Governance and licensing basics

Microsoft Copilot does not change who can see what in your tenant. It changes how quickly people can find it. That single point drives most of the governance work.

This guide is an orientation for managers, IT and risk teams. It is not legal advice, and Microsoft's documentation and your contracts are the authority.

1. Licensing at a glance

Option	What it gives you
Microsoft Copilot Chat	Included with eligible Microsoft 365 plans. Web-grounded chat with enterprise data protection, Copilot Chat in Outlook and Teams, simple agents, and pay-as-you-go access to agents using work data
Microsoft 365 Copilot add-on	Work data grounding through Microsoft Graph and Work IQ, full Copilot in Word, Excel, PowerPoint, Outlook and Teams, Researcher and Analyst, Agent Builder agents with work data, admin analytics
Microsoft Copilot Business	The add-on for organisations with up to 300 users on eligible Microsoft 365 Business plans
Microsoft 365 E7	Includes Microsoft Copilot and Microsoft Agent 365
Usage-based capabilities	Copilot Cowork and other metered services, billed in Copilot Credits under spending policies

2. Data protection

When people sign in with Microsoft Entra work accounts, Microsoft Copilot and Copilot Chat are covered by Microsoft's Data Protection Addendum and Product Terms, with Microsoft acting as data processor. Microsoft states:

Prompts, responses and data accessed through Microsoft Graph are not used to train foundation models.
Microsoft Copilot respects your identity model and permissions, inherits sensitivity labels, applies retention policies and supports auditing.
Web search queries go to Bing with user and tenant identifiers removed, under separate data handling terms.
Anthropic models are currently excluded from the EU Data Boundary and in-country processing commitments. Admins can turn the Anthropic model family off.

For UK organisations, discuss data residency and model choice with IT and your data protection officer, and record the decision.

3. Permissions and oversharing

Because Microsoft Copilot can surface anything a user can access, fix oversharing first:

Review SharePoint sites and Teams with "everyone" or broad access.
Use SharePoint Advanced Management, included with the Microsoft Copilot licence, to find oversharing and inactive sites, and restricted content discovery while you tidy up.
Apply sensitivity labels with Microsoft Purview to confidential content.

4. Agent governance

Copilot controls in the Microsoft 365 admin centre let admins manage who can create and use agents, web grounding and image generation.
The Agent Registry gives an inventory of agents with basic actions such as approve, block and reassign owner. Microsoft Agent 365, included with E7 or sold separately, adds policies, monitoring and deeper identity, security and compliance controls.
Microsoft Copilot Studio agents are governed in the Power Platform admin centre with environments and data policies.
The AI Administrator role allows Microsoft Copilot management without Global Administrator rights.

5. Usage-based billing

As of October 2026, Cowork and some agent scenarios consume Copilot Credits. Spending policies set who can use which service and how much they can spend. Remember Microsoft's warning: a spending policy grants access, even with a tiny limit.

6. A one-page AI policy

At minimum, agree and publish:

Approved tools and accounts (work account only).
What data may and may not be used, by classification.
The human review rule for external or high-stakes work.
Transcription and recording rules for meetings.
Who may build and share agents, and how they are reviewed.
Where to report problems.

Sources

Product details checked against these Microsoft pages in October 2026. Microsoft updates Microsoft Copilot frequently, so check the current page before relying on a detail.