This MS-900 practice question tests your understanding of describe microsoft 365 apps and services. The scenario asks you to isolate a root cause — eliminate options that address a different problem before choosing. 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 needs to ensure that sensitive documents stored in SharePoint Online are automatically encrypted and cannot be shared with external users. Which Microsoft Purview feature should they use?
Communication compliance
Why wrong: This monitors for policy violations in communications, not document protection.
Data Loss Prevention (DLP) policies
Why wrong: DLP detects and blocks sharing but does not automatically encrypt.
Retention labels
Why wrong: Retention labels manage data retention, not encryption or sharing.
Sensitivity labels
Sensitivity labels can apply encryption and restrict external sharing.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Sensitivity labels
Sensitivity labels are the correct choice because they enforce encryption and access restrictions directly on documents, including blocking external sharing. Unlike DLP policies, which detect and prevent sharing after the fact, sensitivity labels apply persistent protection that travels with the file, ensuring it remains encrypted even if downloaded or shared outside SharePoint Online.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
Communication compliance
Why it's wrong here
This monitors for policy violations in communications, not document protection.
Data Loss Prevention (DLP) policies
Why it's wrong here
DLP detects and blocks sharing but does not automatically encrypt.
Retention labels
Why it's wrong here
Retention labels manage data retention, not encryption or sharing.
Sensitivity labels
Why this is correct
Sensitivity labels can apply encryption and restrict external sharing.
Related concept
Read the scenario before looking for a memorised answer.
Common exam traps
The trap here is that candidates often confuse DLP policies with sensitivity labels, assuming DLP can both detect and encrypt content, but DLP only monitors and blocks sharing actions—it does not apply persistent encryption to the files themselves.
Detailed technical explanation
Sensitivity labels in Microsoft Purview leverage Azure Information Protection (AIP) to apply encryption using the Rights Management Service (RMS). When a label with encryption is applied, the document is protected with a policy that includes usage rights (e.g., view-only, no copy) and can be configured to block external users entirely. This protection persists even when the file is copied to external storage or emailed, because the encryption is embedded in the file itself via the Protected Document Format (e.g., .ppdf or .pfile).
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
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
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FAQ
Describe Microsoft 365 apps and services — This question tests Describe Microsoft 365 apps and services — Read the scenario before looking for a memorised answer..
The correct answer is: Sensitivity labels — Sensitivity labels are the correct choice because they enforce encryption and access restrictions directly on documents, including blocking external sharing. Unlike DLP policies, which detect and prevent sharing after the fact, sensitivity labels apply persistent protection that travels with the file, ensuring it remains encrypted even if downloaded or shared outside SharePoint Online.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Read the scenario before looking for a memorised answer.
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Last reviewed: Jun 24, 2026
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