Question 728 of 241
How to Restrict Microsoft 365 Copilot from Using Sensitive Data
Your company recently deployed Microsoft 365 Copilot. Users report that Copilot occasionally generates responses based on sensitive internal documents that should not be shared broadly. What should you configure to restrict Copilot's access?
Quick Answer
The correct answer is to apply sensitivity labels to the documents and configure label scopes to exclude Copilot. This works because sensitivity labels in Microsoft 365 include a scope setting that determines which services—such as Microsoft 365 Copilot—can process the labeled content; by deselecting the Copilot scope on a label like "Confidential," you instruct Copilot to ignore those documents entirely during response generation, effectively restricting Copilot access to sensitive data. On the MS-102 exam, this tests your understanding of information protection and label-based governance, often appearing as a scenario where users see Copilot surfacing internal HR or financial files. A common trap is assuming that disabling Copilot globally or using SharePoint permissions alone will suffice, but those methods don’t prevent Copilot from indexing content it can already read. Remember the mnemonic: “Scope stops Copilot”—if you want to restrict Copilot from using sensitive data, scope the label to exclude it.
⚠ Common exam trap
Many candidates confuse DLP policies (which block sharing) with Copilot access controls, or assume that removing documents or excluding them from search is sufficient, when in fact sensitivity labels with the Copilot scope are the precise mechanism to control Copilot’s data access.
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
✓
Apply sensitivity labels to the documents and configure label scopes to exclude Copilot.
Sensitivity labels can be configured with a label scope that excludes Copilot from accessing the labeled content. By applying a 'Confidential' sensitivity label with the 'Copilot' scope deselected, you instruct Microsoft 365 Copilot to ignore those documents during response generation, preventing it from surfacing sensitive internal information.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Create Data Loss Prevention (DLP) policies to block sharing.
Why it's wrong here
DLP policies do not restrict Copilot's grounding.
- ✗
Remove the sensitive documents from SharePoint Online.
Why it's wrong here
Removing documents is not practical and may break business processes.
- ✓
Apply sensitivity labels to the documents and configure label scopes to exclude Copilot.
Why this is correct
Sensitivity labels can be scoped to prevent Copilot from using labeled content.
- ✗
Configure Microsoft Search to exclude the sensitive documents.
Why it's wrong here
Search exclusion does not prevent Copilot from grounding on documents.
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Same concept, more angles
2 more ways this is tested on MS-102
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. Your company is deploying Microsoft 365 Copilot. You need to ensure that users can use Copilot in Word, Excel, and PowerPoint. The licensing is in place. However, you are concerned about data leakage. You want to ensure that Copilot does not use sensitive organizational data when generating content. What should you configure in Microsoft 365?
hard- ✓ A.Create and assign sensitivity labels with encryption to sensitive documents, and ensure Copilot respects these labels.
- B.Configure a data loss prevention (DLP) policy to block Copilot from accessing sensitive data.
- C.Use the Microsoft Purview compliance portal to restrict Copilot data access.
- D.Disable Copilot for users who handle sensitive data.
Why A: Microsoft 365 Copilot respects sensitivity labels that are applied to documents. By creating and assigning sensitivity labels with encryption to sensitive documents, you can prevent Copilot from using that content as source material when generating responses. This is configured via Microsoft Purview Information Protection, where labels can include encryption settings that Copilot will honor, ensuring data leakage is mitigated without blocking Copilot functionality entirely.
Variation 2. Your company is deploying Microsoft 365 Copilot for all users. You need to ensure that Copilot responses are grounded only in organizational data that users already have permission to access. Additionally, you must comply with data residency requirements in the European Union. Which THREE actions should you take?
hard- ✓ A.Apply sensitivity labels to restrict Copilot from accessing specific files.
- ✓ B.Set the data residency preference for Microsoft 365 Copilot to the European Union in the admin center.
- ✓ C.Configure Microsoft 365 Copilot to respect existing user permissions via Microsoft Entra ID.
- D.Block Copilot for all users outside the EU using conditional access policies.
- E.Enable Copilot caching in Microsoft Purview to control data storage locations.
Why A: Sensitivity labels can be configured to block Copilot from accessing files with specific labels, ensuring that Copilot responses are grounded only in organizational data that users already have permission to access. This is done by using Microsoft Purview Information Protection to define label-based restrictions that Copilot respects, preventing it from surfacing content from labeled files even if the user has direct access.
Last reviewed: Jun 24, 2026
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