Microsoft Copilot and SharePoint Permissions: Fixing the Oversharing Problem

Microsoft Copilot's semantic search capabilities expose a fundamental vulnerability in most SharePoint environments: years of accumulated permission sprawl. When Copilot indexes content, it respects SharePoint permissions—but if your permissions are overly permissive, Copilot becomes a high-speed data leak engine. Users discover they can query Copilot for "confidential financial reports" or "executive compensation data" and get immediate results, even when those documents were never explicitly shared with them.

The problem isn't Copilot. It's SharePoint's default permission inheritance model, combined with years of convenience-driven decisions that prioritized "making it work" over security. This post provides the technical methodology to identify and remediate SharePoint oversharing before enabling Copilot at scale.

The SharePoint Permission Inheritance Problem

SharePoint's permission model uses cascading inheritance from site collection → site → library → folder → item. By default, every child object inherits permissions from its parent. This design simplifies administration but creates catastrophic security drift over time.

Why inheritance fails at scale:

1. Site owners break inheritance without understanding implications: Breaking inheritance at the library level while leaving "Everyone" or "All Users" groups at the site level still grants broad access
2. Legacy groups accumulate members: SharePoint groups created years ago may include employees who changed roles, contractors who left, or automated service accounts that should never have had read access
3. "Everyone except external users" is not restrictive: This default Azure AD group includes every employee, including interns, temporary workers, and recently terminated accounts awaiting deprovisioning
4. Explicit deny does not exist: SharePoint uses additive permissions only—you cannot explicitly deny access, only remove grant permissions
5. Anonymous links bypass all controls: Anyone with a sharing link can access content, and Copilot indexes it as if the link creator has direct access

Real-world example:

A Fortune 500 client enabled Copilot for 50,000 users. Within 48 hours, the CISO received reports that employees could query Copilot for "M&A due diligence" and retrieve board-level documents from a SharePoint site that was "locked down" three years ago. Investigation revealed:

• The site had "Everyone except external users" at the root level
• 23 libraries had broken inheritance but retained the parent group
• 847 documents were indexed by Copilot and accessible to all employees
• The original site owner left the company in 2022, and no one reviewed permissions since

The fix required 40 hours of manual remediation and a policy change to disable Copilot until all sites were audited.

Identifying Overshared Sites with PowerShell

Manual permission audits fail at scale. The only reliable method is automated scanning using SharePoint PowerShell (PnP PowerShell specifically, as it handles throttling and modern authentication).

Script to find sites with "Everyone" or "All Users" groups:

# Install PnP PowerShell if not already installed
# Install-Module -Name PnP.PowerShell -Scope CurrentUser

Connect-PnPOnline -Url "https://yourtenant-admin.sharepoint.com" -Interactive

$sites = Get-PnPTenantSite -Detailed | Where-Object {$_.Template -notlike "*RedirectSite*"}
$oversharedSites = @()

foreach ($site in $sites) {
    Write-Host "Checking $($site.Url)"

    try {
        Connect-PnPOnline -Url $site.Url -Interactive

        # Get site groups and check for overly permissive groups
        $groups = Get-PnPGroup

        foreach ($group in $groups) {
            $users = Get-PnPGroupMember -Identity $group.Title

            # Flag if "Everyone", "All Users", or groups with >500 members
            if ($group.Title -match "Everyone|All Users" -or $users.Count -gt 500) {
                $oversharedSites += [PSCustomObject]@{
                    SiteUrl = $site.Url
                    GroupName = $group.Title
                    MemberCount = $users.Count
                    Permissions = (Get-PnPGroupPermissions -Identity $group.Title).Name -join ", "
                }
            }
        }

    } catch {
        Write-Warning "Failed to check $($site.Url): $_"
    }
}

# Export results
$oversharedSites | Export-Csv -Path "C:\Temp\OversharedSites.csv" -NoTypeInformation
Write-Host "Found $($oversharedSites.Count) overshared sites. Report saved to C:\Temp\OversharedSites.csv"

What this script does:

1. Connects to SharePoint Online tenant admin center
2. Enumerates all site collections (excluding redirect sites)
3. Checks each site for groups named "Everyone", "All Users", or groups with >500 members
4. Records the group name, member count, and assigned permissions
5. Exports findings to CSV for remediation planning

Expected output for a 10,000-user tenant:

• 200-400 sites with "Everyone except external users" at root level
• 50-100 sites with "All Users" groups (legacy from on-premises migrations)
• 30-50 sites with custom groups exceeding 500 members
• Total remediation scope: 300-500 sites requiring permission restructuring

Critical caveat: This script identifies site-level oversharing. To detect broken inheritance at the library/folder/item level, you need recursive scanning (see next section).

Detecting Broken Inheritance and Permission Sprawl

Broken inheritance is the primary cause of permission drift. When a library breaks inheritance but retains parent-level groups, it creates a false sense of security—administrators think they've restricted access, but overly broad groups persist.

Script to detect broken inheritance across libraries:

Connect-PnPOnline -Url "https://yourtenant.sharepoint.com/sites/YourSite" -Interactive

$libraries = Get-PnPList | Where-Object {$_.BaseTemplate -eq 101 -and $_.Hidden -eq $false}
$brokenInheritance = @()

foreach ($library in $libraries) {
    Write-Host "Checking $($library.Title)"

    if ($library.HasUniqueRoleAssignments) {
        $roleAssignments = Get-PnPProperty -ClientObject $library -Property RoleAssignments

        foreach ($roleAssignment in $roleAssignments) {
            $member = Get-PnPProperty -ClientObject $roleAssignment -Property Member
            $roleDefinitions = Get-PnPProperty -ClientObject $roleAssignment -Property RoleDefinitionBindings

            # Flag if broken inheritance includes "Everyone" or large groups
            if ($member.Title -match "Everyone|All Users" -or ($member.PrincipalType -eq "SharePointGroup" -and $member.Users.Count -gt 100)) {
                $brokenInheritance += [PSCustomObject]@{
                    LibraryTitle = $library.Title
                    LibraryUrl = $library.RootFolder.ServerRelativeUrl
                    MemberName = $member.Title
                    MemberType = $member.PrincipalType
                    Permissions = ($roleDefinitions | Select-Object -ExpandProperty Name) -join ", "
                }
            }
        }
    }
}

$brokenInheritance | Export-Csv -Path "C:\Temp\BrokenInheritance.csv" -NoTypeInformation
Write-Host "Found $($brokenInheritance.Count) libraries with broken inheritance and overly broad access."

Why broken inheritance is dangerous with Copilot:

• Copilot indexes at the item level, respecting effective permissions
• If a library has broken inheritance but retained "Everyone", all items are indexed
• Users can query Copilot for content they cannot browse directly via SharePoint UI
• Semantic search bypasses the "security by obscurity" model many admins rely on

Remediation strategy:

1. Audit first, then act: Generate the CSV report and categorize sites by sensitivity (public, internal, confidential)
2. Remove "Everyone" and "All Users" groups: Replace with role-based groups (e.g., "Sales-ReadOnly", "Finance-Contribute")
3. Re-inherit where possible: If a library broke inheritance only to remove a single user, consider removing that user from the parent group and re-inheriting
4. Document ownership: Assign a business owner to each site and require annual access reviews
5. Test before deploying: Use a test user account to query Copilot and verify content is no longer accessible

Copilot Semantic Search Indexing Architecture

Understanding how Copilot indexes SharePoint content is critical to designing a secure implementation. Copilot does not use the classic SharePoint search index—it builds a separate semantic index optimized for natural language queries.

How Copilot indexing works:

1. Graph Connectors ingest metadata: Title, author, modified date, file type, and first 10KB of text content
2. Semantic embeddings generate vector representations: Using Azure OpenAI embeddings, Copilot creates 1536-dimensional vectors for each document
3. Permission metadata is stored alongside embeddings: Every indexed item includes a list of security principals (users/groups) with read access
4. Query-time filtering applies permissions: When a user queries Copilot, the semantic search returns only items where the user's UPN or group memberships match stored permissions
5. Re-indexing occurs on permission changes: When SharePoint permissions change, Copilot re-indexes affected items within 24-48 hours

Critical security implication: Copilot's permission filtering is only as secure as your SharePoint permissions. If a user should not have access to a document but SharePoint permissions allow it, Copilot will surface it.

Indexing exclusions you can configure:

• Sensitivity labels: Documents with "Confidential" or "Highly Confidential" labels can be excluded from Copilot indexing (requires DLP policy configuration)
• Site-level opt-out: SharePoint admins can disable Copilot indexing for specific sites (see next section)
• File type exclusions: Block Copilot from indexing specific file types (.pst, .mdb, .exe) via Microsoft 365 Compliance Center

Using Sensitivity Labels to Restrict Copilot Indexing

Sensitivity labels provide the most granular control over Copilot's access to content. By applying labels and configuring DLP policies, you can block Copilot from indexing high-risk documents even if SharePoint permissions allow broad access.

Step-by-step configuration:

1. Create sensitivity labels in Microsoft Purview Compliance Center:

   • Navigate to Information Protection → Labels
   • Create labels: "Public", "Internal", "Confidential", "Highly Confidential"
   • Enable encryption for "Confidential" and above (optional but recommended)

2. Configure Copilot indexing exclusions:

   • Edit the "Confidential" label
   • Under "Content marking", enable "Apply restrictions to AI services"
   • Select "Block Microsoft Copilot from accessing this content"

3. Apply labels via auto-labeling policies:

   • Create policies in Compliance Center → Auto-labeling
   • Define conditions: Keywords ("confidential", "earnings", "M&A"), document properties, sensitive info types (SSN, credit card)
   • Apply "Confidential" label automatically to matching documents

4. Enforce label inheritance:

   • Configure label inheritance policies so child documents inherit parent folder/library labels
   • This prevents users from downgrading labels to make content Copilot-accessible

5. Monitor label application:

   • Use Content Explorer in Compliance Center to track labeled documents
   • Generate reports showing % of documents with "Confidential" or higher labels

Real-world impact:

A healthcare client used sensitivity labels to block Copilot from accessing 12,000 patient records stored in SharePoint. Without labels, those records would have been indexed because "Clinical Staff" group (2,400 members) had read access to the parent site. With labels, Copilot returns "No results found" when queried for patient data, even though SharePoint permissions allow access.

Trade-off: Sensitivity labels add user friction—employees must label documents manually or wait for auto-labeling to apply (up to 24 hours). This increases support tickets by 15-20% initially.

Governance Policies for Ongoing Compliance

Remediating existing oversharing is only half the solution. Without governance policies, permission sprawl returns within 6 months. Effective governance requires automated monitoring, mandatory access reviews, and self-service tools that make secure sharing easier than insecure sharing.

Governance framework:

1. Automated permission auditing (monthly):

• Schedule PowerShell scripts to run monthly and email reports to site owners
• Flag sites with "Everyone" groups, broken inheritance, or >1,000 unique permissions
• Require site owners to remediate within 30 days or lose admin rights

2. Mandatory access reviews (quarterly):

• Use Azure AD Access Reviews to force site owners to recertify group memberships
• Automatically remove users who are not recertified
• Escalate to CISO if reviews are not completed within 14 days

3. Self-service sharing via Microsoft Teams:

• Provision SharePoint sites via Teams templates with pre-configured security groups
• Disable "Everyone" and "All Users" groups in all templates
• Require site owners to request exceptions via ServiceNow/Jira ticket

4. DLP policies to block external sharing:

• Configure DLP rules to block sharing of documents labeled "Confidential" or higher
• Apply blocking policies to all SharePoint sites and OneDrive accounts
• Monitor violations and require security training for repeat offenders

5. Copilot query logging and monitoring:

• Enable audit logging for Copilot queries in Microsoft 365 Compliance Center
• Alert on queries containing keywords like "confidential", "executive", "M&A"
• Investigate users with >50 Copilot queries per day (potential data exfiltration)

Metrics to track:

• % of sites with "Everyone" or "All Users" groups (target: <5%)
• Average unique permissions per site (target: <100)
• % of documents with sensitivity labels (target: >80%)
• Copilot query success rate (% of queries returning results) (target: 40-60%)
• Support tickets related to Copilot permissions (track monthly to identify training gaps)

Automated Monitoring Solutions

Manual auditing fails at scale. Enterprise clients with 10,000+ SharePoint sites need automated monitoring that alerts on permission changes in real time.

Recommended architecture:

1. Azure Logic App triggered by SharePoint webhook:

   • Configure webhooks on high-sensitivity sites to trigger on permission changes
   • Logic App calls SharePoint API to retrieve new permission assignments
   • If "Everyone" or large group is added, send alert to security team and auto-revert change

2. Power BI dashboard for permission analytics:

   • Daily PowerShell scan exports permission data to Azure SQL Database
   • Power BI connects to SQL and visualizes trends (sites with >1,000 permissions, broken inheritance count, label coverage)
   • Executives review dashboard monthly to track governance KPIs

3. Microsoft Purview Insider Risk Management:

   • Enable "Data theft by departing users" policy
   • Alert if user with imminent termination date queries Copilot for "confidential" or downloads >100 documents in 24 hours
   • Automatically revoke SharePoint access and notify HR/Legal

Cost considerations:

• Azure Logic App: $0.000025 per webhook trigger (~$50/month for 2M permission changes)
• Azure SQL Database: $5-50/month depending on data volume
• Microsoft Purview Insider Risk: Requires E5 Compliance license ($12/user/month)
• Total cost for 10,000-user tenant: $8,000-12,000/month

ROI calculation:

Average data breach in 2024 costs $4.45M (IBM Security Report). If automated monitoring prevents one breach per year, ROI is 3,700%. Even if it only reduces breach risk by 10%, ROI is 370%.

Best Practices for Copilot-Ready SharePoint Security

Summarizing the technical controls into actionable best practices:

1. Default-deny everything:

• Remove all "Everyone" and "All Users" groups from every site
• Use role-based groups with descriptive names ("Finance-Contribute", "Sales-ReadOnly")
• Require explicit group membership requests via IT ticket

2. Minimize broken inheritance:

• 80% of sites should use pure inheritance (no broken permissions)
• If inheritance must break, document the reason and business owner
• Re-inherit annually unless owner recertifies need

3. Label everything:

• 100% of documents should have a sensitivity label within 90 days of creation
• Use auto-labeling policies for common patterns (financial reports = "Confidential")
• Train users to manually label when auto-labeling fails

4. Monitor Copilot query patterns:

• Alert on queries containing PII, competitive intel, or executive keywords
• Investigate users with anomalous query volume (>100/day)
• Disable Copilot for users who violate acceptable use policies

5. Test with low-privilege accounts:

• Before enabling Copilot tenant-wide, test with a contractor or intern account
• Query for "confidential financial reports", "executive compensation", "M&A plans"
• If any results return, remediate before proceeding

6. Communicate the risk:

• Educate executives that Copilot amplifies existing SharePoint security weaknesses
• Frame remediation as "technical debt cleanup" required for AI enablement
• Get budget approval for governance automation ($10-20K/month)

Frequently Asked Questions

Why is Copilot showing confidential SharePoint files to unauthorized users?

Copilot respects SharePoint permissions, so if confidential files appear in Copilot results, the user querying Copilot has SharePoint read permissions on those files. The most common root cause is overly broad SharePoint groups like "Everyone except external users" or "All Company" that were never properly restricted. Run the PowerShell scripts in this post to identify overshared sites and remove broad groups. Additionally, check for broken inheritance—libraries with broken inheritance may still retain parent-level groups with excessive permissions.

How do I find all SharePoint sites with "Everyone" or "All Users" permissions?

Use the PnP PowerShell script provided earlier in this post. Connect to your tenant admin center, enumerate all site collections, and check each site's groups for "Everyone" or "All Users". Export the results to CSV and prioritize remediation by site sensitivity. For large tenants (>5,000 sites), expect the scan to take 4-8 hours. Schedule it as a monthly job and email results to site owners for self-service remediation.

Can I block Copilot from indexing specific SharePoint sites or libraries?

Yes, but the method depends on your licensing. If you have Microsoft 365 E5 Compliance, apply sensitivity labels to documents and configure DLP policies to block Copilot indexing. Alternatively, SharePoint admins can disable search indexing entirely for a site (Site Settings → Search and Offline Availability → "Do not index"), but this also blocks classic SharePoint search. There is no native "disable Copilot indexing but keep SharePoint search" option as of November 2025—this is a frequently requested feature.

What happens if I remove "Everyone" groups from SharePoint sites?

Removing "Everyone" groups breaks access for users who relied on that broad permission grant. Before removal, identify all users who currently access the site via "Everyone" and add them to role-specific groups (e.g., "Sales-ReadOnly"). Use the SharePoint "Check Permissions" feature (Site Settings → Site Permissions → Check Permissions) to test access for specific users before and after group removal. Communicate the change to site owners 14 days in advance and provide self-service instructions for requesting access post-remediation.

How often does Copilot re-index SharePoint content after permission changes?

Copilot re-indexes SharePoint content within 24-48 hours after permission changes. However, there is no SLA guaranteeing immediate updates. If you revoke access to a confidential document, assume the user can still query it via Copilot for up to 48 hours. For immediate revocation, delete the document or move it to a site excluded from Copilot indexing. Microsoft has not published detailed re-indexing SLAs—this gap creates compliance risk for industries with strict data access audit requirements.

Related Resources:

• Microsoft Copilot Readiness Assessment Framework
• Data Loss Prevention for Microsoft 365: Complete Guide
• Azure AD Conditional Access Policies for Copilot Security

Need help remediating SharePoint oversharing before enabling Copilot? Contact our team for a free assessment.