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Just heading with few doubts about while converting the project to simplified workflow from non simplified.
Please refer the attachment for clear understanding.
How to take XML backup of the data as seen in the attachment message?
1. Does data here refers to the workflow or anything else? (If it's anything else what are those and how to take the back up of it?)
2. Just in case if the process fails while converting the project, How to restore the back up data back as existing before?
Welcome to the Atlassian Community.
You would have to request you Jira admin to make a backup of your Jira Cloud tenant.
Select Settings > System
In the IMPORT AND EXPORT section, select Backup manager.
Under Backup for cloud, select Create backup for cloud.
You can read more about this here - https://support.atlassian.com/jira-cloud-administration/docs/export-issues/
If you would like to understand the pro's and con's of XML backup reference - https://www.revyz.io/blog/pros-and-cons-of-using-jira-cloud-database-backup-restore