@Richard Berry, Thanks for posting in Q&A. Based on my researching, the System Reserved partition often acts as the system partition; it holds essential files, including the Boot Configuration Data (BCD) store that holds boot configuration parameters. Windows Recovery environment (Windows RE) is an extensible recovery platform. The system partition store the files essential to load Windows after the BIOS or UEFI firmware has prepared the hardware. It should not be encrypted.
But for our compliance policy, it requires all fixed drives attached need to enable BitLocker which will cause non-compliant. For such devices, I suggest to unassign the D drive to the System Reserved Partition to see if it will change to compliant.
Hope it can help.
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