Data Localization: Definition, Benefits, and Challenges

With the increase in privacy regulations, data localization is a rapidly growing concern for companies. With the right strategies and tools in place, companies can ensure their data remains secure and compliant with privacy laws while also benefiting from its localization. In this blog, we’ll explore what data localization is, the benefits and challenges, and how using the right set of tools can help.

What is Data Localization?

Data localization is the practice of keeping data within the region it originated from. This means that companies must store and process data within the same jurisdiction as the user who is the source of that data.

Data localization has become increasingly important in recent years due to the increased scrutiny of data security catalyzed by foreign entity privacy violations. To mitigate privacy concerns and the  improper handling of customer data, many countries have implemented data localization laws. The figure below represents different levels of data localization requirements:

The Benefits of Data Localization

It may come as a surprise, but most data privacy frameworks do not require data localization. Highly regulated industries like finance and healthcare choose to adopt best practice guidance on data localization due to the nature of the data they store, process, and handle – they’ll proactively choose to localize data due to the security and privacy guardrails they introduce. For other companies, their goals may be tied to the proactive risk mitigation of possible violations by keeping data within specific regions.

Regardless of the reason, adhering to data localization requirements helps companies gain greater control over their data and ensure compliance with local laws. It helps companies keep sensitive information secure by restricting access to certain locations or users, as well as preventing the unauthorized transfer of data across borders. 

The typical benefits of implementing a localized approach are: 

1. Data privacy: enhance data privacy by subjecting data to the laws and regulations of the jurisdiction where it is created and stored. 
2. Reduced costs: savings related to international transfers and costs associated with hosting foreign servers or transferring copious amounts of data between countries.
3. Customer experience: improved performance due to the decreased latency when accessing geographically proximate servers. 
4. Data security: heightened security through enhanced control over who has access to sensitive customer information.
5. Local regulations: compliance with local laws related to consumer protection requirements.

In addition to the obvious privacy benefits, data localization also has the potential to safeguard sensitive data and decrease the probability of cyber-attacks. However, it comes with challenges ranging from significant infrastructure investments to increased storage costs. When implementing a data localization strategy, teams should be aware of and prepare for potential obstacles.

The Challenges of Data Localization

A universal method for localizing data does not exist. Over 100 countries have passed individual data regulation laws, with each implementing unique rules for how data can (or cannot) cross their borders. Companies must ensure they have adequate local resources to remain compliant in especially stringent jurisdictions, from China to California. Some challenges include:

1. Increased costs: Organizations must factor in additional costs associated with setting up infrastructure in multiple countries or regions to store and process data, instead of handling it in a centralized location and transferring elsewhere. Purchasing hardware, getting licenses, and employing personnel aware of local rules all bring in extra costs that can quickly mount up.
2. Regulatory compliance complexities: many regulations are at the national level, which makes them highly variable and, in some cases, contradictory.
3. Trade hurdles: localization has the potential to make it tough for organizations to conduct business globally or can block access to data stored in other countries.
   

Data localization can be a complex and costly endeavor for organizations, and it alone does not ensure that data remains private and secure. Companies will need tools designed to support not only data localization but also data security and privacy governance as a whole.

Riscosity and Data Localization

With Riscosity’s DFPM platform, teams get continuous and complete visibility into their data - destination, classification, sovereignty - and can take action to redact sensitive data or redirect it from traveling to unapproved geographies. They are able to simplify how they meet local data security, privacy, and compliance requirements, programmatically. Ready to implement a comprehensive data localization solution? We’d love to talk to you - find a time that works for you here.