A data retention policy is a set of guidelines that dictates how long businesses must retain various types of data. It involves determining the appropriate duration for holding different data categories based on compliance, legal, and operational needs. Such policies help ensure that organizations manage sensitive information responsibly, mitigating risks associated with data breaches or non-compliance penalties. They also provide a framework for the systematic deletion of data that is no longer necessary, aiding in compliance with regulations like GDPR or HIPAA. Overall, a robust data retention policy is crucial for effective data governance.