Risks and Penalties of Operating Your Business Without a WISP

With the evolving cyber threat spectrum, data security has become non-negotiable for the accounting industry. Therefore, firms are always looking to improve their security posture. However, you cannot achieve an optimal security posture without a well-structured plan. Firms must develop strategies, protocols, procedures, and roles to detect and mitigate cyber threats, identify vulnerabilities, and train employees.  

Such a program is called a Written Information Security Plan (WISP). Not having a WISP makes you vulnerable to data threats like ransomware, phishing, and insider threats. It can also result in non-compliance with regulations enforced by the FTC (Federal Trade Commission) and IRS.

In this blog, we will discuss the basics of WISP and what happens if you don’t have one. 

What is a WISP?

A WISP, or Written Information Security Plan, is a set of guidelines that details all the procedures and tools necessary to protect your accounting firm’s and clients’ sensitive data from threats. It provides a roadmap of what needs to be done before, after, and during a security breach.  

The FTC Safeguards Rule, introduced by the Federal Trade Commission under the Gramm-Leach-Bliley (GLB) Act, mandates each financial institution to prepare a WISP. 

What Should a WISP Include?

Let’s discuss what components an effective WISP must include:

WISP Definition

The first step in creating a WISP is defining its purpose, scope, and objectives. For instance, the primary objective of a WISP should be to prevent risks, such as cyber threats and data breaches. It must also be able to achieve compliance with the FTC Safeguards Rule. The scope and purpose would then describe the measures to achieve the objective and the extent to which it can be done.      

Qualified Individual Assignment

Once the WISP’s objective is clear, you must assign a professional to manage it. The professional designated as Data Security Coordinator (DSC) will be responsible for managing, enforcing, and updating WISP. Some key responsibilities might include staff training, testing policies, and ensuring compliance.

Along with the DSC, another professional is required to be designated as a Public Information Officer (PIO), who will communicate with the clientele and government bodies in the case of an event.  

Risk Assessment Policies

Assessing risks is the first step in mitigation. Therefore, a WISP must include all the protocols required for an effective risk assessment. You must deploy controls to identify external and internal threats, like accidental deletion and ransomware. Moreover, the security posture of the IT infrastructure must be monitored and analyzed to identify any vulnerabilities. Once the threat is identified, you should also implement effective mitigation strategies.

Hardware Inventory Management

A WISP demands managing and listing all the hardware components involved in data storage and transmission. These include workstations, servers, remote devices, external storage devices (USB drives), and more. 

Safety Measures Documentation

You must document all the security measures implemented in your accounting firm. These should include data collection and retention policies, disclosure, network security protocols, incident response policies, and employee code of conduct. For instance, you must create access policies to prevent unauthorized access. It should also include the escalation procedure in the case of a data breach.   

Implementation Clause Creation

Drafting a WISP is only a start. You must ensure its proper implementation to ensure a secure business process. An implementation clause ensures that the WISP is enforced properly and regularly. 

The Consequences of Not Having a WISP

As already discussed, a Written Information Security Plan is mandatory to comply with the FTC Safeguards Rule. Therefore, without a WISP, all the concerned financial institutions (that come under the Bank Holding Company Act) are directly subject to non-compliance. The direct effect of this is heavy penalties by the FTC. 

However, a WISP should not be implemented only to avoid non-compliance. Other risks can hamper an accounting firm due to the absence of a WISP.  Let’s discuss them in detail.

Penalties Involved

Non-compliance penalties with the FTC Safeguards Rule can be as high as 100,000 USD for organizations and 10,000 USD for individuals. Moreover, it can also carry a sentence of up to 5 years. It can also lead to the revocation of your PTIN number if you are a tax firm.     

Risks Involved

1. Directionless Approach: Without a written information security plan, the approach to in-house data security can be ineffective and outdated. All the professionals would fail to recognize their roles and responsibilities. Moreover, without a proper framework, every incident would be encountered like a new one, as no one would know the necessary protocols. 
2. Financial Losses: The average cost of a data breach was estimated to be 4.88 million U.S. dollars in 2024. Without a WISP, data breaches can be a frequent event, proving fatal to the future of your accounting firm. Moreover, the penalties associated with non-compliance could further hamper your finances.   
3. Insecure Endpoints: In 2024, the IRS received over 250 reports of data breaches affecting around 200,000 clients. Cyber threats, such as phishing and ransomware, compromise accounting data by attacking user endpoints through emails, applications, or websites. Moreover, insider threats also take place due to unauthorized access. A WISP clearly defines the protocols for authorized access, employee training, network protection, and endpoint protection. Without it, you would not be able to ensure foolproof endpoint protection.    
4. Loss of Reputation: Reputation is everything for an accounting firm. Your clients entrust you with their critical data and expect that you will keep it safe. In the event of a data breach, clients can lose trust in your operations and switch to another firm. Moreover, a major data breach can cause your firm to be out of business for days. In that case, the affected clients may take legal action against your business. WISP ensures that all data breach attempts are mitigated in time, keeping your reputation intact. 
5. Incompetent Security Infrastructure: Without a security plan, the components of your IT security infrastructure may not integrate efficiently. This could leave vulnerabilities in the security posture, which hackers can exploit easily. Moreover, without a WISP, the cost of deploying the security infrastructure will also increase.      
6. Untimely Escalations: Whenever your firm is subjected to a data breach incident, it is required to inform the clients about it. Moreover, under the FTC Safeguards Rule, you must notify the FTC and the board of directors about the incident. A WISP defines processes for escalation and breach notifications. The lack of a plan can cause delays in escalations and make you subject to FTC scrutiny.  
7. Delayed Incident Response: Your security team must respond rapidly to any data breach event to mitigate its effects. For instance, the infected endpoint must be identified and isolated in real-time. The FTC mandates having an incident response plan as part of WISP. Without an incident response plan, the entire network could be compromised.    

Struggling to Get Started with Your WISP?

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WISP Implementation Challenges & Solutions 

Let’s check out some challenges you might encounter while creating a WISP for your business. 

1. Compliance Tracking

The FTC and IRS regularly amend regulations. For instance, the FTC amended the Safeguards Rule in 2023 to Require Non-Banking Financial Institutions to Report Data Security Breaches. As a financial institution, keeping track of these changes and altering the WISP accordingly is quite challenging.   

2. Lack of Expertise

Creating and enforcing a WISP requires expertise of the highest order. For instance, it details all the protocols required to ensure network security. As an accounting firm, you might lack the skilled professionals who can successfully draft and enforce a WISP.

3. Resistant to Change

Implementing a WISP can be a drastic change for employees. WISPs include strict protocols and responsibilities, which can be challenging for employees to adhere to without proper training. 

Benefits of Opting for Managed WISP Services

If you have not created a WISP yet, you can try managed WISP services. A managed WISP service is where a service provider creates the WISP for your accounting firm according to your business requirements. Here are some perks of choosing managed services.

1. Expertise 

The managed WISP providers have an experienced team well-equipped to handle diverse industries, business setups, and threat actors. Therefore, they can create a plan with no loopholes. 

2. Customization

Competent WISP providers offer free consultations. This enables them to understand your security requirements and niche challenges and devise the best security plan for your business.

3. Cost Savings 

Creating a security posture on a WISP involves various costs, such as investing in tools or training employees. WISP consultation providers can draft the most cost-efficient plan for your business according to your budget constraints.  

4. Compliance Adherence

The FTC keeps modifying the FTC Safeguards Rule. The WISP service providers keep track of these changes and make amendments to the written information security plan accordingly. 

WSIP is a Necessity, Not An Option

The FTC has made it necessary for every financial institution under the Safeguards Rule to have a WISP. If you fall under this category and don’t have a WISP, you can face hefty fines and penalties. 

In addition, it can also weaken your IT security, leaving your data and system vulnerable to data breaches. You can consult a managed WISP provider if you don’t have an FTC-compliant WISP. 

Ace Cloud Hosting offers a free WISP consultation to help create an effective WISP for your firm. Our managed WISP services ensure FTC and IRS compliance, vulnerability assessment, and data breach protection.