CMMC Returns! Do You Know the Impact to your Small- to Mid-sized Business? 

The enactment of 32 CFR Part 170, which formally establishes Cybersecurity Maturity Model Certification (CMMC) 2.0, will have a significant impact on medium and small businesses in sectors like healthcare, financial services, manufacturing, and others that must comply to remain eligible for government contracts, particularly with the Department of Defense (DoD). Below is an exploration of the key implications, challenges, and potential opportunities these businesses will face under the new regulations.

Overview of CMMC 2.0

CMMC’s root are imbedded in the National Institute of Science and Technology’s (NIST) Special Publication 800-171 (NIST SP 800-171), which defines the requirements in handling sensitive data, such as not just personal data (e.g., personal health information (PHI)), but ‘sensitive’ or ‘protected’ data (e.g., system design specifications).

CMMC 2.0 is a cybersecurity standard designed to safeguard controlled unclassified information (CUI) within the supply chain (i.e., third party vendors) of federal contractors, especially those doing business with the DoD. The regulation introduces a three-tiered framework of certification levels, depending on the sensitivity of the information a business handles:

1. Level 1: Basic cyber hygiene.

2. Level 2: Advanced practices, aligned with the 110 controls of NIST SP 800-171.

3. Level 3: Expert level for protecting highly sensitive data.

CMMC certification will be a mandatory prerequisite for businesses bidding on DoD contracts.

Here are seven (7) things you should consider…

Impact on Medium and Small Businesses

1. Financial Burden

• Cost of Compliance: Medium and small businesses will face significant costs in achieving and maintaining CMMC 2.0 compliance. These expenses include hiring consultants, conducting gap analyses, upgrading IT systems, and potentially purchasing cybersecurity tools. Additionally, the certification process itself may be costly, especially for businesses at Levels 2 and 3, where third-party assessments are required.

Pro 

Investing in cybersecurity can reduce the long-term risks and costs of cyber breaches.

Con

Small businesses with tight margins may struggle to absorb these costs, potentially making them less competitive compared to larger firms with more robust IT budgets.

2. Administrative and Operational Strain

• Resource Limitations: Smaller businesses often operate with limited resources, which means they may lack dedicated cybersecurity personnel or IT infrastructure. Meeting CMMC 2.0 requirements may force them to divert staff from other critical functions, like R&D, production, or customer service, to focus on compliance.

Pro

Becoming CMMC 2.0 compliant could increase operational resilience and lead to improved cybersecurity practices overall.

Con

The diversion of resources could slow growth, product development, and innovation, limiting competitiveness.

3. Disruption of Supply Chain Relationships

• Third Party Compliance: Medium and small businesses often rely on a network of suppliers and subcontractors. If a vendor is not CMMC 2.0 compliant, it could disrupt the supply chain, especially if a critical component is sourced from a non-compliant vendor. Businesses will need to ensure that all partners in their supply chain meet the necessary standards.

Pro

Third Party compliance creates an incentive for businesses across industries to raise their cybersecurity standards.

Con

 It places an additional burden on smaller businesses to vet and ensure the compliance of all partners, which could slow down contracting processes.

4. Potential for Market Exclusion

• Loss of Contracts: Non-compliance with CMMC 2.0 means businesses will no longer be eligible for DoD contracts. This is a critical issue for firms in the healthcare, financial, manufacturing, and other sectors that are part of the defense supply chain, or for businesses that handle sensitive data under federal contracts.

Pro

For compliant businesses, there could be a reduction in competition as non-compliant companies are excluded, leading to more opportunities.

Con

 Smaller businesses that cannot afford to comply may be forced out of the federal contracting space altogether.

5. Long-Term Growth Opportunities

• Increased Credibility and Marketability: Businesses that achieve CMMC 2.0 compliance could use their certification as a competitive advantage. The government is increasingly emphasizing cybersecurity across sectors, and private-sector clients may follow suit, preferring to work with companies that have proven their cybersecurity maturity.

Pro

 CMMC compliance could become a differentiator in the marketplace, potentially leading to new business opportunities beyond government contracts.

Con

The certification process may take time, and smaller businesses may struggle to achieve compliance quickly enough to capitalize on immediate opportunities.

6. Technological Modernization and Cyber Resilience

• Improved Cybersecurity Posture and Maturity: Compliance with CMMC 2.0 will necessitate investments in modernizing IT systems, securing networks, and adopting cybersecurity best practices. Over time, these efforts will enhance the overall cyber resilience of medium and small businesses.

Pro

 Maturing Cybersecurity enhancements may protect businesses from cyberattacks, data breaches, and ransomware incidents, which can be financially and reputationally devastating.

Con

The upfront costs and technical expertise required to achieve this modernization may be prohibitive, especially for firms without robust IT teams.

7. Liability and Legal Considerations

• Increased Accountability: Businesses that achieve CMMC 2.0 certification will have clear responsibilities regarding the protection of CUI and compliance with federal cybersecurity regulations. Failing to maintain these standards, or experiencing a data breach, could result in legal and financial penalties, including losing certification.

Pro

 Guideline clarity provided by CMMC 2.0 reduce ambiguity about compliance expectations.

Con

The risk of penalties for non-compliance or failure to maintain standards adds another layer of liability and could discourage small firms from seeking contracts.

Conclusion: We can Help…

While 32 CFR Part 170 and CMMC 2.0 both present small- and medium-sized businesses with considerable financial and operational challenges, the long-term benefits of compliance, including enhanced and maturing cybersecurity, increased market opportunities, and potential protection from cyber threats, are substantial.

However, for some businesses, especially smaller firms with limited resources, the burden of compliance may prove overwhelming, potentially pushing them out of government contracting opportunities unless adequate financial or technical support is provided. As CMMC 2.0 becomes an ingrained industry benchmark, those businesses that can adapt will likely emerge more resilient and competitive.

We can help: CR Advisory is well-versed in the history and practices of CMMC and complying with its tenets. How can we serve you?

For additional guidance, please feel free to reach out.

Thank You!

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