During a third-party risk assessment, an organization discovers that a cloud service provider (CSP) stores data in a jurisdiction with conflicting privacy laws. The organization's legal team advises that this could expose the organization to regulatory penalties. Which of the following contractual clauses would best address this compliance risk?
A DPA with data residency clauses legally restricts where data can be stored, addressing the compliance risk.
Why this answer
A Data Processing Agreement (DPA) is the correct contractual mechanism to enforce data residency restrictions. By requiring the CSP to store data only in approved jurisdictions, the DPA directly addresses the compliance risk of conflicting privacy laws and potential regulatory penalties, as it legally binds the provider to specific geographic data handling requirements.
Exam trap
The CAS-004 exam often tests the distinction between operational controls (audit clauses, SLAs) and legal/compliance controls (DPAs), trapping candidates who confuse visibility with enforcement or apply US-specific agreements (like BAAs) to global privacy issues.
How to eliminate wrong answers
Option A is wrong because a right-to-audit clause allows the organization to inspect the CSP's facilities and processes, but it does not proactively restrict where data is stored; it only provides visibility after the fact, not a preventive control. Option C is wrong because an SLA guaranteeing 99.99% uptime addresses availability and performance, not data residency or privacy law compliance; it is irrelevant to the jurisdictional conflict. Option D is wrong because a Business Associate Agreement (BAA) under HIPAA is specific to protected health information (PHI) in the United States and does not apply to general privacy law conflicts in other jurisdictions; it also does not restrict data storage locations.