As the dust settles from the recent presidential elections, the future of data sovereignty continues to grow increasingly complex, and the regulatory environment ensuring data is stored and processed within specific geographic borders is at the center stage. Although it is still too early to predict the full impact of new global regulations, the anticipated philosophical shifts and specific changes in areas such as trade policy may have far-reaching consequences for digital governance and technology policy in the foreseeable future. Amidst drastic political shifts and rising national security concerns, data sovereignty has reached the forefront of governmental policy, defining how companies store, share, and protect data globally.
The US is among several nations moving to impose updated data sovereignty regulations designed to protect sensitive information and prevent unauthorized access, with complete national control over these valuable data assets. For technology leaders, 2025 promises to be a tipping point in sharing data within regulatory requirements, creating new challenges for data infrastructure, cloud strategy, and AI applications.
If you are a tech leader bracing for the storm, here are five key tips to ensure compliance, reduce risks, and turn data sovereignty into a competitive advantage.
- Understand Key Market Data Residency Requirements
To nimbly navigate these fiercely guarded frameworks, tech leaders need to identify where data is stored and processed for each jurisdiction in which they operate; US-based companies operating in the EU have to house EU citizens’ data on servers based in the EU, even if the company uses a global cloud provider. Proactively mapping data flows and locating residency requirements for every region will save an organization from expensive penalties and productivity-sapping disruptions.
Data residency is becoming increasingly mainstream; over 100 countries have either implemented or are in various stages of developing data protection and data sovereignty laws. They mandate companies to store data such as personal and financial information within the country’s national borders. The most restrictive are Europe’s General Data Protection Regulation and China’s recently updated Data Security Law – which come with multimillion-dollar fines as penalties for failure to adhere to their strict stipulations.
- Adopt Hybrid and Multi-Cloud Strategies
By implementing hybrid or multi-cloud strategies, organizations can house sensitive information within a private cloud/on-premise environment in regions with stringent residency laws while still leveraging scalability with public cloud services for less regulated data.
My organization, Hitachi Vantara, has seen success with hybrid cloud models that allow organizations to balance compliance needs with the operational benefits of cloud computing. This hybrid approach benefits international organizations in keeping their sensitive data within regulated boundaries while availing themselves of an expanded cloud ecosystem for less constrained processing of other data. This flexibility ensures compliance and provides a resilient infrastructure that can adapt as regulations evolve.
- Deploy Data Masking and Tokenization for Security Compliance
As data flows across borders, data masking and tokenization are invaluable tools for protecting sensitive information. Data masking replaces real data with fictitious but realistic data so that it can be shared without compromising its security. Tokenization replaces sensitive data with unique identifiers that can then be decrypted only within a secure environment.
According to the International Association of Privacy Professionals, data masking and tokenization are crucial tools for organizations seeking to comply with data sovereignty and privacy laws while minimizing the exposure of sensitive data, even when crossing borders. These tools are especially useful for companies conducting analytics or training AI models on sensitive data.
- Develop a Sovereign Cloud Strategy
The concept of sovereign clouds—cloud environments that adhere to specific local regulations— is gaining widespread popularity with organizations concerned about sensitive data from regulated industries such as finance and healthcare. However, organizations must also consider hybrid models or on-premise solutions, providing ultimate control over data security while meeting local data regulations.
Hybrid approaches combining sovereign clouds with on-premise systems can reduce the risk of legal challenges for cross-border data transfers while offering operational flexibility. Tech leaders must consider a partnership with cloud providers that offer sovereign cloud options within infrastructure. This will help reduce the risk of legal challenges for cross-border data transfers. According to the UN Trade and Development Report, sovereign clouds could permit companies to meet the growing demand for data localization and decrease risks from cross-border data exchanges.
- Implement Continuous Monitoring and Compliance Automation
As the regulations for data sovereignty continue to increase in complexity, organizations cannot afford to manage compliance manually. The most seamless path forward lies in deploying automated tools and continuous monitoring systems to maintain compliance with dynamically changing regulations.
Compliance automation platforms can track cross-border data flows, enforce access controls, and ensure encryption standards are met with minimal continuous manual intervention. With the integration of these systems, tech leaders can take some of the operational burdens off their teams’ plates, allowing them to focus on innovation while reducing legal and financial risks of non-compliance.
This proactive approach is particularly crucial as organizations navigate the complexities of emerging technologies like AI, which further complicate compliance efforts. Most AI applications need access to large volumes of data for model training. These often contradict data residency laws. AI models developed in one region may not be applicable or non-compliant in other regions due to regional differences in regulatory requirements.
Tech leaders will need to contemplate how they can consider a “Private AI” strategy in which every training and deployment of the AI model happens in compliance with local data regulations, training models only on regional pools of data or deploying AI solutions within sovereign cloud environments in compliance with data residency requirements throughout the AI life cycle.
Going into 2025, data sovereignty will be one of the most pressing regulatory issues that tech leaders will likely face. Recent political changes only enhance the weight of this issue, as governments worldwide are tightening their reins about where and how data is stored and processed. In advance of changing regulations, adopting hybrid or on-premise strategies alongside sovereign cloud solutions will be crucial for any leader who aims to safeguard data assets for global organizations.
By Dan McConnell
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