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How to Manage Compliance for Decentralized Businesses

In today’s digital age, cybersecurity has become a critical aspect of business operations. Cyber threats are becoming more sophisticated and frequent, making it essential for businesses to adopt robust cybersecurity practices. If your business operates in multiple locations or has decentralized subsidiary businesses, managing cybersecurity compliance can be challenging. In particular, adhering to the NIST 800-171 cybersecurity framework can pose unique issues for your organization.

NIST 800-171 is a set of guidelines developed by the National Institute of Standards and Technology (NIST) to help businesses protect sensitive government information that is stored, processed, or transmitted in their systems. The guidelines apply to businesses that handle controlled unclassified information (CUI). Failure to comply with these guidelines can result in significant penalties, including the loss of contracts and legal liabilities.

Compliance challenges

As your decentralized company works to manage compliance with this standard, you may face these potential hindrances.

  • Coordination and communication: Businesses in this category often struggle to maintain consistent cybersecurity policies and practices across all locations. Coordination and communication become critical in ensuring that each location is compliant with NIST 800-171 guidelines. Note that different subsidiary businesses may have different levels of cybersecurity maturity, which can make coordination demanding.
  • Resource constraints: Decentralized subsidiary businesses may have limited resources, making it difficult to implement and maintain robust cybersecurity controls. Each location may also have its own IT infrastructure, which may not have the necessary resources to comply with NIST 800-171 guidelines. In such cases, centralizing IT infrastructure and cybersecurity resources may be necessary, which can be expensive and time-consuming.
  • Compliance audits: These reviews are a necessary part of maintaining NIST 800-171 compliance. Be aware that conducting audits across multiple locations can be time-consuming and resource-intensive. Additionally, auditors may have to deal with varying cybersecurity practices across different subsidiary businesses, making it challenging to consistently assess compliance.
  • Third-party risk: Decentralized subsidiary businesses may rely on third-party vendors for various IT services, such as cloud hosting and managed security services. Third-party vendors can introduce cybersecurity risks if they do not comply with NIST 800-171 guidelines. Businesses must ensure that their third-party vendors also comply with these guidelines.
  • Employee training: This is crucial for maintaining cybersecurity compliance, but training employees across multiple locations is not easy. Employees in different locations may have different schedules, language barriers, and training needs. Businesses must develop effective training programs that address the unique needs of employees across different locations.


Let’s discuss an example to illustrate these issues

Subsidiary A operates independently without any parent company oversight, including its contracting function. Subsidiary A is a defense contractor that handles controlled unclassified information (CUI) and, as such, is required to comply with the Defense Federal Acquisition Regulation Supplement (DFARS) 252.204-7012 clause, which mandates specific cybersecurity controls and reporting requirements.

If the contracting function of Subsidiary A operates independently without any parent company oversight, they may not be aware of the regulatory requirements imposed by DFARS 252.204-7012. As a result, they may not include the necessary cybersecurity controls and reporting requirements in their contracts with the government or other customers, which could lead to non-compliance and potential penalties.

Additionally, assumptions may exist that the parent company has accountability to address regulatory obligations, including those related to DFARS 252.204-7012. Without proper communication and oversight, the parent company may not be aware of the regulatory requirements imposed on Subsidiary A or the subsidiary’s non-compliance with those requirements.

In this scenario, the lack of parent company oversight and communication can lead to a significant regulatory compliance risk for Subsidiary A. It highlights the importance of proper communication and oversight between parent companies and their decentralized subsidiary businesses, particularly in matters related to regulatory compliance.


Steps your business can take

To address these challenges, your business with decentralized subsidiary operations can do the following:

  1. Develop a centralized cybersecurity policy: Outline the necessary cybersecurity controls and guidelines for all locations. This policy should be communicated clearly to all employees across different locations.
  2. Centralize IT infrastructure and cybersecurity resources: This can help ensure that all of your locations have access to the necessary resources to comply with NIST 800-171 guidelines. While it may be expensive, the approach can help streamline cybersecurity practices and policies across different locations.
  3. Conduct regular compliance audits: This step can help your business ensure that all locations are complying with NIST 800-171 guidelines consistently. These audits should be conducted by qualified auditors who have experience working with decentralized subsidiary businesses.
  4. Monitor third-party vendors: This monitoring ensures that these vendors comply with NIST 800-171 guidelines. It should include regular security assessments and vendor compliance audits.
  5. Tailor employee training: Address the unique needs of employees across different locations. This approach can help ensure that all employees understand the necessary cybersecurity controls and guidelines.
  6. Communicate, communicate, communicate: If centralization is not an option, your business should clearly communicate that autonomous subsidiaries must verifiably meet regulatory requirements—and your business should support those subsidiary compliance initiatives with appropriate financial and human resourcing.

If you have any questions on how to manage the complex challenges of managing the compliance of your decentralized subsidiary operations, you can rely on the skill and experience of the experts at CyberSheath. Contact us to get started.

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