What Is a Data Retention Policy? How It Works & Why You Need It

No matter how important a piece of information becomes to your organization, it inevitably goes through the various data lifecycle stages. Therefore, you must have a robust risk management protocol to guide the storage and disposal of sensitive and proprietary information. 

A data retention policy enables you to handle and dispose of your data in an orderly and systematic manner by providing the necessary structure and compliance profile to do so.

What Is a Data Retention Policy?

A data retention policy guides businesses on storing, securing, and accessing data, including duration and access permissions.

This policy is typically in accordance with regulatory compliance and is designed to help businesses effectively manage their information assets. It further outlines the process for deleting or disposing of information after its retention period ends. An effective data retention policy aids in managing storage costs, enhancing data management, and ensuring data compliance with regulations like GDPR, HIPAA, etc.

Why Is a Data Retention Policy Important?

Data Retention Policy is important for several reasons:

• Litigation Support: The data retained can be used as evidence in court if a dispute arises. It can help protect and defend the business from lawsuits and demonstrate compliance with laws and regulations.
• Operational Efficiency: Retaining too much unnecessary data can lead to inefficiencies and increased costs. A clear retention policy ensures only necessary data is kept, improving system speed and efficiency. 
• Risk Management: Proper data retention can help mitigate data breaches and loss risks. If data is only kept for as long as necessary and then properly destroyed, it reduces the volume of data that could potentially be exposed in a breach.
• Business Continuity: In the event of a disaster, a robust data retention policy can aid in recovery. Backed-up data can be used to restore systems to their pre-disaster state.
• Fosters Trust: A clear data retention policy can enhance transparency and increase customers' trust, knowing that their data is handled responsibly and securely. 
• Financial Management: Storing data costs money. By determining which data is important to keep and for how long, a business can manage and even reduce its storage costs.

How to Create a Data Retention Policy?

Creating a data retention policy involves multiple steps and collaboration from different teams within an organization. These teams should include members from legal, IT, management, and all other departments that handle data. Here are the essential steps to create a data retention policy:

• Form a Team: Participating members should include representatives from every department (HR, Finance, IT, Legal, etc.) that handles different data types.
• Identify the Types and Categories of Data: Different data types could include personal data, business records, financial information, documents, emails, and digital messages, among others. Understand the different types of data your organization handles.
• Conduct a Legal Review: Work closely with your legal team or consult a lawyer to understand all the current laws and regulations relating to data retention applicable to your business. Compliance laws can vary across industries and nations.
• Determine Business Needs: Not all data has to be preserved indefinitely. Determine how long each data type is valuable for business operations or decision-making. 
• Define Retention and Deletion Procedures: Determine how long each data type needs to be retained according to legal needs and business requirements, and specify a deletion process. 
• Outline Responsibilities: Assign accountability for executing and administering the policy. Make it clear who is responsible for managing and enforcing it. 
• Train Employees: Once the policy is in place, educate all employees about their roles and responsibilities. Regular training should be provided to ensure ongoing compliance.
• Implement Security Measures: Ensuring the stored data's safety is crucial. Perspectives on security may vary based on the data type, so include encryption, backup, disaster recovery plans, and access controls in the policy.
• Regularly Review and Update the Policy:  Laws, business needs, and technology change over time. The policy should be dynamic, undergo regular reviews, and be updated when necessary to adapt to the changes.

Creating a data retention policy might seem daunting, but it is crucial for any business handling data. A good policy can help minimize risks, enhance operational efficiency, and ensure legal compliance.

The Key Components of a Successful Data Retention Policy

• Clear Scope: A successful data retention policy should explicitly describe what kind of data it applies to. It could be customer data, financial data, employee data, and so forth.
• Legal and Regulatory Compliance: Adherence to legal and regulatory standards is imperative; the policy must align with all relevant laws and regulations. This could encompass guidelines from the General Data Protection Regulation (GDPR), the Health Insurance Portability and Accountability Act (HIPAA), and the Sarbanes-Oxley Act.
• Retention Period: This is a defined length of time data must be stored. 

The duration may fluctuate based on the nature of the data and regulatory directives.

• Secure Storage: The policy should outline secure storage methods that protect data from loss, breaches, or other security threats. 
• Access Controls: Only authorized individuals should have access to certain data. The policy should define access controls.
• Data Destruction: Data should be properly destroyed or deleted after the retention period has expired. The policy should outline how and when this happens.
• Regular Review and Updates: A successful data retention policy is dynamic and evolves with changes in the business or regulations. Regular reviews and updates are essential.
• Training and Communication: For maximum usefulness, all individuals in an organization should know and understand the data retention policy. Regular training and clear communication are key components.
• Disaster Recovery Plan: Data retention practices should be paired with a disaster recovery plan outlining how to recover data in case of incidents or breaches.
• Data Classification: Classifying data based on criticality, usage, sensitivity, etc., can help determine its retention period and storage.
• Audit Trails: Successful data retention policies should have data audit trails to track all data-related activities, including access, modification, deletion, and sharing. This can help detect and investigate unauthorized access or data discrepancies.

The Benefits of Data Retention Policy

• Regulatory Compliance: Adhering to a data retention policy helps organizations comply with various local, national, and global regulations such as GDPR, HIPAA, and CCPA. Non-compliance with these regulations can lead to severe penalties.
• Reduced Storage Costs: Retaining unnecessary data for longer periods can increase storage costs. With a proper data retention policy in place, organizations can delete outdated data, reducing storage costs.
• Enhanced Data Security: The less data an organization stores, the less likely it is to be compromised. Therefore, a data retention policy can improve data security by ensuring only necessary data is retained.
• Improved Efficiency: By removing redundant and obsolete data, data retention policies can make locating and accessing necessary information easier, improving organizational efficiency and productivity.
• Effective Disaster Recovery: Having systematically backed-up data thanks to a retention policy can greatly aid in swift and effective disaster recovery.
• Legal Defense: In case of legal disputes, data retained according to a well-defined policy can serve as evidence to protect the organization.
• Risk Mitigation: Data retention policies help organizations delete obsolete data, reducing potential exposure to data breaches and cyberattacks.
• Improved Decision-Making: Retention of important data allows companies to analyze past trends and make more informed decisions. 
• Greater Operational Transparency: Clear policies around data retention help employees better understand data handling processes, leading to greater operational transparency. 
• Customer Trust: Lastly, a well-executed data retention policy demonstrates to clients and customers that the company takes data management seriously, thereby enhancing trust.

Data Retention Policy Best Practices

• Be Aware of Legal and Regulatory Requirements: Understand the relevant regulations for your industry, such as GDPR, HIPAA, SOX, etc., and ensure your policy is updated with these requirements.
• Classify Your Data: Not all data is created equal. Identify and classify data based on its importance and sensitivity to determine how long it should be retained.
• Specify Retention Periods: Define clear retention periods for different types of data based on their classification and regulatory requirements. 
• Secure Your Data: Use encryption, access controls, and other security measures to protect stored data from unauthorized access and breaches.
• Regular Auditing: Conduct regular audits to ensure the data retention policy is followed and effective.
• Safe Disposal: It is crucial to outline how and when stored data will be securely disposed of at the end of its life cycle.
• Regular Reviews and Updates: Laws and regulations often change, and so does your organization's data. Keep the policy updated to reflect these changes.
• Employee Training: Ensure employees understand the policy and know their roles and responsibilities in adhering to it.
• Use Reliable Technologies and Solutions: Invest in reliable data storage, backup, and archiving technologies to effectively implement your data retention policy.
• Document the Policies: Record all data retention policies in a written document. This ensures everyone understands what's required and helps in case of regulatory inquiries or audits. 
• Backup Consistently: Ensure that you have consistent data backups in case of disaster recovery.
• Transparency with Customers: Be transparent about your policies with customers and stakeholders, especially regarding personal data.

Understanding Digital Guardian Can Boost Your Data Retention Policy

Digital Guardian provides its customers with granular and high-level visibility into its data, a vital prerequisite for data retention.

Don’t fall behind on your data retention policies. Schedule a demo with us to learn about managed services and data classification techniques that can help enhance your data retention policies.