Key Rotation is the process of regularly replacing cryptographic keys to maintain a secure environment and reduce the risk of unauthorized access. Cryptographic keys are fundamental to data encryption, decryption, and authentication processes. Over time, keys may become vulnerable due to exposure, misuse, or advanced attacks, making their regular rotation a crucial aspect of maintaining security.

Key rotation involves generating new keys, updating systems and users to use these keys, and securely retiring the old ones. This process can be manual or automated, with automation often preferred to reduce the potential for human error. For example, cloud providers and security tools like AWS Key Management Service (KMS) or Azure Key Vault offer automated key rotation capabilities.

Benefits
1. Enhanced Security: Regularly rotating keys limits the lifespan of a key, thereby reducing the potential impact if a key is compromised.
2. Regulatory Compliance: Many regulations, such as GDPR and PCI DSS, mandate regular key rotation as part of best practices.
3. Risk Mitigation: Minimizes the risks posed by malicious actors who may gain access to static keys.

Challenges
- Compatibility: Ensuring that all systems and applications can handle old and new keys during the transition period.
- Automation Complexity: Automating key rotation in a large, multi-system environment can be complex.

Organizations implement policies to define the frequency and methods for key rotation, balancing operational needs with security.