Data retention defines a timeframe for dependable storage of information to meet organizational rules and regulatory demands. Other answers are incorrect because they address different policies (encryption concerns data security, deletion discards data without specifying how long it was stored, and processing deals with the treatment of data during use).
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What are the key components of a Data Retention Policy?
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How does regulatory compliance affect data retention?
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What distinguishes a Data Retention Policy from a Data Deletion Policy?