In the age of digitization, data serves as the foundation for innovation, decision-making, and competitive advantage for organizations. Being useful in so many ways, data also brings up concerns about security, privacy, and regulation. Knowing where the data is stored can help you overcome most of the data concerns, and that’s where data residency comes into play.
Data residency establishes the location where data is stored and processed, which is crucial for professionals carrying out ETL (Extract, Transform, Load) practices. It impacts everything from compliance with data protection regulations to data transfer and access effectiveness.
This article will discuss data residency from a beginner’s perspective and how it is important for carrying out ETL.
What is Data Residency?
At its core, data residency means a geographical or physical location where your data is stored. You can think of it as a home address for your data.
As different countries have different data privacy laws, data residency greatly impacts how your data is stored and managed. Often, due to the regulations around data, organizations have to store data in specific regions. For example, organizations are mandated to store sensitive data within their respective countries.
However, compliance with laws can be expensive, and you might need to hire talents and learn about data residency laws. However, cloud computing platforms can help you avoid some workloads around data residency.
Platforms like AWS and Microsoft Azure provide data residency solutions through the availability of a wide spread of global regions for storing data. This allows you to comply with different data regulations cost-effectively.
Examples of Data Residency Laws
Data residency laws are a part of countries’ data privacy policies and regulations. Some popular data privacy laws are the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
According to GDPR, data must remain within the EU. If data migrates to a different location, it should go to a country offering comparable privacy protection. Businesses that handle regulated data around finances and health must abide by the rules of GDPR.
Another interesting example can be found in the Data Protection Act—Data Protection Act No. 152 FZ—of Russia. The act promotes data localization, which requires companies to store and manage residents’ data on servers based in Russia. In simple terms, you can’t migrate sensitive data of Russian residents to other countries of the world. This regulation attempts to uphold better control over citizen data and ensures that it stays inside the jurisdictions of Russia.
Different laws and regulations on data residency make it challenging for organizations to conduct business operations. However, understanding the need for these laws is something crucial as well.
Importance of Data Residency
Below are some of the reasons that explain the importance of data residency:
- Legal Compliance: As governments are very critical of residents’ data, there are many rules and regulations on data processing. These rules and regulations govern which data to process and how to use it. There can be sensitive data that must stay within a particular geographical area. Therefore, organizations must comply with specific regions’ laws and regulations to function.
- Data Privacy & Security: As the data is stored in multiple locations, it becomes difficult to perform data breaches on all your databases. Additionally, data residency puts a critical layer of privacy protection on user’s data by complying with laws of the country. Therefore, data residency has a big influence on data privacy and security.
- Organizational Operations: An organization in a particular part of the world might operate differently than another part. This could be because user behavior differs across the world. Storing country-specific data locally can help you manage and analyze data according to regional needs.
- Manage Risks: Through data residency, you can minimize the potential risk of processing sensitive data. This allows you to avoid the possibility of legal challenges by performing data processing in a way that complies with a particular region. Also, you can avoid any reputational harm with the help of data residency.
Requirements of Data Residency
Data residency requirements can vary from place to place. Some of the common requirements are mentioned below:
- Encryption: Data encryption is a common requirement for data residency. Encryption means turning data into unintelligible code that can only be decoded with the right keys. It helps protect data from potential breaches and unauthorized access.
- Storage Location: Understanding what data you can move across borders and what information needs to be stored within the region is essential to comply with the laws. Failing to adhere to the rules may result in a hefty penalty by the respective authorities.
- Data Retention Policies: You must frequently create and apply data retention policies to comply with data residency regulations. These policies govern how long the data should remain and when it should be deleted. In simple terms, these policies have a big role in shaping the way you store and process the data.
- Data Protection Impact Assessments (DPIAs): To process data in particular regions, you should conduct DPIAs, especially if the data can endanger the privacy of individuals. DPIAs evaluate how data processing operations affect data subjects and assist in identifying or reducing particular risks.
- Documentations: Data residency requires maintaining detailed documentation and records of data processing. This includes documenting security precautions, data locations, compliance activities, and access restrictions. Regular updates on documentation may be required according to some regulations.
Challenges of Data Residency
Data residency has many challenges, some of which are mentioned below:
- Operational Challenges: An operational issue like data consistency, privacy, and accessibility occurs when managing data across many locations simultaneously. Ensuring that different data residency requirements are followed without constantly changing how the organization functions around using data is challenging.
- Data Fragmentation: When you deal with data across multiple locations internationally, the data might spread across many servers, cloud providers, or data centers. As a result, difficulties occur while performing data analytics and reporting. To avoid this issue, you must carry out operations like data consolidation and harmonization, which can be resource-intensive.
- Compliance Complexity: The compliance of data residency is a challenge to comprehend, especially for organizations operating on an international level. Following different data protection regulations can be difficult because dealing with every jurisdiction’s legal requirements can be very complex.
- Risk of Data Loss: Data residency in a specific location can lead to the risk of losing the data. Natural disasters, technology malfunctions, and other events might put data in danger of being lost. Therefore, you should create replicas locally to maintain data resilience and consistency.
- Cost Concerns: It can be costly to fulfill requirements for data residency in different locations. Setting up on-premise data centers for sensitive data following enhanced security measures and employing legal compliance professionals can strain budgets for organizations.
How to Overcome Challenges of Data Residency?
While performing ETL, data residency challenges can be avoided by using automated ETL platforms like Hevo Data. Below are some of the challenges that Hevo helps you to overcome:
- Resource Intensive: Carrying out data residency practices like data management, according to regions, can be very resource-intensive and time-consuming. You might have to hire several developers to meet operational requirements. Using Hevo’s Multi-region Support feature, you can streamline storing data in multiple regions.
- Your Compliance Officer: If you want to comply with different countries’ laws and regulations during data integration, you must continuously update your data policies accordingly. This can be challenging as it involves modifying data pipelines. However, Hevo allows you to implement different security measures like encryption, data retention, and more to preserve sensitive data to comply with GDPR, CCPA, SOC2, and more
Above are some points showing how Hevo empowers data residency tasks in ETL practice. Here, you can learn about the regulatory compliance of Hevo in detail.
Data Residency vs. Data Sovereignty vs. Data Localization
Now that you understand data residency well, you should know about data sovereignty and localization. Many often confuse these three as the same but differ in concepts.
As you know, data residency is a physical location where your data is stored, but data sovereignty is a broader concept. It considers where the data is stored and gives importance to the laws and regulations of the country where it resides. You can take data sovereignty as the idea that data is subject to the governance or laws of the country in which they are collected. The country has the right to control the data generated within its borders. This includes not only the storage of the data but also its processing, control, and distribution.
Another term used with data residency is data localization. It is a more strict concept. This concept requires that all the data processing be done entirely within the boundaries of the country where the data is located. The goal of data localization is to get total control of the data. It can significantly impact how well data is processed and cross-border data flows. Broadly, these three concepts play vital roles in data management and compliance.
In conclusion, understanding the need for data residency is crucial as it governs your future operations for processing the data of users. As discussed above, data residency is not just about storage location but also privacy, security, data accessibility, and more. Being mindful of where your data is stored and how it operates also helps avoid data breaches and privacy challenges.
Therefore, you must address data residency considerations by staying updated on regulations and implementing efficient data management practices. Tools like Hevo not only simplify the complexities of data transformations but also provide solutions for data residency compliance through measures like having servers globally and compiling to the standard regulations like HIPAA. As a result, you can harness the full potential of your data assets while ensuring they meet globalized standards.
Hevo offers 150+ plug-and-play integrations and saves countless hours of manual data cleaning & standardizing. Our in-built pre-load data transformations can get it done in minutes via a simple drag-and-drop interface or your custom Python scripts.
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