What Is Data Residency and Why Does It Matter?

It is where your data is physically stored and processed. A lot of legislation mandates that certain data, especially personal data, be housed only within certain regions, so residency becomes a compliance requirement, not just a technical detail.

Residency is basically the physical storage and processing of data. Sovereignty refers to the legal jurisdiction of the particular nation where the data resides, so its location determines which laws govern it. Sovereignty is an extension of residency.

Because sending a prompt to a model moves the data to wherever that model is located, which could even be across a border. If the data is subject to residency rules, the choice of model and its hosting region becomes a compliance decision.

By using models hosted in the required region or running models on your own infrastructure, so sensitive prompts never leave the permitted jurisdiction, and by logging where data is stored and processed to prove it.