What is Data Localisation and What does it Mean for Organizations?

What is Data Localisation and What does it Mean for Organizations?

Article by Tsaaro

7 min read

Table of Contents

What is Data Localisation and What does it Mean for Organizations?

As data consumption continues to grow manifold, the questions regarding how the data is stored and managed have become contentious. Data localisation regulations have come to allay many fears regarding data privacy concerns when it comes to the management of data collected by organizations, given its volume and sensitive nature. Data localisation refers to the process of retaining data within the geographical region from where it originated. If a company gathers data in the UK, it stores the data there rather than sending it elsewhere to be processed. Data localisation aims to shield residents’ financial and personal information from international surveillance while granting domestic governments and regulators the authority to request such information when necessary. Data controllers and data processors may not always be able to uphold their commitments if a country’s data protection regimes allow personal data pertaining to their citizens and residents to leave their boundaries.

Many nations have adopted data localisation regulations to address public data transfer concerns. Even in India, sans a comprehensive data privacy law, there exist rules for data localisation. For example, Section 94 of the Companies Act, 2013, read with Sections 88 and 92, requires covered organizations to store financial information at the company’s registered office. Paragraph 2(i) of the Reserve Bank of India’s Directive 2017-18/153 (issued on April 6, 2018), given under the Payment and Settlement Systems Act 2007 requires organizations to locally store and process sensitive data belonging to Indian users of multiple online payment services. Paragraph 3(9) of the IRDAI (Maintenance of Insurance Records) Regulation, 2015 mandates organizations to store insurance data within India.

Challenges to Data Localisation.

While the data localisation regulations are dynamic in nature, with Government authorities molding them in order to meet emerging challenges, organizations need to remain agile and flexible while ensuring compliance. It is also important for multi-national corporations to note that data localisation laws encompass, among other things, rules regarding requirements for data storage (for example, data security in data centers), different rules for different data sets, and varied local regulations which are often inconsistent to one another (such as the American anti–money laundering rules, which are to be applied globally, but in many nations data localisation regulations hinder the exchange of information). This means that data localisation breeds many challenges for organizations. Other than this, there are also technical difficulties, such as identifying all systems that store sensitive information and deploying controls for them, and hiring experts in different regions for ensuring compliance. Companies are being forced to change their conventional uniform approach to data management due to data localisation regulations; organizations that previously excelled by thinking globally now have to think locally. Because they have to invest time, effort, and management focus into comprehending the distinctive features of each regulatory jurisdiction where they operate, this raises their regional compliance costs. The heavy fines and punitive measures (such as in the EU, Russia, and China) mean that non-compliance cannot be afforded by organizations.  

Another significant issue relates to the creation of data localisation is the issue of data centers. To manage, analyze, store, and distribute massive volumes of data, companies, organizations, and other online-based entities rely on data centers. Without being constrained by regional boundaries, scalable cloud servicing providers make data centers accessible across India and the rest of the world. It means that by paying a set fee, various companies/entities from all over the world can utilize data center services (without physically visiting the facility). In addition to storage, people are becoming increasingly concerned about how organizations gather data and their privacy policies. Moreover, with stringent data localisation laws coming into place, organizations would no longer be able to depend on data centers in other countries.

Benefits of Data Localisation

Local storage of data facilitates reducing network latency and enhanced speed. Businesses may hire top personnel at reasonable prices and increase transactional efficiency thanks to the localisation of data storage and strong market drivers including the expansion of the cloud, user data, and e-commerce. Additionally, data localisation has evolved into a crucial commercial factor for enterprise companies. They benefit from it in many ways, including centralized leadership, the removal of obstacles, improved profit margins, data storage and management made possible, safety, and extraordinary development potential.

Efficient data localisation practices are bound to yield significant success. One of them is ensuring an optimized customer experience. Companies can, for instance, provide clients with a customized experience wherever they go, innovate quicker by utilizing larger and more diverse data sets, and expand quickly into new geographies with the assurance that they can change their strategy as needed. Moreover, a business can efficiently transition from one area to the next and cut expenses by implementing a repeatable data localisation approach. Additionally, staying compliant keeps management’s focus off of regulatory concerns.

Notably, by portraying themselves as credible sources of knowledge regarding digital identity and data privacy as well as custodians of customer data, businesses may enhance their reputations and attract new clients. Some businesses have even gone after rivals head-on by pointing out to clients that their rivals haven’t put in place data security on par with their own.

Map for Organizations.

While data localisation might seem to be a herculean task, organizations can have an efficient data localisation policy by moving methodically.

  • The first step is to ascertain the precise needs and decide on the required steps, doing a thorough review of the underlying regulatory demands. 
  • Then it is important to examine the market potential in a certain area or nation to see whether it justifies having its own IT and data infrastructure. 
  • Organizations should then define a target state for potential regional IT and data operations, taking into account how much the business will rely on local suppliers or develop its own localised skills. 
  • It is essential to implement appropriate planning and budgeting, with the assistance of the relevant international and local data and IT teams. 
  • Companies should then identify specific privacy and security measures. These could include tokenization to protect personally identifiable information (PII) during the migration to a local infrastructure and field-level encryption to secure sensitive personal data, depending on the data kinds and the severity of the dangers. 
  • Finally, businesses would then be able to organize the actual data migration and secure installation of the local operations and infrastructure.

Conclusion.

With data becoming the “new gold”, authorities and citizens are rightly concerned about how the data is stored and processed. While data localisation seems to be a daunting task, if carried out efficiently, it can be advantageous for businesses, while also increasing trust and transparency between Government authorities and customers.

There are several new data localisation laws emerging all around the world. Although they have different rationales, the difficulties facing the IT and data landscapes are sometimes extremely similar. Companies with the flexibility to handle this legislative change might gain significant competitive advantages. Nonetheless, this would require the assistance of numerous experts, ranging from legal counsels to engineers. 
The guidelines for better Privacy management and administration are straightforward once you understand them. Once they become ingrained in your behavior, they will aid in defending you from frequent scam tactics. Get in touch with us at info@tsaaro.com If you want to run an audit of your consent practices, check out our Regulatory Compliance Service, and Schedule a call with our experts by clicking here.

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