Privacy regarding Copilot Chat

Question

Hello, The employees in our company have a Microsoft O365 E3 license, not a specific M365 Copilot license.

If our employees now want to use the Copilot Chatand "question" internal company documents, can this be done without hesitation if the tenant configuration (data boundary) is appropriate? Are there any differences in data protection in terms of use here, contrary to an additional Copilot license?

We are currently creating our own agents with Copilot Studio and would like to work with company knowledge here as well, which will then be billed on a pay-as-you-go basis. The same question arises here: Are agents from Copilot Studio more "secure" in terms of privacy/security than using Copilot Chat as an add-on in the O365 E3 license?

Consideration:

Does it make sense to provide an explicit agent to work with company knowledge instead of Copilot Chat to ensure increased data security?

Answer 1

Dear Evans Darcy,

Based on Microsoft’s enterprise data protection model, employees using Microsoft 365 Copilot Chat with a work account are protected by the same enterprise security, privacy, and compliance commitments that apply to Microsoft 365 services. Prompts, responses, and organizational data accessed through Copilot are not used to train foundation models, and Copilot respects existing Microsoft 365 permissions and access controls.

From a security and privacy perspective, Copilot Studio agents are not inherently more secure than Copilot Chat. Both rely on your organization's Microsoft 365 security, identity, compliance, and data governance controls.

The key difference is that Copilot Studio provides additional governance and customization capabilities. For example, organizations can create purpose-built agents that use specific knowledge sources, follow predefined instructions, integrate with business systems, or support particular business processes. This can help limit the scope of information users interact with and provide a more controlled experience.

If your primary goal is to allow employees to securely ask questions about company documents, Copilot Chat is generally sufficient when Microsoft 365 permissions, sensitivity labels, and data governance policies are properly configured. In many cases, the most important security consideration is ensuring that access permissions for SharePoint, OneDrive, Teams, and other Microsoft 365 content are correctly managed, as Copilot can only surface content that a user is already authorized to access.

Creating a dedicated Copilot Studio agent may be beneficial if you want to:

• Restrict users to a curated set of knowledge sources.
• Provide responses only from specific departments or business areas.
• Implement custom workflows or integrations.
• Apply additional governance and lifecycle management controls.

In summary, a Copilot Studio agent should be viewed as a way to provide a more focused and governed experience rather than as a solution that automatically provides stronger privacy or security than Copilot Chat. The foundation for data protection remains your organization's Microsoft 365 permissions and governance framework.

For more reference:

• Privacy and protections
• Choose between Microsoft 365 Copilot and Copilot Studio to build your agent

I hope this helps. Please feel free to reply below if you have any update or further concern.  

Thank you very much for your valuable time and your cooperation.

Answer 2

For users with only Microsoft 365 E3, Copilot Chat is protected by Enterprise Data Protection (EDP), and prompts and responses are covered by the same contractual protections used for Exchange and SharePoint data. Prompts and responses are encrypted at rest and in transit, tenant data is isolated, access controls and policies apply, and data isn’t used to train foundation models.

The key difference is not that Microsoft 365 Copilot is “more secure,” but what data each experience can access:

• Copilot Chat without a Microsoft 365 Copilot license is grounded in web data only by default.
• It cannot access shared enterprise data, individual data, or Graph connector data unless the user explicitly provides organizational content, uses Copilot Chat in supported app scenarios, or uses an agent that has access to organizational content.
• Users can still bring company data into Copilot Chat by pasting content, uploading files, selecting files, using Copilot Chat in Outlook, using Edge with webpage/PDF access enabled, or using an agent grounded in organizational content.

So, employees can use Copilot Chat with internal company documents, but only when that content is explicitly provided or made available through supported app or agent scenarios. In those cases, EDP still applies, and the data is not used to train foundation models.

For data boundary behavior:

• Copilot Chat LLM calls are routed to the closest regional datacenters.
• For EU users, Copilot Chat has additional safeguards so traffic stays within the EU Data Boundary.
• Worldwide traffic can be processed in the EU or other regions when capacity requires it.

For Copilot Studio agents, the context supports this conclusion:

• Agents can be grounded in shared tenant data such as SharePoint or Microsoft 365 Copilot connector content.
• Agents that access SharePoint or Graph connector content are governed through Copilot and Power Platform configurations.
• When using agents, privacy handling depends on the agent’s privacy statement and terms of use.

Based on the available information, Copilot Studio agents are not inherently more secure than Copilot Chat. Both are covered by Microsoft’s enterprise protections when used in these Microsoft 365 scenarios. The practical security difference is scope and control of data access:

• Copilot Chat is broader and web-grounded by default, with organizational data added only in specific ways.
• An explicit agent can be designed to access only defined knowledge sources, such as selected SharePoint content or connector data configured by admins.

Because of that, providing an explicit agent to work with company knowledge can make sense when the goal is tighter control over what organizational content is available. That is a governance and scoping advantage, not evidence of stronger underlying privacy guarantees.

In short:

• No additional Microsoft 365 Copilot license is required for EDP-level protection in Copilot Chat.
• A Microsoft 365 Copilot license changes data access and product capabilities, not the baseline enterprise data protection model for prompts and responses.
• An agent can be the better choice when company knowledge should be exposed in a controlled, source-specific way.
• It should not be assumed that agents are categorically “more secure”; they are more controllable in what they can reach.

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• Considerations for Microsoft 365 Copilot Chat admins
• Overview of Microsoft 365 Copilot Chat
• Enterprise data protection in Microsoft 365 Copilot and Microsoft 365 Copilot Chat
• Privacy and protections
• Frequently asked questions about Copilot Chat