5 Common Security Concerns with AI in Microsoft 365

Hello, fellow business leaders and IT professionals. Here at Ideal State, we've spent considerable time diving into the intersection of AI adoption and security within the Microsoft ecosystem. With AI tools like Microsoft Copilot becoming integral to productivity—Microsoft's 2025 Work Trend Index reports that 75% of knowledge workers are now using AI, leading to significant time savings and creativity boosts—it's no surprise that mid-sized organizations are eager to integrate these capabilities into their Microsoft 365 environments.

However, this enthusiasm comes with valid concerns about data security and privacy. Drawing from insights from our client work, we'll explore five common security concerns. For each, I'll explain the issue based on real-world reports and provide practical mitigation strategies, emphasizing governance through Microsoft Purview integration.

Over-Permissioning and Unintended Data Access

One of the most prevalent concerns is over-permissioning, where AI tools like Copilot inherit user permissions and potentially expose sensitive data across the organization. As noted in Concentric AI's 2025 report on Microsoft Copilot security, this can lead to vulnerabilities if access controls aren't tightly managed, allowing users to inadvertently query and retrieve information they shouldn't see. Without proper safeguards, AI adoption risks exposing proprietary or confidential information during routine operations.

To mitigate this, we recommend integrating Microsoft Purview's sensitivity labels and data loss prevention (DLP) policies. Purview allows you to classify data automatically based on content and context, restricting AI access to labeled items. For instance, enable Copilot's semantic index with Purview governance to ensure queries only surface permitted data. One of the first things we do in most of our client engagements is conduct an AI readiness assessment to identify over-permissions and configure these controls, helping you achieve secure, role-based access while maintaining productivity.

Shadow AI and Unapproved Tool Usage

Shadow AI—employees using unauthorized AI tools without oversight—poses a significant risk of data leakage outside the Microsoft 365 tenant. Microsoft's security blog from April 2025 highlights this as a major concern, noting that eager teams might bypass controls, leading to unmonitored data flows and potential breaches. This is compounded in mid-sized firms with limited IT oversight, where we commonly see most permissions go unused, amplifying exposure risks.

Mitigation starts with Microsoft Purview's auditing and risk management features, which detect and block unsanctioned AI interactions. Set up Purview's communication compliance policies to monitor for shadow AI indicators, such as unusual data exports. Additionally, foster a culture of approved tools through training. We do this with effective change management. For example, we want to understand why they are using the unsanctioned tool, because that is usually a valid use that should be addressed in the company-wide rollout.

Data Leakage and Oversharing of Sensitive Information

AI in Microsoft 365 can inadvertently facilitate data leakage, especially when Copilot processes and summarizes shared content without adequate checks. For example, misconfigurations, like improper storage in OneDrive or Teams, can lead to accidental leaks of sensitive data, including internal messages or proprietary files.

This is easily addressed by leveraging Purview's DLP and information protection capabilities to automatically detect and prevent oversharing. For example, you can apply endpoint DLP to block sensitive data from being copied into AI prompts. Purview's integration with Copilot ensures that AI operations respect these policies, encrypting data in transit and at rest. For our clients who use our Transform365 subscription, we continuously monitor these settings for anomalies and provide ongoing governance to safeguard your information.

Compliance Violations and Insider Threats

Ensuring compliance with regulations like GDPR or HIPAA becomes challenging with AI, as tools might process regulated data without proper auditing, leading to insider threats or unintentional violations. Lepide's 2025 report on Microsoft 365 cybersecurity challenges points to evolving threats, including insider risks amplified by AI access. Even Microsoft has warned that cyber espionage and data theft can exploit AI environments.

Purview's insider risk management and compliance manager tools are essential for mitigation, offering AI-powered detection of risky behaviors and automated policy enforcement. Integrate these with Microsoft 365's activity logs to track AI interactions and generate compliance reports.

Evolving Attack Surfaces and Adversarial Threats

The integration of AI expands the attack surface, inviting threats like adversarial machine learning or malware targeting Copilot. Issues like phishing, unauthorized access, and malware that could exploit AI features. In our experience, unified governance is the key to counter this. In all of our client engagements, we help our customers establish a process for governance--often referred to as a Digital Workplace Governance Committee. In fact, we often facilitate this committee on an ongoing basis!

These types of risks can be mitigated by using Purview's data security posture management (DSPM) for AI, which proactively scans for vulnerabilities and integrates with Microsoft Defender for threat protection. We often recommend enabling features like secure prompts in Copilot to block harmful content.

In wrapping up, while AI in Microsoft 365 offers tremendous value, addressing these security concerns through robust governance is key to ethical and safe implementation. At Ideal State, our Transform365 subscription service provides you with a dedicated transformation team that will deliver your company an AI-enabled workforce--and do most of the heavy lifting to get there. Reach out for a consultation today. Let's build a resilient, AI-enabled workforce together.