Introduction
Cloud adoption across the European Union has accelerated rapidly. Enterprises rely on cloud platforms to improve agility, reduce infrastructure overhead, and support digital transformation. However, this shift has also intensified regulatory scrutiny around cloud security and data residency. European regulators are clear: moving to the cloud does not reduce accountability for protecting data, ensuring availability, or maintaining compliance. In many cases, it increases responsibility.
Regulations such as GDPR and the NIS2 Directive place explicit obligations on organisations to understand where data resides, how it is protected, who can access it, and how services will continue during disruptions. These expectations apply regardless of whether systems are hosted on-premises or with global cloud providers. The misconception that the cloud provider handles security continues to be a major source of regulatory findings.
This article explains what EU regulators expect when assessing cloud security and data residency. It focuses on governance, risk management, and operational controls rather than technical configuration details. The aim is to help business leaders and decision-makers understand how to use cloud services confidently while meeting European regulatory expectations.
Why Cloud Security and Data Residency Matter in the EU
European regulators view cloud services as critical infrastructure dependencies. When cloud environments fail, misconfigure, or are compromised, the impact can be widespread, affecting data protection, service availability, and even national economic stability. High-profile incidents involving cloud misconfigurations and provider outages have reinforced this concern.
Data residency matters because EU law prioritises:
- Protection of individuals’ rights
- Sovereignty over personal data
- Predictability of legal jurisdiction
- Control over cross-border data access
As a result, cloud security for VC funds and data residency are treated not as IT design choices, but as regulatory risk decisions that must be governed at organisational level.
Understanding Data Residency vs Data Localisation
Data residency and data localisation are often used interchangeably, but they are not the same.
- Data residency refers to where data is stored and processed.
- Data localisation requires data to remain within specific geographic boundaries.
GDPR does not impose strict localisation requirements, but it does require organisations to understand where data resides and ensure adequate protection wherever it is processed. Regulators expect enterprises to know, document, and justify data location decisions, especially when data leaves the EU.
GDPR Expectations for Cloud Data Residency
Under GDPR, organisations remain fully responsible for personal data processed in cloud environments. Key expectations include:
- Knowledge of data storage and processing locations
- Lawful mechanisms for international data transfers
- Protection against unauthorised access, including foreign government access
- Ability to demonstrate compliance through evidence
Using a cloud provider does not absolve the organisation of these responsibilities. Regulators often examine whether enterprises truly understand their cloud provider’s data flows.
International Data Transfers and Cloud Platforms
Many cloud platforms operate globally, which creates complexity around international data transfers. GDPR restricts transfers of personal data outside the EU unless specific safeguards are in place, such as:
- Adequacy decisions
- Standard Contractual Clauses
- Supplementary technical and organisational measures
Enterprises must assess not only contractual safeguards, but also practical risk, including access by third-country authorities. This assessment must be documented and periodically reviewed.
NIS2 and Cloud Security: A Resilience Perspective
While GDPR focuses on personal data protection, NIS2 broadens expectations to include service availability and operational resilience. For cloud environments, this means regulators assess:
- Dependency on cloud services
- Impact of cloud outages on operations
- Resilience and recovery planning
- Oversight of cloud service providers
Cloud security under NIS2 is not just about preventing breaches. It is about ensuring that critical services remain available, even when cloud platforms experience incidents.
Shared Responsibility: What Regulators Expect Enterprises to Understand
Cloud providers operate under a shared responsibility model. While providers secure the underlying infrastructure, enterprises are responsible for:
- Configuration of cloud services
- Identity and access management
- Data protection controls
- Monitoring and incident response
- Compliance and governance
Regulators frequently find that organisations misunderstand this model, assuming the provider handles more security responsibilities than it actually does. Lack of clarity here is often treated as a governance failure.
Access Control and Identity Governance in the Cloud
Cloud environments introduce new access risks, particularly through misconfigured permissions and over-privileged accounts. EU regulators expect enterprises to implement:
- Strong identity governance
- Least-privilege access
- Regular access reviews
- Secure authentication mechanisms
Because cloud access is often remote and scalable, weak access governance can quickly lead to large-scale exposure.
Cloud Configuration and Misconfiguration Risk
Misconfiguration remains one of the most common causes of cloud incidents. Regulators increasingly expect enterprises to demonstrate that:
- Secure configurations are defined
- Changes are controlled
- Configurations are monitored continuously
The absence of configuration governance often indicates inadequate cloud risk management.
Encryption and Data Protection in the Cloud
Encryption is a critical safeguard under GDPR, particularly in cloud environments where physical control is limited. Regulators expect enterprises to consider:
- Encryption of data at rest and in transit
- Key management responsibility
- Separation of duties between provider and customer
Encryption alone is not sufficient, but it significantly reduces risk and regulatory exposure when implemented correctly.
Monitoring, Logging, and Visibility
Visibility is essential in cloud environments. Regulators expect enterprises to maintain:
- Logging of access to personal and sensitive data
- Monitoring for suspicious activity
- Retention of logs sufficient for investigation
Inability to detect incidents promptly is often cited as a breach of organisational measures under GDPR and NIS2.
Incident Response in Cloud Environments
Cloud incidents often require coordination between the enterprise and the cloud provider. Regulators expect organisations to:
- Understand provider incident notification processes
- Integrate cloud incidents into internal response plans
- Meet regulatory reporting timelines regardless of provider delays
Relying solely on provider communications without internal readiness is considered inadequate.
Business Continuity and Cloud Dependency Risk
Cloud platforms are resilient, but not immune to failure. EU regulators expect enterprises to assess:
- Single-provider dependency risk
- Backup and recovery strategies
- Exit and migration planning
- Impact of prolonged outages
This does not mandate multi-cloud strategies, but it does require informed dependency decisions.
Third-Party and Cloud Provider Oversight
Cloud providers are third parties under GDPR and directive NIS2. Enterprises must ensure:
- Appropriate contractual safeguards
- Understanding of sub-processor chains
- Ongoing oversight of provider security posture
- Integration into vendor risk management programmes
Contracts alone are insufficient without operational oversight.
Documentation and Evidence for Regulators
Cloud security decisions must be documented. Regulators expect evidence such as:
- Data residency mappings
- Transfer impact assessments
- Cloud risk assessments
- Access reviews
- Incident records
- Continuity testing results
Evidence demonstrates accountability and preparedness.
Common Cloud Compliance Gaps Observed by Regulators
Across EU enforcement actions, regulators frequently observe:
- Unclear data residency understanding
- Weak shared responsibility awareness
- Over-privileged cloud access
- Poor monitoring and logging
- Inadequate incident coordination
- Lack of resilience planning
These gaps often stem from governance failures rather than technical limitations.
Avoiding Over-Engineering Cloud Security
Regulators do not expect enterprises to eliminate all cloud risk. Overly complex controls can slow innovation and frustrate teams. Instead, regulators expect:
- Proportionate measures
- Risk-based decision-making
- Clear justification for choices
Balanced governance is more effective than excessive technical control.
Turning Cloud Governance into a Competitive Advantage
Enterprises that manage cloud security and data residency well benefit from:
- Reduced regulatory risk
- Greater customer and partner trust
- Faster incident recovery
- Stronger control over digital operations
Cloud governance, when done well, supports both compliance and growth.
How Infodot Supports Cloud Security and Data Residency in the EU
Infodot helps EU enterprises operationalise cloud security and data residency requirements through an execution-led governance model. Rather than focusing only on advisory documentation, Infodot embeds controls into daily IT operations.
Infodot supports organisations by:
- Mapping cloud data residency and flows
- Governing access, configuration, and monitoring
- Managing patching and vulnerability risk
- Supporting incident response and reporting
- Maintaining inspection-ready evidence
- Overseeing cloud providers and MSPs
- Reducing internal operational burden
This approach ensures cloud adoption remains compliant, resilient, and business-aligned.
Conclusion
Cloud services are now foundational to EU enterprises, but they come with increased regulatory expectations. GDPR and NIS2 make it clear that cloud adoption does not dilute responsibility. Instead, it requires stronger governance, clearer accountability, and continuous execution.
Enterprises that treat cloud security and data residency as strategic risk decisions, rather than technical afterthoughts, are better positioned to meet regulatory scrutiny and maintain operational resilience. In the EU regulatory landscape, cloud success depends not just on innovation, but on control, visibility, and preparedness.
Cloud Security and Data Residency Compliance Checklist (EU)
| Domain | Key Question | Regulatory Expectation (GDPR / NIS2) | Evidence to Maintain |
| Scope & Applicability | Which cloud services process EU personal data? | Clear identification of in-scope cloud workloads | Cloud service inventory |
| Data Residency Mapping | Where is data stored and processed? | Documented data locations and flows | Data flow diagrams |
| International Transfers | Does data leave the EU/EEA? | Lawful transfer mechanisms and safeguards | SCCs, TIAs, adequacy records |
| Transfer Impact Assessment | Are third-country risks assessed? | Risk-based assessment with mitigations | TIA documentation |
| Shared Responsibility | Are responsibilities clearly understood? | Defined customer vs provider duties | Responsibility matrix |
| Governance Ownership | Who owns cloud risk at leadership level? | Named executive accountability | Role descriptions, board minutes |
| Cloud Risk Assessment | Are cloud risks formally assessed? | Periodic, updated risk assessments | Cloud risk register |
| Provider Due Diligence | Was provider security assessed pre-onboarding? | Proportionate due diligence | Due diligence records |
| Contractual Controls | Do contracts include GDPR/NIS2 clauses? | Security, breach notice, audit rights | Signed contracts, DPAs |
| Sub-Processor Visibility | Are sub-processors identified and approved? | Ongoing visibility and approval | Sub-processor lists |
| Identity Governance | Is access centrally managed? | Least privilege and role-based access | IAM logs |
| Privileged Access | Are admin accounts tightly controlled? | Strong controls and reviews | PAM records |
| Authentication | Is strong authentication enforced? | MFA for sensitive access | Authentication policies |
| Access Reviews | Are access rights reviewed periodically? | Regular, documented reviews | Access review reports |
| Configuration Baselines | Are secure configurations defined? | Hardened baselines enforced | Configuration standards |
| Change Management | Are cloud changes controlled? | Approved, logged changes | Change logs |
| Encryption at Rest | Is sensitive data encrypted? | Appropriate encryption controls | Encryption configs |
| Encryption in Transit | Is data protected during transfer? | Secure transport protocols | TLS configurations |
| Key Management | Who controls encryption keys? | Defined key ownership and rotation | KMS policies |
| Logging | Are access and actions logged? | Sufficient logging for investigation | Log retention records |
| Monitoring | Can incidents be detected early? | Active monitoring and alerts | Monitoring dashboards |
| Incident Response | Are cloud incidents covered in IR plans? | Integrated response procedures | IR playbooks |
| Provider Notification | Will providers notify incidents timely? | Contractual and operational readiness | Notification clauses |
| Breach Reporting | Can GDPR timelines be met? | Prepared reporting workflows | Reporting templates |
| Backup Strategy | Are backups secure and recoverable? | Protected, tested backups | Backup test reports |
| Ransomware Resilience | Are backups isolated? | Protection against encryption attacks | Backup architecture |
| Disaster Recovery | Can services be restored quickly? | Tested DR plans | DR test results |
| Dependency Risk | Is single-provider risk understood? | Awareness and mitigation planning | Dependency analysis |
| Exit Strategy | Is cloud exit or migration planned? | Feasible exit without disruption | Exit plans |
| Vendor Oversight | Is provider security reviewed periodically? | Ongoing oversight | Review records |
| Training & Awareness | Are teams cloud-risk aware? | Relevant training completed | Training logs |
| Evidence Management | Is compliance evidence centralised? | Inspection-ready documentation | Evidence repository |
| Continuous Improvement | Are gaps tracked and closed? | Documented remediation | Action plans |
| Inspection Readiness | Can evidence be produced quickly? | Regulator-ready posture | Mock inspection outcomes |
Executive Takeaway
Cloud compliance in the EU is not about where servers sit alone.
It is about knowing where data flows, who controls access, how risks are governed, and how quickly the organisation can respond and recover.
If these questions cannot be answered with evidence, regulatory and operational risk remains high.
Frequently Asked Questions
Does moving to the cloud reduce GDPR responsibility?
No. Organisations remain fully accountable for personal data protection, even when data is processed or stored on cloud platforms.
Is data residency mandatory under GDPR?
GDPR does not mandate localisation, but requires organisations to know, document, and protect where data is stored and processed.
What is the difference between data residency and data localisation?
Residency refers to where data resides; localisation mandates that data remains within specific geographic boundaries.
Are EU cloud regions automatically GDPR compliant?
No. Compliance depends on configuration, access controls, and governance, not just region selection.
Do international data transfers still apply in cloud environments?
Yes. Transfers outside the EU require lawful safeguards, even when using global cloud providers.
What is a Transfer Impact Assessment (TIA)?
A documented assessment evaluating risks of third-country access to EU personal data and identifying mitigating measures.
Does NIS2 apply to cloud services?
Yes. NIS2 covers cloud services that support essential or important services and requires resilience and availability controls.
Who is responsible for cloud security under shared responsibility?
The organisation is responsible for configuration, access, data protection, and compliance; providers secure underlying infrastructure.
Is encryption mandatory in cloud environments?
Encryption is strongly recommended and often expected, especially for sensitive personal data.
Who should manage encryption keys?
Key ownership should be defined clearly, with organisations retaining appropriate control over keys protecting sensitive data.
Are backups in the cloud regulated under GDPR?
Yes. Backups containing personal data must be protected and considered in risk assessments.
Can cloud provider certifications guarantee compliance?
No. Certifications support assurance but do not replace organisational accountability.
How do regulators assess cloud access controls?
They review identity governance, least privilege enforcement, and regular access reviews.
Are cloud misconfigurations a compliance issue?
Yes. Misconfigurations are considered failures of organisational security measures.
Does cloud logging matter for compliance?
Yes. Logging supports detection, investigation, and breach notification obligations.
How quickly must cloud incidents be detected?
Regulators expect timely detection proportionate to risk, enabling prompt response and notification.
Are SaaS platforms considered third parties?
Yes. SaaS providers are third parties and require vendor risk governance.
What is cloud dependency risk?
Over-reliance on a single cloud provider that could disrupt operations if services fail.
Does NIS2 require multi-cloud strategies?
No. It requires understanding and managing dependency risk, not mandatory multi-cloud adoption.
Are cloud outages reportable incidents?
Yes, if they impact service availability or personal data protection under GDPR or NIS2.
How should cloud incidents be handled?
Cloud incidents must follow internal incident response plans, regardless of provider involvement.
Can providers notify regulators on our behalf?
No. Regulatory reporting responsibility remains with the organisation.
Is exit planning required for cloud compliance?
Regulators expect organisations to understand and plan for cloud exit or migration risks.
How often should cloud risk be reviewed?
Regularly and when significant changes occur, such as new services or provider changes.
Do regulators expect continuous cloud monitoring?
Yes, particularly for higher-risk workloads and critical services.
Is cloud compliance a one-time assessment?
No. It requires ongoing governance, monitoring, and evidence.
How do access reviews work in cloud environments?
Access rights must be reviewed periodically to ensure least privilege and remove unnecessary permissions.
Are test and development environments in scope?
Yes, if they contain or access personal data.
Does cloud compliance apply to non-EU companies?
Yes, if they process EU personal data or support EU essential services.
How is cloud compliance inspected by regulators?
Through evidence requests, interviews, and review of governance and execution practices.
What is the biggest cloud compliance risk?
Lack of visibility into data location, access, and configuration.
Can cloud security slow innovation?
Proper governance enables safe innovation by reducing unexpected risk and disruption.
What role do MSPs play in cloud compliance?
MSPs can support continuous execution but accountability remains with the organisation.
How should executives engage with cloud compliance?
By approving risk-based decisions and reviewing regular cloud risk reports.
How does Infodot support cloud compliance?
Infodot embeds cloud security governance, execution, and inspection-ready evidence into daily IT operations.
