- A
Apply all governance controls individually to each new subscription after it is created.
Why wrong: This is operationally expensive and risks inconsistent configuration as subscriptions grow.
- B
Organize subscriptions under management groups and assign the baseline at the appropriate management group.
Management groups provide inheritance so new subscriptions automatically receive the assigned governance controls.
- C
Use a resource lock on the subscription root.
Why wrong: Locks are not designed for hierarchical organization or for enforcing a reusable governance baseline.
- D
Place all resources into one shared resource group per business unit.
Why wrong: Resource groups are too narrow for subscription-level governance and do not solve subscription inheritance.
Quick Answer
The answer is to organize subscriptions under management groups and assign the governance baseline at the appropriate management group. This works because management groups create a hierarchical structure above subscriptions, allowing Azure Policy and RBAC assignments to flow down via automatic inheritance. When you place all production subscriptions under a dedicated management group and assign the baseline—such as an Azure Policy initiative—any new subscription added to that group instantly inherits the rules, while sandbox subscriptions remain unaffected in a separate group. On the AZ-104 exam, this tests your understanding of governance at scale, often appearing in scenario-based questions where you must choose between assigning policies at the subscription versus management group level. A common trap is trying to assign policies individually to each new subscription, which defeats automation. Remember the memory tip: “Group to govern, inherit to automate”—if you want automatic inheritance, always assign at the management group, not the subscription.
AZ-104 Manage Azure Identities and Governance Practice Question
This AZ-104 practice question tests your understanding of manage azure identities and governance. Match the stated requirement to the specific cloud service, access model, or configuration option — many options are valid in isolation but not for this scenario. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A company creates new Azure subscriptions every month. Central IT wants all production subscriptions to inherit the same governance baseline automatically, while sandbox subscriptions remain separate. What should the administrator implement?
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Organize subscriptions under management groups and assign the baseline at the appropriate management group.
Management groups allow hierarchical organization of Azure subscriptions, enabling the assignment of Azure Policy and RBAC at the management group level. By placing all production subscriptions under a dedicated management group and assigning the governance baseline (e.g., Azure Policy initiatives) to that group, new subscriptions automatically inherit the baseline without manual intervention. Sandbox subscriptions remain separate by being placed in a different management group or at the root level without the baseline.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Apply all governance controls individually to each new subscription after it is created.
Why it's wrong here
This is operationally expensive and risks inconsistent configuration as subscriptions grow.
- ✓
Organize subscriptions under management groups and assign the baseline at the appropriate management group.
Why this is correct
Management groups provide inheritance so new subscriptions automatically receive the assigned governance controls.
Related concept
Read the scenario before looking for a memorised answer.
- ✗
Use a resource lock on the subscription root.
Why it's wrong here
Locks are not designed for hierarchical organization or for enforcing a reusable governance baseline.
- ✗
Place all resources into one shared resource group per business unit.
Why it's wrong here
Resource groups are too narrow for subscription-level governance and do not solve subscription inheritance.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is confusing resource locks (which protect against accidental deletion/modification) with governance baselines (which enforce compliance via Azure Policy), leading candidates to incorrectly select resource locks as a solution for automatic policy inheritance.
Detailed technical explanation
How to think about this question
Azure Management Groups support up to 10,000 management groups in a single directory and allow up to six levels of hierarchy (excluding the root). When an Azure Policy is assigned at a management group, it is inherited by all child subscriptions and resource groups via the policy evaluation engine, which runs during resource creation and modification. This inheritance is transitive, meaning policies applied at a parent management group affect all descendants, enabling centralized governance without per-subscription configuration.
KKey Concepts to Remember
- Read the scenario before looking for a memorised answer.
- Find the constraint that changes the correct option.
- Eliminate answers that are true in general but not in this case.
TExam Day Tips
- Watch for words such as best, first, most likely and least administrative effort.
- Review why wrong options are wrong, not only why the correct option is correct.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
How this comes up in practice
A company's IT admin needs to give a contractor read-only access to production logs without sharing account credentials. Using role-based access control (RBAC) and temporary scoped permissions — not a permanent shared password — is the correct pattern. Questions like this test whether you can apply least-privilege access across cloud identity services.
What to study next
Got this wrong? Here's your next step.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
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Manage Azure Identities and Governance — study guide chapter
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FAQ
Questions learners often ask
What does this AZ-104 question test?
Manage Azure Identities and Governance — This question tests Manage Azure Identities and Governance — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: Organize subscriptions under management groups and assign the baseline at the appropriate management group. — Management groups allow hierarchical organization of Azure subscriptions, enabling the assignment of Azure Policy and RBAC at the management group level. By placing all production subscriptions under a dedicated management group and assigning the governance baseline (e.g., Azure Policy initiatives) to that group, new subscriptions automatically inherit the baseline without manual intervention. Sandbox subscriptions remain separate by being placed in a different management group or at the root level without the baseline.
What should I do if I get this AZ-104 question wrong?
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
What is the key concept behind this question?
Read the scenario before looking for a memorised answer.
About these practice questions
Courseiva creates original exam-style practice questions with explanations and wrong-answer analysis. It does not publish real exam questions, exam dumps, or protected exam content. Learn why practice questions differ from exam dumps →
Same concept, more angles
2 more ways this is tested on AZ-104
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. A company has 18 Azure subscriptions. Production subscriptions must inherit stricter governance than sandbox subscriptions, and central IT wants one place to target future policy assignments to each group. What should the administrator do?
medium- ✓ A.Create management groups for Prod and Sandbox, then move subscriptions into them
- B.Create resource groups named Prod and Sandbox in each subscription
- C.Use tags on subscriptions to separate production from sandbox
- D.Apply a CanNotDelete lock to each subscription
Why A: Management groups allow you to organize Azure subscriptions hierarchically and apply Azure Policy and role-based access control (RBAC) at the management group level, which is inherited by all subscriptions within that group. By creating separate management groups for Prod and Sandbox and moving the respective subscriptions into them, central IT can assign policy assignments once to each management group, ensuring stricter governance for production subscriptions and a lighter touch for sandbox subscriptions.
Variation 2. New Azure subscriptions are created every month. Production subscriptions require stricter governance than sandbox subscriptions, and central IT wants those rules to apply automatically to any future production subscription without reconfiguring each one. What should they set up?
medium- A.Separate resource groups for production and sandbox workloads in each subscription.
- ✓ B.A management group hierarchy with production and sandbox child management groups, then assign governance at the appropriate scope.
- C.A CanNotDelete lock on each subscription.
- D.A custom role assigned to each subscription owner.
Why B: Management groups allow you to build a hierarchy that reflects your organizational structure and apply governance policies (e.g., Azure Policy, RBAC) at the management group scope. By creating a 'Production' child management group under the root, any new subscription placed in that group automatically inherits the assigned policies and role assignments, eliminating the need to reconfigure each subscription individually.
Last reviewed: Jun 11, 2026
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