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Today’s ever-evolving business landscape is one in which legal and regulatory frameworks continuously mold and shape industry practices. Indeed, compliance has emerged as the cornerstone of success, as it ensures adherence to laws, regulations and industry standards, at the same time mitigating risks and building trust with stakeholders.

While compliance is a significant component of any business, it is even more important for MSPs. Why? Because handling sensitive client data and providing critical IT services makes adherence to regulations 100% vital for data protection, risk management and as always, client trust.

Ultimately, understanding and prioritizing compliance for your MSP is not merely a prudent and wise approach to businesses—it is also a strategic necessity that is imperative to safeguarding your long-term success!

Why is compliance a crucial component of success for MSPs?

MSP compliance can serve as a guardian of sorts, protecting your business from potential pitfalls and protecting its path to meaningful success.

When you embrace the principles of MSP compliance, you’re also unlocking valuable insights, best practices and actionable strategies that will empower your organization to meet regulatory requirements as well as cultivate a truly resilient, thriving enterprise. You’ll be better equipped to navigate a complex and intricate web of regulations, mitigate potential liabilities and position your business as a trusted leader in your industry.

Here is a break down on why compliance should be a top priority:

  • Enhancing security and data protection

    By mandating the implementation of robust security controls and best practices, MSP compliance ensures proactive risk management via regular assessments and audits, in turn minimizing potential security vulnerabilities and data breaches.

  • Building trust with clients and stakeholders

    Demonstrating a commitment to data protection and security best practices assures your clients that their sensitive data is handled according to industry standards and regulations. It also showcases your dedication to maintaining a secure environment.

  • Mitigating legal and financial risks

    By complying with relevant regulations and contractual obligations, you minimize the risk of legal penalties, regulatory sanctions, and potential lawsuits—as well as financial losses associated with data breaches, reputational damage, and loss of business partnerships.

  • Maintaining a competitive edge in the market

    Compliance differentiates MSPs as trustworthy and reliable service providers, thereby positioning you as capable of meeting industry standards and client requirements, and in turn enhancing your reputation and boosting your competitive edge. Bonus: you’ll attract clients who prioritize compliance too.

What are the key regulations for MSPs to consider?

To ensure you meet all requirements, it’s important to stay updated on all relevant compliance regulations based on your client base, industry and geographic location.

The following regulations represent just a few regulations all MSPs should consider:

HIPAA (Health Insurance Portability and Accountability Act)

When dealing with healthcare clients, MSPs are subject to compliance with HIPAA. HIPAA is a federal law in the United States that establishes data privacy and security standards to protect patient’s sensitive health information. MSPs play a crucial role in supporting healthcare organizations by offering IT services and solutions.

MSPs are considered “business associates” under HIPAA if they handle, process, or store protected health information (PHI) on behalf of healthcare providers, health plans, or healthcare clearinghouses. As business associates, MSPs have specific obligations to ensure the confidentiality, integrity and availability of PHI while complying with HIPAA’s requirements.

SOC 2 (Service Organization Control 2)

MSPs can be affected by SOC 2 compliance when they handle or process data on behalf of their clients. SOC 2 is a widely recognized auditing standard developed by the American Institute of Certified Public Accountants (AICPA). It focuses on the controls and processes related to security, availability, processing integrity, confidentiality, and privacy of data.

When MSPs seek to become SOC 2 compliant, they are essentially demonstrating to their clients that they have established and adhered to robust security practices and controls. This compliance can help build trust with clients, particularly those who rely on MSPs to handle sensitive or critical data.

GDPR (General Data Protection Regulation)

MSPs can be affected by GDPR if they handle or process the personal data of individuals located in the European Union (EU). The GDPR is a comprehensive data protection law that aims to safeguard the privacy and rights of EU citizens concerning their data. When MSPs handle personal data on behalf of their EU clients, they are considered “data processors” under the GDPR.

PCI-DSS (Payment Card Industry Digital Security Standard)

MSPs can be significantly affected by PCI-DSS if they handle, process, or store payment card information on behalf of their clients. While not a regulation per se, PCI-DSS is a set of required security standards developed by the Payment Card Industry Security Standards Council (PCI SSC) to protect cardholder data and ensure secure transactions. When MSPs handle payment card data, they are considered “service providers” under PCI-DSS.

What are the consequences of non-compliance?

MSP non-compliance also offers motivation—in the form of heavy consequences:

  • Legal penalties and fines

    Legal penalties and fines can vary depending on the specific regulations and jurisdictions involved. Civil penalties for HIPAA violations can range from $100 to $50,000 per violation, and in cases of willful neglect, can reach up to $50,000 per violation, with an annual cap of $1.5 million. Meanwhile, under GDPR, organizations can face fines of up to 4% of their global annual revenue or €20 million, whichever is higher.

  • Damage to reputation and loss of clients

    Non-compliance exposes your clients’ data to potential breaches or unauthorized access, damaging trust and confidence in your ability to protect their sensitive information. In turn, news of non-compliance can spread rapidly, damaging your reputation and making it far less attractive to potential clients. As a result, some clients may choose to sever their relationship with you due to security concerns.

  • Increased risk of data breaches and cyberattacks

    According to the most recent IBM/Ponemon Institute Cost of a Data Breach Report, the average cost to organizations that suffer a data breach is 4.24 million dollars per incident. Fact: when non-compliant MSPs have inadequate security measures in place, they are more susceptible to unauthorized access and exploitation by cybercriminals, and attacks are more likely to be successful as well. What’s worse, non-compliant MSPs often lack proper incident response protocols, exacerbating the consequences.

  • Potential business disruptions and operational challenges

    In addition to legal penalties, regulatory investigations, and sanctions, non-compliance can divert valuable resources and attention away from regular operations, leading to unplanned downtime, outages, or interruptions, as the case may be, in turn impacting client operations. Unsurprisingly, this can strain or break business relationships, thus affecting revenue and overall business stability.

How to generate revenue by assisting SMB clients with compliance

When your SMB clients recognize your MSP as a trusted compliance partner, they can divert more of their resources to their core business operations—something every business wants.

You can generate revenue by assisting SMB clients with compliance in the following ways:

Providing compliance consulting and support services

Consider generating revenue by sharing your expertise in navigating complex compliance requirements, conducting assessments, developing customized compliance strategies, and implementing necessary controls and processes.

Developing compliance-focused managed services and solutions

You may also be able to generate revenue by offering your SMB clients comprehensive compliance monitoring, incident response, data protection, and security management tailored to meet their specific regulatory requirements.

At the end of the day, compliance best practices like policies and checklists are proactive measures in your company can implement to stay ahead of regulatory changes. Performing regular assessments and audits, offering ongoing employee training and keeping stringent records can all help to build a positive culture of compliance. Want to Learn More about compliance for MSPs?

You’ve come to the right place!

Many MSPs are intimidated by the complexity of tackling compliance, and not all can afford a full-time compliance expert. But you don’t have to tackle these regulations alone. Why not stay on top of regulations, compliance checklists and security for your business with an expert partner in your corner? Check out Sherweb’s partner guide to see how we can help set you up for success!

Written by The Sherweb Team Collaborators @ Sherweb