Explanation
De-identification is a technique that removes or modifies direct and indirect identifiers in a data set to prevent or limit the identification of the data subjects. De-identification reduces the risk of re-identification and thus limits the organization's potential exposure in the event of consumer data loss. De-identification also maintains the traceability of the data by preserving some characteristics or patterns of the original data that can be used for analysis or research purposes. The other options are not effective ways to limit exposure and maintain traceability1, p. 75-76 References: 1: CDPSE Review Manual (Digital Version)

Explanation
The best practice to protect data privacy when disposing removable backup media is B. Data sanitization.
A comprehensive explanation is:
Data sanitization is the process of permanently and irreversibly erasing or destroying the data on a storage device or media, such as a hard drive, a USB drive, a CD/DVD, etc. Data sanitization ensures that the data cannot be recovered or reconstructed by any means, even by using specialized software or hardware tools.
Data sanitization is also known as data wiping, data erasure, data destruction, or data disposal.
Data sanitization is the best practice to protect data privacy when disposing removable backup media because it prevents unauthorized access, disclosure, theft, or misuse of the sensitive or confidential data that may be stored on the media. Data sanitization also helps to comply with the legal and regulatory requirements and standards for data protection and privacy, such as the General Data Protection Regulation (GDPR), the Health Insurance Portability and Accountability Act (HIPAA), the Payment Card Industry Data Security Standard (PCI DSS), etc.
There are different methods and techniques for data sanitization, depending on the type and format of the storage device or media. Some of the common methods are:
Overwriting: Overwriting replaces the existing data on the device or media with random or meaningless data, such as zeros, ones, or patterns. Overwriting can be done multiple times to increase the level of security and assurance. Overwriting is suitable for magnetic media, such as hard disk drives (HDDs) or tapes.
Degaussing: Degaussing exposes the device or media to a strong magnetic field that disrupts and destroys the magnetic structure and alignment of the data. Degaussing renders the device or media unusable and unreadable. Degaussing is suitable for magnetic media, such as hard disk drives (HDDs) or tapes.
Physical Destruction: Physical destruction involves applying physical force or damage to the device or media that breaks it into small pieces or shreds it. Physical destruction can be done by using mechanical tools, such as shredders, crushers, drills, hammers, etc., or by using thermal methods, such as incineration, melting, etc. Physical destruction is suitable for any type of media, such as hard disk drives (HDDs), solid state drives (SSDs), USB drives, CDs/DVDs, etc.
Data encryption (A) is not a good practice to protect data privacy when disposing removable backup media because it does not erase or destroy the data on the media. Data encryption only transforms the data into an unreadable format that can only be accessed with a key or a password. However, if the key or password is lost, stolen, compromised, or guessed by an attacker, the data can still be decrypted and exposed. Data encryption is more suitable for protecting data in transit or at rest, but not for disposing data.
Data scrambling is not a good practice to protect data privacy when disposing removable backup media because it does not erase or destroy the data on the media. Data scrambling only rearranges the order of the bits or bytes of the data to make it appear random or meaningless. However, if the algorithm or pattern of scrambling is known or discovered by an attacker, the data can still be unscrambled and restored. Data scrambling is more suitable for obfuscating data for testing or debugging purposes, but not for disposing data.
Data masking (D) is not a good practice to protect data privacy when disposing removable backup media because it does not erase or destroy the data on the media. Data masking only replaces some parts of the data with fictitious or anonymized values to hide its true identity or meaning. However, if the original data is still stored somewhere else or if the masking technique is weak or reversible by an attacker, the data can still be unmasked and revealed. Data masking is more suitable for protecting data in use or in analysis, but not for disposing data.
References:
What Is Data Sanitization?1
How to securely erase hard drives (HDDs) and solid state drives (SSDs)2 Secure Data Disposal & Destruction: 6 Methods to Follow3

Explanation
From a privacy perspective, it is most important to ensure data backups are encrypted. Encryption is a process of transforming data into an unreadable form using a secret key or algorithm. Encryption can help protect the confidentiality, integrity, and availability of data backups by preventing unauthorized access, disclosure, or modification. Encryption can also help comply with legal and regulatory requirements for data protection, such as the General Data Protection Regulation (GDPR) or the Health Insurance Portability and Accountability Act (HIPAA). Encryption can be applied to data backups at different levels, such as file-level, disk-level, or network-level encryption.
Incremental backups, differential backups, or pseudonymization are also useful for data backup management, but they are not the most important from a privacy perspective. Incremental backups are backups that only copy the data that has changed since the last backup, whether it was a full, differential, or incremental backup.
Incremental backups can help save storage space and time, but they do not directly protect the data from unauthorized access or disclosure. Differential backups are backups that only copy the data that has changed since the last full backup. Differential backups can also help save storage space and time, but they also do not directly protect the data from unauthorized access or disclosure. Pseudonymization is a process of replacing identifying information in data with artificial identifiers or pseudonyms. Pseudonymization can help enhance the privacy of data by reducing the linkability between data and data subjects, but it does not prevent re-identification or inference attacks.
References: Data backups 101: A complete guide for 2023 - Norton, Backup & Secure | U.S. Geological Survey - USGS.gov, The GDPR: How the right to be forgotten affects backups

Explanation
The answer is B. Personal data could potentially be exfiltrated through the virtual workspace.
A comprehensive explanation is:
A virtualized workspace is a cloud-based service that provides remote access to a desktop environment, applications, and data. A virtualized workspace can enable software development teams to collaborate and work efficiently across different locations and devices. However, a virtualized workspace also poses significant privacy risks, especially when it is implemented by a third-party provider.
One of the greatest privacy concerns of using a third-party virtualized workspace is the potential for personal data to be exfiltrated through the virtual workspace. Personal data is any information that relates to an identified or identifiable individual, such as name, email, address, phone number, etc. Personal data can be collected, stored, processed, or transmitted by the software development organization or its clients, partners, or users. Personal data can also be generated or inferred by the software development activities or products.
Personal data can be exfiltrated through the virtual workspace by various means, such as:
Data breaches: A data breach is an unauthorized or unlawful access to or disclosure of personal data. A data breach can occur due to weak security measures, misconfiguration errors, human errors, malicious attacks, or insider threats. A data breach can expose personal data to hackers, competitors, regulators, or other parties who may use it for harmful purposes.
Data leakage: Data leakage is an unintentional or accidental transfer of personal data outside the intended boundaries of the organization or the virtual workspace. Data leakage can occur due to improper disposal of devices or media, insecure network connections, unencrypted data transfers, unauthorized file sharing, or careless user behavior. Data leakage can compromise personal data to third parties who may not have adequate privacy policies or practices.
Data mining: Data mining is the analysis of large and complex data sets to discover patterns, trends, or insights. Data mining can be performed by the third-party provider of the virtual workspace or by other authorized or unauthorized parties who have access to the virtual workspace. Data mining can reveal personal data that was not explicitly provided or intended by the organization or the individuals.
The exfiltration of personal data through the virtual workspace can have serious consequences for the software development organization and its stakeholders. It can result in:
Legal liability: The organization may face legal actions or penalties for violating the privacy laws, regulations, standards, or contracts that apply to the personal data in each jurisdiction where it operates or serves. For example, the General Data Protection Regulation (GDPR) in the European Union imposes strict obligations and sanctions for protecting personal data across borders.
Reputational damage: The organization may lose trust and credibility among its clients, partners, users, employees, investors, or regulators for failing to safeguard personal data. This can affect its brand image, customer loyalty, market share, revenue, or growth potential.
Competitive disadvantage: The organization may lose its competitive edge or intellectual property if its personal data is stolen or misused by its rivals or adversaries. This can affect its innovation capability, product quality, or market differentiation.
Therefore, it is essential for the software development organization to implement appropriate measures and controls to prevent or mitigate the exfiltration of personal data through the virtual workspace. Some of these measures and controls are:
Data minimization: The organization should collect and process only the minimum amount and type of personal data that is necessary and relevant for its legitimate purposes. It should also delete or anonymize personal data when it is no longer needed or required.
Data encryption: The organization should encrypt personal data at rest and in transit using strong and standardized algorithms and keys. It should also ensure that only authorized parties have access to the keys and that they are stored securely.
Data segmentation: The organization should segregate personal data into different categories based on their sensitivity and risk level. It should also apply different levels of protection and access control to each category of personal data.
Data governance: The organization should establish a clear and comprehensive policy and framework for managing personal data throughout its lifecycle. It should also assign roles and responsibilities for implementing and enforcing the policy and framework.
Data audit: The organization should monitor and review the activities and events related to personal data on a regular basis. It should also conduct periodic assessments and tests to evaluate the effectiveness and compliance of its privacy measures and controls.
Data awareness: The organization should educate and train its staff and users on the importance and best practices of protecting personal data. It should also communicate and inform its clients, partners, and regulators about its privacy policies and practices.
The other options are not as great of a concern as option B.
The third-party workspace being hosted in a highly regulated jurisdiction (A) may pose some challenges for complying with different privacy laws and regulations across borders. However it may also offer some benefits such as higher standards of privacy protection and enforcement.
The organization's products being classified as intellectual property may increase the value and attractiveness of the personal data related to the products, but it does not necessarily increase the risk of exfiltration of the personal data through the virtual workspace.
The lack of privacy awareness and training among remote personnel (D) may increase the likelihood of human errors or negligence that could lead to exfiltration of personal data through the virtual workspace. However it is not a direct cause or source of exfiltration, and it can be addressed by providing adequate education and training.
References:
8 Risks of Virtualization: Virtualization Security Issues1
Security & Privacy Risks of the Hybrid Work Environment2
The Risk of Virtualization - Concerns and Controls3
What is Virtualized Security?4

Explanation
The first thing to do when a data collection process is deemed to be a high-level risk is to conduct a privacy impact assessment (PIA). A PIA is a systematic process that identifies and evaluates the potential effects of personal data processing operations on the privacy of individuals and the organization. A PIA helps to identify privacy risks and mitigation strategies at an early stage of the data collection process and ensures compliance with legal and regulatory requirements. A PIA also helps to demonstrate accountability and transparency to stakeholders and data subjects regarding how their personal data are collected, used, shared, stored, or deleted.
Performing a business impact analysis (BIA), implementing remediation actions to mitigate privacy risk, or creating a system of records notice (SORN) are also important steps for managing privacy risk, but they are not the first thing to do. Performing a BIA is a process of analyzing the potential impacts of disruptive events on the organization's critical functions, processes, resources, or objectives. A BIA helps to determine the recovery priorities, strategies, and objectives for the organization in case of a disaster or crisis. Implementing remediation actions is a process of applying corrective or preventive measures to reduce or eliminate the privacy risks identified by the PIA or other methods. Remediation actions may include technical, organizational, or legal solutions, such as encryption, access control, consent management, or contractual clauses. Creating a SORN is a process of publishing a public notice that describes the existence and purpose of a system of records that contains personal data under the control of a federal agency. A SORN helps to inform the public about how their personal data are collected and maintained by the agency and what rights they have regarding their data.
References: Privacy Impact Assessment (PIA) - European Commission, Privacy Impact Assessment (PIA) | ICO, Privacy Impact Assessments | HHS.gov