Microsoft 365 is the backbone of productivity for most small and mid-sized businesses. From email and file sharing to Teams meetings and cloud-based apps, it's where your day-to-day work happens.
But by default, Microsoft 365 is not fully locked down for security. Many of its most important protections are either optional or not turned on out of the box. If your business relies on Microsoft 365, configuring the right security settings is essential to avoid data breaches, phishing attacks, and compliance issues.
This guide will walk you through the top Microsoft 365 security settings your SMB should enable in 2025 to protect users, data, and company assets.
Why Microsoft 365 Security Configuration Matters for SMBs
While Microsoft provides a robust platform, it leaves many security controls up to the admin or IT partner. That means the protection you get depends on the setup you choose.
For SMBs, a misconfigured or undersecured 365 environment can lead to:
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Compromised user accounts through phishing
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Unauthorized data sharing or access
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Regulatory non-compliance
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Business email compromise (BEC)
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Unnoticed intrusion by threat actors
See how proactive vs. reactive protection can change your outcome: The Difference Between Reactive and Proactive Computer Security
Enable Multi-Factor Authentication (MFA) for All Users
What it does: Requires users to verify their identity using a second method like a mobile app or hardware token.
Why it matters: Passwords alone are no longer enough. MFA is one of the most effective ways to block account compromise, especially from phishing attacks.
Where to find it: Microsoft 365 Admin Center → Azure Active Directory → Security → MFA
Not all MFA is created equal. Learn more about advanced options here: What Is Phishing-Resistant MFA? A Must-Know Guide for SMBs
Set Up Conditional Access Policies
What it does: Controls access to Microsoft 365 based on user role, location, device status, or risk level.
Why it matters: You can block risky logins, restrict access from unmanaged devices, and prevent users from logging in from unexpected countries or locations.
Where to find it: Azure Active Directory → Security → Conditional Access
Need help securing remote access? Read: ZTNA or VPN in 2025: The Best Remote Access Strategy for Your Business
Protect Admin Accounts with Just-in-Time Access or Privileged Identity Management (PIM)
What it does: Limits permanent admin rights and provides elevated access only when needed.
Why it matters: Global admin accounts are the number one target for attackers. Keeping access limited and time-bound greatly reduces risk.
Where to find it: Microsoft Entra ID (formerly Azure AD) → PIM
Explore admin security in more detail: Global Admin Access in Microsoft 365: Should You Have It and How to Secure It
Use Microsoft Defender for Office 365
What it does: Provides advanced protection against phishing, malware, business email compromise, and zero-day threats.
Why it matters: This tool uses AI-powered detection and sandboxing to inspect email links and attachments before they reach your inbox.
Where to find it: Microsoft 365 Security Center → Threat Management → Policies
Click here for more info: Microsoft Defender for Office 365 Overview
Enable Data Loss Prevention (DLP) Policies
What it does: Prevents sensitive information from being accidentally or intentionally shared outside your organization.
Why it matters: DLP helps you comply with privacy laws like PIPEDA and GDPR by blocking or alerting users when they attempt to send restricted data.
Where to find it: Microsoft Purview compliance portal → Data loss prevention
Learn more about compliance for Canadian SMBs: What Cybersecurity Services Are Available in Canada
Configure Alerts and Activity Monitoring
What it does: Notifies admins about suspicious behavior, login attempts, file access, and potential breaches.
Why it matters: Visibility is key. If you don’t know what’s happening in your environment, you can’t respond quickly to threats.
Where to find it: Microsoft 365 Defender portal → Alerts and Incidents
For full incident preparedness, also read: What Is an Incident Response Plan and Why Does Your Business Need One
Encrypt Email and Sensitive Data
What it does: Applies Microsoft Purview Information Protection to emails and files containing confidential content.
Why it matters: Email encryption ensures sensitive client or internal information is only accessible to intended recipients.
Where to find it: Microsoft Purview compliance portal → Information protection
Complement this with strong access controls: Why Your Business Needs a Password Manager
Audit and Remove Inactive Users and Licenses
What it does: Identifies and deactivates unused Microsoft 365 accounts that may still have access.
Why it matters: Old accounts are often overlooked but can be exploited by attackers. Regular auditing is a basic yet powerful security step.
Where to find it: Microsoft 365 Admin Center → Users → Active users
Boost operational efficiency with this guide: How to Work Effectively with Your IT Service Provider and Get the Best ROI from Your IT Spend
Review Microsoft Secure Score
What it does: Provides a security benchmark and recommends improvements across your Microsoft 365 environment.
Why it matters: Secure Score helps SMBs prioritize high-impact security changes and track progress over time.
Where to find it: Microsoft 365 Defender portal → Secure Score
Want a better understanding of core terms? Visit: Basic Cybersecurity Terms You Should Be Familiar With
Final Thoughts
Microsoft 365 offers powerful built-in security features, but most of them are not fully enabled by default. If your business is not taking advantage of these settings, you are leaving critical data exposed.
As your MSP partner, we can help you:
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Review your current Microsoft 365 configuration
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Enable and enforce these security best practices
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Monitor your environment and respond to threats
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Train your team on safe usage and ongoing awareness
