Table of Contents
Serving clients from different industries involves a massive amount of sensitive data. This confidential information is prone to cyber threats if not properly stored, handled, and shared across the web.
Because the business process outsourcing (BPO) sector has a global reach, service providers struggle to safeguard enterprise and personal data. This is challenging when they operate in different countries with varying data security rules.
To avoid getting bogged down in the complexity of multinational policies, BPO companies familiarize themselves with each region’s security regulations and data localization requirements. The sections below detail the relevant information they must note.
Understanding BPO and data localization requirements
According to IBM’s 2024 data, service contractors risk losing approximately $5 million due to a data breach. The report noted that 40% of these incidents involved information across multiple environments. Such findings are concerning when businesses operate remotely and globally.
However, the need to prioritize service quality might lead BPO providers to overlook the significance of data localization. This regulation requires every piece of information that they collect, process, and store to remain within the borders of the specific country they operate in.
Countries worldwide mandate data localization requirements to enforce adherence to data privacy laws in BPO. This approach simplifies how local governments monitor BPO companies’ compliance and impose sanctions through these main types of data localization:
| Two types of data localization requirements affecting BPO | ||
|---|---|---|
| Type | Definition | Use Case |
| Universal data sovereignty | All personal information must be stored on physical servers within the country of operations. Sensitive data processing and duplication must take place in the country of operations. | A global cloud service provider encounters regulatory issues as different countries execute their own data sovereignty laws. This approach allows the vendor to establish data centers in every jurisdiction where it operates and develop and implement an operational framework to integrate the local requirements of all countries it serves. It also allows the vendor to execute interoperable access controls based on the specific data requirements of each jurisdiction. |
| Partial data sovereignty | Some confidential data is stored within the country of operations, except by sector or region. Classified information can be transferred, processed, or stored abroad under certain conditions (e.g., explicit consent from data subjects and compliance with binding corporate rules). | A financial service provider must transfer and process confidential data in and outside its home country. This model allows the contractor to sort all data into sensitive (bank accounts), semi-sensitive (decrypted data), and non-sensitive groups (aggregated reports). It also uses the data classification system to identify which information to share in different locations and implement access controls and non-disclosure agreement (NDA) terms to ensure that data is accessible only to authorized personnel overseas. |
Examples of laws and regulations covering data localization
Data localization differs from data transfer. Data localization means keeping information within a geographical boundary, while data transfer involves moving information across a location. However, data localization restricts cross-border data transfers to ensure compliance with these examples of local laws and regulations.
European Union’s (EU) General Data Protection Regulation (GDPR)
- GDPR regulates personal data processing within the EU. Although the organization does not have specified data localization requirements, the recent invalidation of the Privacy Shield could be considered one.
- The law orders companies, even those from the BPO sector, to protect confidential data inside the EU. If the data needs to be moved outside the region, countries or organizations that have signed up for equivalent privacy security can only receive it.
Data localization/data residency laws in the Philippines
- The Philippines has a draft executive order on data localization guidelines covering cloud-based information. The proposed policy would impose data residency requirements for private companies offering cloud computing services and handling sensitive information.
- Philippine national security, tax, employment, and export control laws might mandate the retention and storage of personal data in the local jurisdiction or ban data flow across borders.
Industry-specific strategies for data localization in the United States
- The United States implements a sector-focused approach to data localization rather than a unified federal strategy. For instance, healthcare BPO companies adhere to the Health Insurance Portability and Accountability Act of 1996 (HIPAA) when fulfilling data localization and management requirements.
- HIPAA necessitates healthcare providers and support vendors to implement its standard encryption practices, regardless of the data’s physical location. The law also requires a business associate agreement (BAA) to ensure organizations’ commitment to safeguarding protected health information (PHI).
China’s cybersecurity and information security laws influencing data localization
- Chinese cybersecurity and information security laws require high-level data managers to store classified and critical information within China’s territory. Organizations can transfer data to foreign regions only after security verification.
- When transmitting personal data overseas, it must undergo security review assessments. For instance, healthcare support providers should accomplish a security review based on legal standards before moving medical data out of China.
India’s Personal Data Protection Bill
- If the Personal Data Protection Bill is enacted, BPO companies based in India must comply with data localization requirements. This proposed law details critical categories of highly confidential data to guide exclusive processing and storage in the country.
- Organizations should keep a local copy of other personal details before transferring. These proposed rules resemble India’s strategic plan to protect information while promoting its worldwide digital goals.
Data localization and data residency laws in Mexico
- The Mexican government directs the retention of personal data within its local jurisdiction. If the service provider works with a national security agency, the contractor shall store information processed within the facilities of the public organization.
Strategies for navigating data localization requirements in BPO
Service providers take necessary measures to ensure compliance with different data localization requirements. The strategies below are what BPO companies do to maintain cost efficiency and output quality while avoiding costly data security violations.
- Categorize data based on sensitivity, legal complexity, and usage levels (e.g., personal, classified, and unclassified).
- Combine local data hubs with global cloud services when storing and processing confidential information. This hybrid approach helps BPO contractors meet localization requirements while handling less sensitive data in the cloud.
- Develop and implement anonymization or pseudonymization strategies to safeguard critical data while transmitting it across borders, allowing more flexibility under specific legal frameworks.
- Create robust legal compliance measures, such as regular audits to ensure adherence to international standards (e.g., ISO 27001 certification for information security management system).
- Use legal mechanisms, such as standard contractual clauses, binding corporate rules, or approved certifications, to streamline cross-border data transfers.
- Establish regional BPO teams that handle data localization processes and requirements. Some service providers set up multiple processing centers in various regions, each complying with local data regulations.
- Execute robust encryption protocols for data at rest and in motion to keep it secure and unreadable without the correct keys.
- Include data localization policies and procedures when conducting regular BPO training for staff members. These courses help employees understand their legal obligations when handling confidential information within the country of operations.
The bottom line
BPO companies manage massive amounts of confidential data while serving multiple clients in different industries. Because of their global reach, handling data becomes increasingly complex, especially when every country they operate in has varying laws and regulations.
To ensure efficiency and legal compliance, BPO companies study data localization requirements for each region they serve. Knowing the associated laws in different countries and implementing the abovementioned strategies help them avoid sanctions and unnecessary delays.
Do you want to learn more about how a BPO company navigates data localization? Let’s connect today! We can also discuss how Unity Communications can boost your data management and security.
