Common Gaps & NIST Compliance Risks in Dynamics 365 Document Management

Ensuring NIST compliance is becoming increasingly critical for organizations handling sensitive data and documents, particularly as compliance is often a prerequisite for contract eligibility.

It has now been a year since the publication of NIST Cybersecurity Framework v. 2.0, which, according to Kevin Stine, chief of NIST’s Applied Cybersecurity Division, was “developed by working closely with stakeholders and reflecting the most recent cybersecurity challenges and management practices", and “will help organizations, sectors and even entire nations better understand and manage their cybersecurity risk.”.

Still, many organizations using Dynamics 365 for document management still face challenges in meeting key NIST requirements, especially those outlined in NIST SP 800-171 and SP 800-53.

A key reason for this misalignment is that default Dynamics 365 configurations do not always meet NIST compliance standards. This is a problem not only in terms of compliance but also because organizations may unknowingly have security gaps.

Why don’t these configurations align with NIST? The key issues in Dynamics 365 environments are:

• Excessive access permissions leading to uncontrolled file access
• Weak authentication mechanisms exposing documents to unauthorized users
• Lack of proper audit logging, making incident detection and investigations difficult

The good news is that businesses can effectively avoid these risks with proactive configuration and a coordinated effort across security, compliance, and IT teams.

This article will focus on how to do that in the Dynamics 365 environment. We will cover the following topics:

NIST establishes cybersecurity guidelines for protecting Controlled Unclassified Information (CUI) and for organizations that handle that information.

If your organization uses Microsoft Dynamics 365 for document management, you should specifically take a look at the following:

• NIST SP 800-171 (Securely handling unclassified government data)
• NIST SP 800-53 (Security & privacy controls for federal and private enterprise systems)
• NIST SP 800-207 (Zero Trust Architecture – ZTA – Enforcing continuous authentication and least-privilege access)

As we mentioned earlier, despite Microsoft's built-in security settings, many out-of-the-box configurations in Dynamics 365 are not fully aligned with NIST controls, leading to potential compliance risks.

Below are the top compliance risks in Dynamics 365:

• Over-Permissioned Access– User roles provide excessive privileges, violating Least Privilege (NIST SP 800-53 AC-6 “Employ the principle of least privilege, allowing only authorized accesses for users that are necessary to accomplish assigned organizational tasks.”). Also, a concern is privileges not being updated when necessary, as that violates AC-6 (7) “The need for certain assigned user privileges may change over time”

• Lack of Microsegmentation – Microsegmentation is a critical security measure in Dynamics 365 and SharePoint integrations. Without microsegmentation, users often gain unnecessary access to documents beyond their intended scope. For more on this, we recommend reading this article on Microsegmentation in a Dynamics 365 and SharePoint Integration.
• Data Retention – While NIST doesn't dictate exact timeframes, NIST SP 800-53 SI-12 “Information System Logging" control requires that organizations "manage and retain information within the system and information output from the system in accordance with applicable laws, executive orders, directives, regulations."
• No Multi-Factor Authentication (MFA) – Many Dynamics 365 environments still rely solely on password-based authentication. However, NIST SP 800-171 (3.5.3) mandates MFA for administrative access and remote login, while NIST SP 800-53 IA-2 requires MFA to strengthen identity verification across systems. MFA is also a core pillar of Zero Trust security.
• Incomplete Audit Logs – A lack of comprehensive file activity tracking in Dynamics 365 makes it difficult to meet NIST AU-2, AU-12, and AU-14 (Audit Logging Controls) and creates security gaps that can lead to undetected breaches and compliance penalties. NIST Checklist 1169 mandates automated logging for all access attempts, modifications, and failed authorization events. To ensure audit logs' integrity, organizations should deploy advanced solutions like Truth Enforcer. Such solutions should have authenticity verification mechanisms.

Failing to address these issues increases security risks in Dynamics 365 and results in gaps in NIST compliance.

The following scenario illustrates common compliance failures involving Dynamics 365 and document access control:

Scenario: Financial Services Firm Access Control

• A financial services company using Dynamics 365 and SharePoint did not enforce microsegmentation, allowing broad internal access to confidential data.
• Financial records were accessible to employees outside the accounting and legal departments.
• The firm failed a NIST compliance audit.
• Result: The company lost a federal contract worth several million dollars due to the compliance failure.

This scenario is hypothetical but reflects real-world problems and highlights why securing document access in Dynamics 365 is critical for businesses handling regulated or sensitive data. Beyond lost contracts, failing to secure document access in Dynamics 365 can lead to reputational damage and financial penalties under other regulatory standards like GDPR.  

Ensuring Dynamics 365 security aligns with NIST requirements requires proactive risk mitigation.

Key Solutions for NIST Compliance in Dynamics 365

By implementing these solutions, organizations can reduce risks and protect Controlled Unclassified Information (CUI) in Dynamics 365.

While Dynamics 365 offers powerful capabilities, its default configurations do not fully align with NIST’s security control frameworks. Without proactive oversight, organizations face real risks—data breaches, failed audits, and lost federal contracts.

The good news: with the right tools and cross-team coordination, it’s entirely possible to close the gaps, decrease risk, and confidently meet NIST requirements for document management in Dynamics 365.

The key aspects to consider are:

• Tight control of access, enabled by enforcing least privilege, microsegmentation, and multi-factor authentication to prevent unauthorized data exposure. Ensure that access controls remain consistent across Dynamics 365 and Microsoft 365, reducing the risk of non-compliance due to misaligned permissions.
• Visibility and traceability, achieved through robust audit logging, consistent classification, and automated retention policies.

Is your Dynamics 365 document security configuration NIST-compliant? If not, the first step is to use our checklist to discover the issues you might have.