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January 31, 2023

Data residency challenges and risks you need to know

Data residency challenges and risks you need to know

Data residency is a growing area of compliance for global businesses. As laws in different countries seek to regulate how data is collected, processed, and shared, companies face the challenge of conducting operations to meet all data privacy standards in different regions.

The effects of the pandemic made online operations more mainstream for many companies. This surge in the digital space has heightened the need to comply with data residency concerns, such as when operating across borders and using a compliant cloud service. 

In this article, we’ll explain how business owners can keep abreast of data residency challenges and risks and how to navigate through them to a long-lasting solution.

Data residency background

Data residency means storing personal information within the country from which the data is obtained and according to the country’s policies and regulations. Personal information is information that can be used to identify a particular individual, such as personally identifiable information (PII) and personal health information (PHI).

Businesses have to comply with local data legislation, which in various cases requires that certain types of data, namely, information about citizens or residents of the country, be viewed, stored, and processed inside the country. This is known as “data residency.”

An efficient data residency-as-a-service solution eases the burden on companies whose business operations necessitate having to keep tabs on varying and changing laws across sales regions. With this, your business will easily and efficiently meet the demands of law and regulation while expanding into more countries. Additionally, data residency helps businesses efficiently process customer data and ensure a better customer experience. By complying with data privacy and protection rules, it is easier for companies to diversify and invest in new market spaces.

We must mention here that, though data residency is beneficial, compliance comes with certain challenges. Therefore, it is necessary for companies to understand these compliance challenges in order to be better prepared to handle them.

Data residency challenges

Due to constantly changing regulations from the government and regulatory bodies, data residency has become increasingly convoluted, requiring constant internal policy reviews by businesses to ensure compliance.

Data residency challenges come in different ways. Therefore, it is also important to evaluate some of these ways, understand how they apply to your business, and learn how you can handle them. 

Collaboration challenges

Due to the complex requirements of data residency, many companies have a nagging fear that they might omit some aspects and suffer huge consequences as a result. With many data residency laws to comply with, some businesses collaborate with third-party cloud service providers for effective implementation. Others, however, are opposed to leaving compliance entirely to data residency service providers.

A CSCC survey asked some business owners their thoughts on collaborating towards achieving data protection. Most respondents declined to use such arrangements, while others had reservations. However, there is no doubt that such collaborations can be extremely helpful to companies if done with a trusted and efficient data residency cloud service provider. It is a sure way to protect the sensitive personal information of customers from risks associated with unauthorized access.

Implementation challenges

Complying with data residency laws may require constant upgrades or a total overhaul of internal policy measures. This may include changes in storage, access control, backup and replication facilities, networking infrastructure, and data transition to suit new localization requirements. Also, the need to set up all of this equipment can significantly raise the cost of operations.

The process of implementing data residency laws per country is usually a tiresome exercise for many SaaS companies. The shortage and high cost of technical expertise may pose another challenge in implementing these changes. For example, some countries’ regulations specifically demand specialized IT engineers’ services. This could cause a layoff of the existing technical staff where their qualifications fall short.

Potential pitfalls

Data residency laws are closely linked with the economy and politics of the nation. As such, issues may arise when business owners try to protest against these laws. Countering governmental policies may not augur well with your business and give you a bad reputation among the locals.

Even though data residency compliance is challenging, it is better to tactfully draw the attention of lawmakers to the particular issues faced within the industry. It is also important to educate clients on changes caused by data residency compliance, especially where such affects them.

Common data residency risks 

Risks often arise as data-oriented companies carry out their business operations, especially globally. If your company plans to have a safe landing, it is important to have a firm grasp of data residency laws by country.

Here are some risks global companies face by not being conversant with data residency: 

  • Unintentionally breaking data laws or which may incur serious penalties.
  • Access to the company’s and its customers’ sensitive information by unauthorized third parties.
  • Espionage by a foreign government or organization.
  • Loss of clients to competitors due to concerns about data mismanagement.
  • Incapacity to undertake projects where data residency compliance is a requirement.
  • Proneness to cyberattack, e.g., in case of attacks on locally operated data centers with lower level security.
  • Delay in business growth in foreign countries due to concerns about non-compliance.
  • Distrust by potential and existing customers resulting from a previous data breach.

Fear of these risks might cripple business operations, but that is hardly necessary because while data residency challenges abound, solutions exist too.

Rather than being apprehensive or overwhelmed by data residency compliance, companies can proactively minimize and manage risk situations and seek a permanent solution to data residency challenges.

Data residency-as-a-service from InCountry

We are well aware that global businesses dealing with data from many different countries must adhere to local data residency laws in each region. This is exactly why InCountry exists.

InCountry cuts the red tape of data residency regulations, providing global businesses with instant, ready-made compliance solutions. Companies can resolve challenges without interfering with daily business operations.

InCountry is the best way to comply with cloud data residency risks and challenges. At InCountry, we adhere to legal and technical best practices to ensure data security across different political regions. With InCountry. companies no longer have to worry about breaking data rules while focusing on global operations and expansion.

Using InCountry’s detailed data residency services reduces the risk of data leakage and increases customer trust in your product or service.

InCountry’s services are prompt and efficient, enable seamless integration for all SaaS products, and are available worldwide

InCountry has leading experts who also provide top-notch consultation services for all your queries. Schedule a demo to speak with our experts.