How Microsoft 365 Copilot uses and protects your data

Most Copilot questions on the exam come back to one idea: Copilot works with your data, not around your security. If you know how grounding and permissions work, many scenario questions answer themselves.

What grounding means

A large language model alone knows only its training data. Grounding adds your own context to the prompt before the model answers. In Microsoft 365 Copilot this context comes from Microsoft Graph: your emails, chats, meetings, calendar and files in OneDrive and SharePoint. The pipeline is: you send a prompt, Copilot retrieves relevant Graph data (this step is called orchestration or retrieval), sends prompt plus data to the model, then returns the response after a check for security and compliance.

Work and Web scope

In Microsoft 365 Copilot Chat you can choose where answers come from.

Scope	Source of the answer
Work	Organizational data the user can access, plus the model’s knowledge
Web	Public web content found through Bing web search, plus the model’s knowledge

Work scope is not “all company data”. It is only the data you personally have permission to see.

Security inheritance

Copilot does not have its own access rules. It inherits:

• Permissions: if you cannot open a SharePoint file, Copilot cannot use it for you.
• Sensitivity labels from Microsoft Purview: new content created from labeled files carries the label, and the highest-priority label wins.
• Retention and compliance policies, plus encryption settings.

Prompts, responses and the data used are not used to train the foundation models, and data stays within the Microsoft 365 service boundary.

Your activity and your control

Copilot keeps your conversation history. You can delete a single conversation or all your Copilot activity from the Copilot app or the My Account portal. Administrators can search and retain this data with Microsoft Purview, but you do not need an administrator to delete your own history.

Features such as custom instructions and memory also store information about you. If Copilot “remembers” something you no longer want, delete that memory in Copilot settings. Deleting a conversation does not necessarily delete saved memories.

Licensing in one line

Microsoft 365 Copilot Chat is available to people with a Microsoft Entra work account, and it can use the web. The paid Microsoft 365 Copilot license adds work-data grounding through Microsoft Graph and Copilot inside Word, Excel, PowerPoint, Outlook and Teams.

Exam traps

• Work scope does not mean everything in the tenant. It means everything the user may already access.
• Copilot does not bypass permissions. Oversharing happens when files are already shared too broadly.
• Prompts and your data do not train the foundation model.
• Deleting a conversation is a user action. Do not choose the admin center or Purview unless the question asks about admin or compliance tasks.
• Labels are inherited by generated content. They are not removed and Copilot does not refuse by default.

Practice questions

Choose an answer, then review the explanation to check your understanding.

1. A colleague asks which data Microsoft 365 Copilot can use for a prompt in the Work scope. What is correct?

1. A.All files stored anywhere in the organization
2. B.Only the organization data that the signed-in user already has access to
3. C.Only the general knowledge of the language model
4. D.Only files that the user uploaded in the current chat

Show answer

Answer: B.Copilot grounds answers on Microsoft Graph data and respects the user's existing permissions, so it only surfaces what the user can already open.

2. How does Copilot keep your organization's information private and secure?

1. A.It applies its own separate permission model
2. B.It inherits the existing security, compliance and privacy policies of Microsoft 365
3. C.It uses your prompts to train the shared foundation model
4. D.It copies your data to a public index

Show answer

Answer: B.Copilot inherits Microsoft 365 policies such as permissions, sensitivity labels, retention and compliance settings. It does not create a parallel model, and prompts are not used to train the foundation models.

3. You ask Copilot in PowerPoint to build a deck from a Word file labeled Highly Confidential. What is the expected result?

1. A.Copilot refuses because of the label
2. B.Copilot creates the deck and the label is dropped
3. C.Copilot creates the deck and the label is inherited by the new content
4. D.Copilot creates the deck and asks the user to pick any label

Show answer

Answer: C.Copilot-generated content inherits the sensitivity label from the source file, and when several sources are used the label with the highest priority applies.

4. You want to delete one Copilot conversation that used confidential material, without asking an administrator and keeping your other chats. What do you use?

1. A.Microsoft 365 admin center
2. B.Microsoft Purview portal
3. C.The conversation delete option in Copilot or the My Account portal
4. D.Reinstall the Microsoft 365 Copilot app

Show answer

Answer: C.Users manage their own Copilot activity history from Copilot itself or from My Account. No admin approval is needed.