significant financial penalties and other legal-related consequences for companies. These include fines, criminal sanctions, and even imprisonment, and this alone should be enough to show the importance of the compliance process and adequate risk management for all involved.
Regulation compliance is also important, though, because it can help to ensure that customers have the best possible experience while they are using your MSP services. Research has shown that customers are willing to pay more for MSP services if they feel that the MSP has the skills and expertise necessary to put themselves under regulatory scrutiny.
Alternatively, if an MSP is not meeting regulatory compliance requirements or cannot show clients that they are, this could result in decreased customer satisfaction and subsequently lower revenues for the company.
What are the primary regulations being enforced?
The primary regulations being enforced at this time are the Health Insurance Portability and Accountability Act (HIPAA) and credit card security standards (PCI-DSS). However, there are many other regulations that MSPs need to be aware of and ensure compliance with. Some examples include Sarbanes-Oxley Act (SOX), Gramm-Leach-Bliley Act (GLBA), Health Information Technology for Economic and Clinical Health Act (HITECH), Fair Credit Reporting Act (FCRA), and Consumer Financial Protection Bureau (CFPB).
In addition, any flyover country or jurisdiction that has its own laws regarding data privacy will also have its own set of regulations which will need to be adhered to.
How does compliance reporting support and enhance an MSP’s business?
The most common way for an MSP to increase their profitability is through client retention and growth, and a key factor that helps support this strategy is a high level of client satisfaction with their MSP.
Satisfied clients are typically more loyal to the company, which generates loyal customers, who refer even more customers to the company. In addition, satisfied clients usually spend more money on managed services than dissatisfied ones (if they are able to pay for them of course). This increases revenue for the MSP and allows them to serve even more customers at a reduced cost per customer.
Compliance reporting provides an effective tool that allows companies to provide value-added services while meeting regulatory requirements, standards, and laws themselves. It also supports multi-channel marketing strategies because it provides companies with comprehensive data on all channels that they service, so they can understand where their money is going and what channels will deliver the most value in terms of return on investment (ROI).
How much time should an MSP expect to spend on compliance reporting?
This is a difficult question to answer. First, there is no set amount of time that an MSP should expect to spend on compliance reporting. Every organization has different needs and will have different amounts of time allocated to compliance reporting. This will also depend on many other factors such as the size of the organization, the type of services being provided, the number of clients that are being serviced, and whether there are any regulations specific to each industry.
Implementing a designated compliance officer can ensure that your compliance reports include the necessary data to adequately evaluate your MSPs compliance risk and guarantee your clients that you are on top of the necessary compliance requirements.
The best advice that can be given here is that it takes time and effort to gather accurate data and to ensure that it is reliable. It may take 15 minutes or 15 hours but if you know what you are looking for and how to analyze the data, then you can begin making improvements in how your clients receive services from you.
How often should an MSP expect to be required to perform compliance reporting?
Again, this is a difficult question to answer as there are many factors that will determine the frequency of compliance reporting. It would be best to speak with your clients and gather their feedback on how often they would like you to perform compliance reporting.
You should also ask yourself if you have the time and resources available to devote to compliance reporting. If you do have the time and resources, then it is recommended that, as a bare minimum, you perform a quarterly compliance report based on comprehensive data collection in order for your organization to stay up to date with regulatory requirements and standards.
Should you use manual or automated compliance reporting?
When it comes to compliance reporting for your managed services business, you have two options—manual or automated—and both are valid choices depending on your needs:
Manual option: The manual option involves manually documenting all your compliance efforts in spreadsheets or even Word documents. You would then need someone familiar with compliance reporting standards to review your documentation and ensure that it is compliant.
The benefit of this option is that it’s easy and inexpensive to implement, but the downside is that it can be quite time-consuming and labor-intensive.
Automated option: The automated option involves using a third-party software solution, such as a cloud-based provider or local tool, to automatically track your compliance efforts. This provides an audit trail for all your compliance efforts so that you can easily determine whether you are meeting compliance requirements.
The benefit of the automated option is that it’s relatively easy to implement, but the downside is that it requires you to use a third-party’s software solution, which means you must pay for access to their product or service.
One of the best ways to determine which option is right for you is to do a quick cost analysis to determine which option would provide you with the most value given your budget and desired level of automation. You should also consider how much time you want or need to spend on compliance reporting because this will help you determine whether an automated solution will be effective for your business.
If you spend a lot of time on compliance matters each month, then an automated solution may be worth it in the long run since it will help reduce your workload and allow you to focus on other aspects of running your MSP business.
Regardless of which option you choose, your compliance efforts must remain organized so that they are easy to review and manage in the future. This means that when you create a reporting system for yourself or your team members, it should be easy for anyone else in the company to access that information quickly and easily.
For example, if all your documentation is stored in an online document management system like Google Drive or Dropbox (or something similar), then everyone can access that information when needed without any additional effort required from other team members. And if someone new joins the company later down the road, they’ll be able to access the information they need to stay on top of compliance matters without having to spend a lot of time searching for it.
The market is moving towards increased regulation of security services and the role of MSPs in providing those services. Compliance is there to protect consumers from rogue service providers – but only if we play by the rules!
As such, compliance matters are important for MSPs because they can directly impact your ability to compete in the marketplace. Since MSPs are always looking for new ways to differentiate themselves from their competitors, compliance reporting provides them with a unique opportunity to stand out in an increasingly flooded MSP market and prove their worth as a business partner.