Policy Configuration for Copilot

Overview

Organizational Copilot settings apply to your entire tenant. But different user groups often need different configurations. Your IT team might need full Copilot capabilities for testing. Your general staff might have web grounding disabled. A team handling sensitive data might need additional restrictions.

Policy configuration gives you this granular control. This video covers the available policy settings, how to configure them through the admin center and PowerShell, how to target them to specific groups, and how to test before broad deployment.

What You’ll Learn

• Available Policies: What you can control at the policy level for Copilot
• Admin Center Configuration: Where to set policies and how to target them
• PowerShell Management: When and how to use scripting for policy management
• Testing: How to validate policies before they affect production users

Script

Hook: one size doesn’t fit all

Your organization isn’t uniform. Different teams handle different data. Different roles have different needs. And different compliance requirements may apply to different groups.

Copilot policy configuration lets you match Copilot capabilities to each group’s requirements. More permissive for teams that benefit from full AI capabilities. More restrictive for teams handling sensitive data. And always documented for governance.

Let’s set up the policies that make this work.

Available policy settings

Copilot policies break down into several categories.

Access policies control who can use Copilot. The primary mechanism is licensing—if a user doesn’t have a Copilot license, they can’t access Copilot features. But you can layer additional controls on top. Conditional Access policies can restrict Copilot access to specific devices, locations, or conditions. Group-based licensing lets you control which users get Copilot licenses in the first place.

Feature-level controls determine which Copilot capabilities are available. You can enable or disable Copilot in specific M365 applications—for example, enabling Copilot in Outlook and Teams but disabling it in Word and Excel for a particular group. This is useful during phased rollouts where you want to introduce capabilities incrementally.

Data access policies control what content Copilot can reference when generating responses. The baseline is that Copilot respects the user’s existing permissions. But you can further restrict data access through sensitivity labels, DLP policies, and information barriers. If a DLP policy prevents sharing certain content types, that policy extends to Copilot interactions.

Web and external content policies control whether Copilot can access the internet. This is configured at the organizational level, but you should decide whether exceptions are needed for specific groups. In most government deployments, web grounding is either on or off for the entire tenant.

Meeting and transcription policies in Teams control Copilot’s meeting capabilities. These are configured in the Teams admin center through meeting policies. You can enable transcription for some meeting policies and disable it for others, effectively controlling which users get meeting Copilot and which don’t.

Configuring through the admin center

Most Copilot policies are configured through admin center interfaces.

For tenant-level policies, go to the Microsoft 365 admin center, then Settings, then Copilot. The settings here apply to all users unless overridden by more specific policies. This is where you configure web grounding, model improvement opt-out, and app-level enablement.

For Teams meeting policies, use the Teams admin center. Navigate to Meetings, then Meeting policies. You can create multiple meeting policies and assign them to different user groups. For Copilot, the critical settings are transcription and meeting recap. Create a policy that enables transcription for users who should have meeting Copilot, and a separate policy that disables it for users who shouldn’t.

For app-specific policies, the Microsoft 365 Apps admin center provides controls for how Office applications behave. Cloud Policy settings let you configure Copilot-related features for specific groups using Entra ID security groups.

When applying policies to groups versus individuals, always prefer group-based targeting. Create Entra ID security groups that represent your policy tiers—for example, “Copilot Full Access,” “Copilot Restricted,” and “Copilot Pilot.” Assign policies to these groups rather than individual users. This scales better and is easier to audit.

PowerShell for advanced policy management

The admin center handles most policy configuration, but PowerShell is essential in several scenarios.

Use PowerShell when you need to apply policies to hundreds of users at once, when you need to automate policy changes as part of a provisioning workflow, or when you need detailed logging of every policy change for compliance records.

Microsoft Graph PowerShell provides cmdlets for managing Copilot-related policies. For Teams policies specifically, the Microsoft Teams PowerShell module lets you create, modify, and assign meeting policies programmatically.

A typical workflow looks like this: define your policy settings in a script, test the script against a small group, run the script against your target population, and log the results. Keep your scripts in version control—a Git repository is ideal. This gives you a history of every policy change, who made it, and when.

For government environments, version-controlled policy scripts serve double duty. They’re an operational tool and a compliance artifact. When your auditor asks “when did you change this policy and why,” you can point to the commit history.

Change tracking is critical. Every policy change should be logged with the date, the administrator who made the change, the groups affected, and the rationale. Whether you track this in a change management system, a SharePoint list, or your Git commit messages, the record needs to exist.

Testing policy configurations

Never deploy a policy change to production without testing.

Test in your pilot group first. Apply the new policy to a test group, wait for it to propagate, and verify the behavior. Does Copilot appear where it should? Is it blocked where it should be? Do the right features show up for the right users?

Verify policy inheritance and conflicts. When multiple policies apply to the same user—through group membership, meeting policies, and organizational defaults—understand which policy wins. Microsoft generally follows a “most restrictive wins” model, but this varies by policy type. Test combinations to confirm.

Common testing mistakes include not waiting long enough for policy propagation—some policies take up to 24 hours to apply. Not testing from the user’s perspective—sign in as a test user, not as an admin. Not testing across all affected apps—a policy change in Teams doesn’t automatically affect Outlook. And not documenting what you tested—if you can’t prove you tested it, you didn’t test it.

Document your test results. Record the test date, the policy configuration tested, the user accounts used, the expected behavior, and the actual behavior. This documentation supports your change management process and provides evidence for compliance reviews.

Close: policy governance

Policy configuration isn’t a one-time activity. It’s ongoing governance.

Document all active Copilot policies. Create a policy register that lists each policy, its settings, the groups it targets, the date it was implemented, and the business rationale. Store this with your IT governance documentation.

Review policies quarterly. Microsoft adds new Copilot capabilities and new policy controls regularly. Each quarter, review your policies against current capabilities and adjust as needed. New features may require new policy decisions.

Align policies with your ATO and compliance requirements. Every Copilot policy is a security control. Document the relationship between your Copilot policies and the security controls in your System Security Plan. When your AO asks how you’re controlling AI capabilities, your policy register is the answer.

Sources & References

• Microsoft 365 Copilot setup — Copilot setup including policy configuration
• Enable users for Microsoft 365 Copilot — User enablement and policy targeting
• Copilot page in Microsoft 365 admin center — Admin center Copilot settings and policies