Advanced Governance in Microsoft 365: Combining Sensitivity Labels, Retention Policies, and Insider Risk Management

As regulatory demands increase and insider threats become more sophisticated, organizations must move beyond basic data classification. Microsoft 365 provides an integrated suite of Information Governance, Information Protection, and Insider Risk Management capabilities that work in tandem to enforce robust data lifecycle and security policies.

In this article, we explore how to design and implement advanced governance scenarios using:

• Sensitivity Labels – For data classification and protection
• Retention Policies – For managing content lifecycle and regulatory compliance
• Insider Risk Management (IRM) – For identifying and responding to risky behavior

The Governance Stack in Microsoft 365

These services are deeply integrated into Microsoft Purview, providing a unified experience for security, compliance, and data lifecycle management.

Scenario 1: Managing Financial Documents with Lifecycle Controls

Use case: All financial reports should be classified as Confidential – Finance, retained for 7 years, and monitored for unauthorized sharing.

Configuration Steps:

1. Sensitivity Label
   • Name: Confidential – Finance
   • Settings:
     • Encryption: Only Finance Group
     • Content marking: Watermark “Confidential”
     • Auto-labeling: Triggered by keywords (e.g., “Q4 results”, “P&L”)
2. Retention Label
   • Name: Finance 7-Year Retention
   • Settings:
     • Retain content for 7 years
     • Then delete or review manually
   • Publish to SharePoint libraries or Exchange mailboxes
3. Insider Risk Management Policy
   • Triggered by:
     • Sharing labeled documents externally
     • Download of multiple protected files in short time
   • Action:
     • Alert compliance officer
     • Block download via Microsoft Defender for Endpoint (MDE)

Scenario 2: Employee Departure – Risk of Data Exfiltration

Use case: Detect users who are about to leave the company and might exfiltrate sensitive data.

Configuration Steps:

1. Sensitivity Labels
   • All business-critical documents are labeled using auto-labeling rules
2. Insider Risk Policy: Departing Employee
   • Signals:
     • HR system integration (e.g., marked for termination)
     • Increased file download or email forwarding
     • USB activity or copying to personal OneDrive
   • Response:
     • Alert investigators
     • Apply Conditional Access restrictions
     • Auto-quarantine suspicious documents

Scenario 3: Project-Based Teams with Time-Bound Retention

Use case: Project Teams that must be automatically expired after completion with no residual data leakage.

Configuration Steps:

1. Sensitivity Label for Project Teams
   • Applied at group creation
   • Blocks guest access
   • Applies default file label: “Internal – Project”
2. Auto-Expiration Policy (Azure AD)
   • Group lifecycle policy: Auto-delete inactive Teams after 180 days
3. Retention Policy
   • Retain Teams chat, files, and SharePoint site content for 90 days post-expiration
4. Label Activity Review
   • Use Activity Explorer to verify document lifecycle and external access attempts

Integration Architecture

These capabilities are not siloed; they are tightly integrated across the Microsoft 365 ecosystem:

• Microsoft Purview: Central console for labeling, DLP, and retention
• Microsoft Defender: Endpoint-level enforcement and alerts
• Azure AD Conditional Access: Identity-based access control linked to label context
• Microsoft Graph: Unified audit and compliance telemetry
• Power Automate / Logic Apps: Custom workflows triggered by compliance signals

Summary Table