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Hi Mansha Irfan!
Thanks for your prompt response!
Yes, you are correct that the justification for a label downgrade is recorded in the audit logs. However, for a real-time notification or approval workflow involving a line manager, Microsoft Purview has built-in features for both approval workflows and alert notifications related to sensitivity label actions, but they are not always directly available out-of-the-box for all scenarios, primarily through its Information Protection and Data Loss Prevention (DLP) features, often integrated with Power Automate. You can implement approval workflows for sensitive label changes and configure alert notifications for specific events like label downgrades
The primary mechanism for managing downgrades is through the audit logs and requiring justification.
However, there are ways to achieve a notification/alerting mechanism that could trigger an approval process, albeit requiring some integration work. This typically involves leveraging audit logs in conjunction with Microsoft Sentinel, Azure Logic Apps, or Microsoft Power Automate.
You can refer to this similar issue faced by a customer Issue this may help you with your solution.
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Happy to Help!