Dean Anderson, Commercial Director.

Enthusiasm and concern have greeted the spread of Microsoft Copilot for Microsoft 365. For business leaders, Copilot promises efficiency, automation, and increased productivity. For data security teams, it raises the risks of data being exposed or shared inappropriately within and outside of an organisation. This leads to a fundamental question: Is deploying Copilot without adequate guardrails in place truly a largely cost-free business enabler, or does it expose organisations to potentially costly and catastrophic risks?  

In the rush to embrace AI productivity tools, many organisations have adopted Microsoft 365 Copilot in their workspaces, often with minimal strategic planning. The allure of enhanced productivity is compelling—Microsoft’s survey data from 2023 Copilot trials shows that 70% of users report increased productivity, 64% spend less time processing emails, and 85% create better first drafts in less time.

Microsoft Copilot integrates deeply with an organisation’s Microsoft 365 environment—Teams, Outlook, Word, SharePoint, and more. It is an intelligent Generative AI (GenAI) based assistant that can draft documents, summarise emails, generate reports, and automate workflows. But there’s a critical issue: Copilot can access all the data your employees can access. And if your employees have access to any data they shouldn’t be able to access via misconfigured permissions, then so does Copilot.  

For businesses, this is not just an IT team concern but rather a financial and regulatory risk. Without adequate security and compliance guardrails, Copilot can expose sensitive data, inadvertently breach regulations like GDPR, and even create misinformation that could damage your business decisions or how external organisations (or the stock market) view and value your company. 

The Potential Risks of Using Copilot Without Guardrails

Microsoft 365 Copilot is unlike any productivity tool your organisation has deployed. It doesn’t just help users perform tasks—it fundamentally transforms how employees interact with your organisation’s data. Copilot aggregates content from across Microsoft 365 using the Microsoft Graph to access whatever your employees can see.

A common assumption is that Copilot is safe because it follows Microsoft 365 permissions. However, this assumption is one of the main reasons why Copilot is a significant risk. Many organisations unknowingly over-permission employees’ file and system access rights, leading to Copilot having access to information that users should never see. Indeed, Copilot will access data that over-provisioned users will never access because they don’t know they have access.

Copilot will “read” everything it can access as it builds a picture of the Microsoft Graph data it has available. This powerful access creates significant vulnerabilities, such as:

Over-Permissioning and Data Exposure

As mentioned previously, data access is frequently over-permissioned within many organisations. With Copilot’s ability to access and synthesise this data, the risk of inappropriate exposure multiplies. Here are some examples where this over-permissioned data access could be a problem when staff use Copilot:  

• Financial Risk – A junior finance team member uses Copilot to generate a revenue summary. Due to misconfigured access permissions, Copilot pulls sensitive executive-level financial reports—potentially exposing strategic plans or pre-IPO information.  There are anecdotal reports that one of the most common questions to Copilot is, “What’s the salary of the CEO?”
• Regulatory Breach – An HR manager uses Copilot to compile a list of high-performing employees. The generated document includes private salary and disciplinary data, violating data protection regulations.
• Intellectual Property Risk – A product team member asks Copilot to summarise past project notes. Copilot inadvertently includes details from confidential R&D files, increasing the risk of intellectual property leaks.  

These are not hypothetical concerns. Significant amounts of an organisation’s business-critical data get overshared, with many employees accessing files far beyond their job scope. In an era of strict compliance and increasing cyber threats, the cost of a misstep if Copilot surfaces that data could be devastating.

The Classification Challenge

Microsoft acknowledges in their documentation that “Copilot results do not inherit the security labels from the source files.” This places the responsibility for the proper classification of Copilot-created files entirely on employees.

Microsoft 365 permissions are highly complex, with access rights coming from a combination of places such as the files, Microsoft 365 group permissions, SharePoint local permissions (with custom levels) and even via temporary access links used for sharing files. It is a recipe for data leaks if ever there was one, especially when a GenAI system is reading and regurgitating the content.

Dark Data Risks

Copilot can access what Microsoft terms “dark data”—unused information accumulated over standard business activities. This data could offer misleading or outdated information, creating business risks when incorporated into reports for external consumption or internal decision-making.

Financial risks

The financial costs of a Copilot-related data incident can be high and, in extreme cases, an existential risk to the business. Some direct financial costs of a copilot data breach include:

• Regulatory penalties – With regulations like GDPR imposing fines of up to 4% of global turnover, the financial impact can be devastating.
• Legal expenses – Litigation resulting from data breaches or compliance failures.
• Remediation costs – The expense of identifying and containing exposure.
• Reputational damage – Perhaps the most financially significant but challenging to quantify as future business opportunities and partnerships are not realised due to reputational damage.

Understanding Microsoft Copilot Guardrails

Putting guardrails on Microsoft 365 Copilot means implementing security, compliance, and governance measures to ensure its AI-driven automation enhances productivity without exposing sensitive data, violating regulations, or creating misinformation. It involves configuring access controls, enforcing sensitivity labels, applying data loss prevention (DLP) policies, and monitoring AI interactions to prevent oversharing or unauthorised access. Guardrails effectively balance AI productivity benefits with necessary security controls, transforming Copilot from a potential risk vector into a secure business tool that respects your organisation’s boundaries and compliance requirements.

Microsoft provides several built-in security features to provide Copilot guardrails, but the deployment tools do not automatically configure them. Businesses must proactively design and implement governance measures to truly secure Copilot. The basic set of components may not be sufficient. Indeed, they may impose significant management overhead to configure and maintain them. Key guardrails include –   

• Access Controls – Limiting what Copilot can access by reviewing SharePoint, OneDrive, and Teams permissions.  
• Data Governance & Sensitivity Labels – Using Microsoft Purview (specific M365 licensing required) to enforce DLP policies, retention labels, and data classification.  
• Content Filtering & Oversharing Prevention – Implementing strict permissions, zero-trust principles, and access audits.  
• AI Risk Management – Regularly monitoring Copilot’s outputs for accuracy and compliance.  

While these measures improve security, they require specialist expertise to configure correctly, something many IT teams lack the time or resources to do in-house. This is an area where the Cased Dimensions consultancy team can assist. More on this later in this article.

Lessons from Microsoft’s Internal Implementation

Microsoft’s internal deployment of Copilot offers valuable insights for organisations seeking to implement Copilot securely. The Cased Dimensions consultancy team is well-versed in Microsoft’s insights and those from Copilot projects with our clients. Here are some of the insights that they have made public.

Data Classification and Labelling – Microsoft’s internal IT team established four essential data labelling practices:

• Responsible self-service – Support employees in creating appropriately secured workspaces.
• Top-down defaults – Labelling containers for data segmentation by default (typically “Confidential\Internal Only”).
• Consistency within containers – Deriving file labels from parent containers.
• Employee awareness – Training staff to handle and label sensitive data appropriately.

Protection Beyond Classification – Effective guardrails extend beyond labelling to include:

• Data loss prevention – Configuring Microsoft Purview DLP to automatically detect and control sensitive content.
• Oversharing detection – Using Microsoft Graph Data Connect to identify inappropriate access.
• Lifecycle management – Implementing expiry and attestation protocols to ensure data has owners.
• Access control refinement – Limiting oversharing through thoughtful link permissions.

Phased Implementation – Rather than an all-at-once approach, Microsoft deployed Copilot in strategic phases:

• Initial testing with internal engineering teams.
• Limited licensing for core scenarios requiring validation.
• Extended access to teams responsible for support and governance.
• Full organisational deployment with established guardrails.

The learning from the Microsoft Copilot deployment should be foundational for any Copilot deployment in other organisations.

The Business Case for Premium Guardrails

While Microsoft ensures that Copilot operates within existing permissions, these access rights rarely get configured correctly. The reality is that data mismanagement, oversharing, and regulatory breaches are often already present in many organisations. Copilot magnifies any existing hidden poor configurations.

Investing in tools to discover and fix existing data permissions issues will have benefits beyond delivering enhanced guardrails. Fixing data permissions to stop Copilot from accessing and surfacing data it shouldn’t, will also fundamentally fix misconfigured permissions at their core. This will prevent non-Copilot-related unauthorised access to data from happening in future. For example, insider threats from disgruntled staff or cybercriminals who compromise a user’s login to gain access. 

Potential Costs of Not Adopting Premium Guardrails

If an organisation goes with no guardrails or with basic tools that are complex and difficult to configure correctly, then it is open to the risks outlined previously in this article. With Copilot automatically surfacing corporate data in response to queries, one misstep could lead to an instant compliance violation.

The need to properly secure data is a legal requirement in finance, legal, healthcare, and government sectors. A breach that results from a failure to do so can lead to significant fines and costs that run into millions of €.

• GDPR non-compliance fines can reach €20 million per incident or 4% of annual turnover—whichever is higher.  
• UK Financial Conduct Authority (FCA) penalties have exceeded £100 million for data mismanagement in recent years.

Instead of viewing enhanced guardrails for Copilot as an expense, organisations should view them as an investment in operational resilience and risk reduction. Preventing a single data leak or regulatory fine could save millions. Much more than the cost of implementing advanced security policies and AI-powered risk mitigation tools such as Microsoft Purview alongside a competent team of Copilot security experts such as Cased Dimensions. For CFOs and IT decision-makers, the equations are simple:  

• Proactive security investment = Reduced risk of fines, breaches, and compliance failures = Higher organisational resilience and trust.  
• Avoiding security investment = Regulatory exposure, legal costs, and potential brand damage = Catastrophic financial consequences.  

With cybersecurity now a board-level concern, investing in Copilot security isn’t a nice add-on for your GenAI journey—it’s a necessity for businesses that want to reap the gains of increased productivity that Copilot offers. Would you rather pay a little upfront now to protect your data or pay much more later in fines, lost contracts, and crisis management? The decision to forgo premium guardrails might seem like a cost-saving measure initially, but it often leads to more significant financial and operational costs in the future.

The Cased Dimensions Team Is Here to Help

As Copilot adoption accelerates, organisations cannot afford to take a relaxed approach to data security.  Understanding how to correctly deploy Copilot guardrails is as much a function of experience as technical know-how.

Cased Dimensions has the experience and the technical expertise to assist organisations of all sizes in deploying Copilot safely and productively. With expertise in cybersecurity, cloud infrastructure, and IT strategy, Cased Dimensions helps organisations transform their approach to Copilot implementation by:

• Designing and implementing Microsoft Purview security frameworks tailored to your regulatory and business needs. Delivering compliance with regulations like GDPR, FCA requirements, and DORA. 
• Identifying and mitigating hidden data exposure risks before Copilot goes live.  
• Establishing real-time AI monitoring and security controls, ensuring continuous protection and compliance alignment.  
• Providing a roadmap for secure AI adoption, balancing innovation with robust risk management.

A typical engagement follows a five-step process—however, each organisation is unique, so this is not a regimented process. 

1. Conduct a Data Governance Assessment – Before deployment, assess your current data environment to ascertain current data labelling use and other planning requirements.
2. Develop a Comprehensive Guardrail Strategy – Work with security, legal, and compliance teams to establish a plan on how staff should classify the data and what default protections will be applied.
3. Implement a Phased Rollout – Rather than organisation-wide deployment, select a suitable pilot group to trial initial use in.
4. Invest in Employee Enablement – Success requires technical controls and human awareness. Devise a plan to train staff on what they need to do to get the most from Copilot and to get their buy-in to the project.
5. Monitor, Measure, and Adapt – Continuous monitoring and improvement are essential as Copilot rolls out to the broader workforce. Adapt the deployment as required in light of the real-world use and learnings from staff usage patterns.

Conclusion

Microsoft 365 Copilot is a tremendous opportunity and a significant risk for organisations. While it promises remarkable productivity gains, deploying Copilot without proper guardrails exposes businesses to potentially catastrophic data breaches, regulatory penalties, and financial losses.

The core risk lies in Copilot’s ability to read everything your employees can access, including data they shouldn’t have permission to see due to misconfigured access rights. This fundamental security gap gets magnified by Copilot’s ability to “read” and synthesise all accessible content, potentially exposing sensitive financial information, intellectual property, and regulated data.

Implementing robust security guardrails shouldn’t be seen as another expense but as a strategic investment with measurable returns. Properly configured sensitivity labels, data loss prevention policies, access controls, and monitoring systems transform Copilot from a potential liability into a secure productivity tool. 

The question isn’t whether your organisation can afford a proper Copilot guardrails implementation. The question is whether you can afford the risk of using Copilot without appropriate security guardrails in place!

Take the Next Step

Cased Dimensions has the technical expertise, experience, and strategic insights required to deploy Copilot with proper guardrails tailored to each organisation’s specific regulatory and business requirements.

Contact our team today to discuss your Copilot implementation needs and discover how we can help you balance productivity gains with robust risk management. Let us guide you through the complexities of secure Copilot adoption so your organisation gets all the productivity benefits of Copilot while maintaining the highest data protection and compliance standards.

References

Microsoft Copilot Overview – https://learn.microsoft.com/en-us/copilot/microsoft-365/microsoft-365-copilot-overview

Microsoft: Deploying Microsoft 365 Copilot in four chapters – https://www.microsoft.com/insidetrack/blog/deploying-copilot-for-microsoft-365-in-four-chapters/

Microsoft: Data, Privacy, and Security for Microsoft 365 Copilot – https://learn.microsoft.com/en-us/copilot/microsoft-365/microsoft-365-copilot-privacy

Microsoft Graph Overview – https://learn.microsoft.com/en-us/graph/overview

Microsoft Purview – https://www.microsoft.com/en-us/security/business/microsoft-purview

Microsoft Security Blog: Strengthen your data security posture in the era of AI with Microsoft Purview – https://techcommunity.microsoft.com/blog/microsoft-security-blog/strengthen-your-data-security-posture-in-the-era-of-ai-with-microsoft-purview/4298277