Incident response is the policy that defines how an organization responds to a security breach or cyberattack that affects its data, systems, or operations. It is most critical for being in compliance with regulatory agencies because it helps to minimize the impact of the incident, preserve the evidence, and restore the normal operations as soon as possible. Regulatory agencies often require organizations to report any incidents that compromise the confidentiality, integrity, or availability of the data they handle, especially if it involves personal or sensitive information. Failure to comply with these reporting obligations can result in fines, penalties, or legal actions. Therefore, having an effective incident response policy is essential for ensuring compliance and protecting the reputation of the organization123. Reference: CompTIA Cloud Essentials+ Certification Study Guide, Second Edition (Exam CLO-002), Chapter 3: Security in the Cloud, pages 75-76.