Definition
Data residency refers to the physical or geographic location where an organisation’s data is stored and processed. It is often influenced by regulatory, contractual, or policy requirements that dictate whether data must remain within a specific country or region. Businesses handling personal, financial, or sensitive information must consider data residency to comply with legal obligations and customer expectations.
For example, an Australian business collecting customer data may be required to store it on servers located in Australia to meet privacy and security standards set by regulators or clients.
Advanced
Data residency is often tied to data sovereignty, which concerns the laws governing data in the country where it is stored. Different jurisdictions impose varying requirements. In Australia, the Privacy Act 1988 and Australian Privacy Principles include obligations for cross-border disclosure of personal information. In the European Union, GDPR imposes strict rules on transferring data outside of member states.
Advanced strategies involve selecting cloud providers with regional data centres, drafting contractual clauses for international transfers, and conducting risk assessments on third-party data storage. Businesses must balance compliance, performance, and cost, especially when operating globally. Emerging frameworks, such as data localisation requirements in certain countries, are adding further complexity.
Why it matters
- Ensures compliance with privacy and data protection laws.
- Reduces legal and financial risks related to cross-border transfers.
- Builds customer trust by maintaining transparency about data handling.
- Helps manage cybersecurity risks tied to jurisdictional requirements.
Use cases
- Storing healthcare data in-country to comply with local regulations.
- Using regional cloud servers to meet contractual data residency requirements.
- Applying policies for government data that must remain onshore.
- Conducting due diligence on cloud vendors for compliance assurance.
Metrics
- Percentage of data stored within required jurisdictions.
- Number of cross-border data transfers audited.
- Compliance audit results for data residency obligations.
- Incidents of regulatory breaches linked to data storage location.
Issues
- Increased infrastructure costs from maintaining in-country servers.
- Limited choice of cloud providers in regions with strict rules.
- Legal exposure when data is transferred without adequate safeguards.
- Operational inefficiencies in multinational data management.
Example
A financial services firm in Australia uses a global cloud provider but specifies that all customer data must be hosted in Sydney data centres. This ensures compliance with local privacy requirements and reassures clients about the security of their personal information.