This SC-900 practice question tests your understanding of describe the capabilities of microsoft security solutions. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. 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.
Which TWO Microsoft Purview features can be used to classify and label sensitive data in Microsoft 365?
Auto-labeling policies
Automatically apply sensitivity labels.
Data Loss Prevention policies
Why wrong: Prevent data leaks, not classify.
Retention policies
Why wrong: Manage data retention, not classification.
Sensitivity labels
Classify and protect data with labels.
Audit policies
Why wrong: Log activities, not classify.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Auto-labeling policies
Auto-labeling policies (A) are correct because they allow organizations to automatically apply sensitivity labels to data based on conditions such as sensitive information types or pattern matching, enabling classification and labeling without manual user intervention. Sensitivity labels (D) are correct because they are the core mechanism in Microsoft Purview for classifying and protecting sensitive data by applying persistent labels that can enforce encryption, access restrictions, and visual markings across Microsoft 365 services.
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.
Auto-labeling policies
Why this is correct
Automatically apply sensitivity labels.
Related concept
Read the scenario before looking for a memorised answer.
Data Loss Prevention policies
Why it's wrong here
Prevent data leaks, not classify.
Retention policies
Why it's wrong here
Manage data retention, not classification.
Sensitivity labels
Why this is correct
Classify and protect data with labels.
Related concept
Read the scenario before looking for a memorised answer.
Audit policies
Why it's wrong here
Log activities, not classify.
Common exam traps
The trap here is that candidates often confuse Data Loss Prevention policies with classification and labeling, but DLP policies only enforce actions based on existing labels or sensitive info types, not create or apply the labels themselves.
Detailed technical explanation
Auto-labeling policies use the Microsoft 365 built-in sensitive information types (e.g., credit card numbers, passport IDs) or custom patterns to automatically apply sensitivity labels at rest or in transit, supporting both client-side and server-side labeling. Sensitivity labels are defined in the Microsoft Purview compliance portal and can be configured with encryption via Azure Rights Management (RMS), custom header/footer markings, and conditional access policies, and they persist with the data even when exported or shared. A subtle behavior is that auto-labeling policies can be set to simulate mode first to test impact before enforcement, which is critical for avoiding unintended over-classification in production.
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 the capabilities of Microsoft security solutions — This question tests Describe the capabilities of Microsoft security solutions — Read the scenario before looking for a memorised answer..
The correct answer is: Auto-labeling policies — Auto-labeling policies (A) are correct because they allow organizations to automatically apply sensitivity labels to data based on conditions such as sensitive information types or pattern matching, enabling classification and labeling without manual user intervention. Sensitivity labels (D) are correct because they are the core mechanism in Microsoft Purview for classifying and protecting sensitive data by applying persistent labels that can enforce encryption, access restrictions, and visual markings across Microsoft 365 services.
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
This SC-900 practice question is part of Courseiva's free Microsoft certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the SC-900 exam.
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