Azure Policy: Building Custom Policies for Standards and Compliance

Margaret_Farmer

Microsoft

May 12, 2025

For nonprofits striving to balance limited resources with the need to meet organizational standards and regulatory compliance, Azure Policy offers a powerful toolset. In this blog post, we'll explore how nonprofits can leverage Azure Policy to achieve these objectives through a step-by-step scenario.

The Importance of Data Protection Regulations

Regulations such as the General Data Protection Regulation (GDPR), Protected Health Information (PHI) standards, Personally Identifiable Information (PII) safeguards, and the Health Insurance Portability and Accountability Act (HIPAA) play a critical role in ensuring organizations maintain the privacy and security of sensitive data. These frameworks are designed to provide a structured approach to data governance, giving organizations clear guidelines on handling, storing, and sharing information. For nonprofits, the stakes are particularly high as they often manage a wealth of sensitive information, including donor PII, health-related PHI, or other regulated data types. Noncompliance with these regulations can result in severe financial penalties, loss of donor trust, and reputational damage—effects that are particularly devastating for resource-limited organizations dependent on public goodwill.

The Growing Threat Landscape

In an era marked by heightened cyber threats, including ransomware and Business Email Compromise (BEC) attacks, the importance of safeguarding sensitive data cannot be overstated. Ransomware attacks have surged in recent years, targeting organizations of all sizes and sectors, including nonprofits. These attacks often result in the encryption of critical data, with attackers demanding substantial payouts for its release. Similarly, BEC involves deceptive tactics such as phishing or spoofed emails to gain access to sensitive systems, commit fraud, or steal funds. The cost of these breaches is not just monetary—it also erodes organizational credibility and causes irreversible harm to relationships with donors, stakeholders, and beneficiaries. For nonprofits handling sensitive data, such as donor financial information or healthcare records, the implications can be catastrophic.

Proactive Measures for Data Safeguarding

To combat these threats and remain compliant with regulations, nonprofits must adopt a proactive approach to data protection. Custom Azure policies can play a pivotal role here by enabling the enforcement of tailored security measures. For instance, policies can be designed to automatically encrypt data at rest and in transit, restrict access to authorized personnel only, and enforce multi-factor authentication (MFA) to secure account logins.

Moreover, organizations should implement robust training programs to raise staff awareness about phishing, ransomware, and other cybersecurity threats. By combining technology solutions with human vigilance, nonprofits can significantly reduce their exposure to malicious activities.

Benefits for Nonprofits

By implementing custom Azure policies, nonprofits can:

Ensure Donor Trust: Maintain data residency and encryption standards to protect sensitive donor information.
Optimize Costs: Restrict VM sizes or resource types to prevent unnecessary expenditures.
Streamline Audits: Demonstrate compliance with organizational and regulatory policies through Azure’s built-in reporting tools.
Enhance Governance: Align cloud practices with your nonprofit’s mission and values.

Custom Azure Policies for Nonprofits

Custom Azure Policies can greatly enhance security, compliance, and efficiency in your cloud environment. Below are practical examples tailored specifically to nonprofits, showcasing how policies can be proactively applied:

1. Data Encryption Policies

Encrypt Storage Accounts at Rest

This policy ensures all new and existing Azure Storage accounts have encryption at rest enabled. Azure Storage automatically encrypts data, but this policy ensures consistency and compliance across the board.
Use Case: Ensuring donor information or sensitive documents are always securely stored.

Require Secure Transfer for Storage Accounts

This policy mandates all data transactions with Azure Storage accounts must occur over HTTPS, enforcing secure data transfer and protecting sensitive data in transit.
Use Case: Preventing unauthorized data interception during uploads or downloads.

2. Access Control and Authentication Policies

Enforce Multi-Factor Authentication (MFA) via Microsoft Entra ID Conditional Access

This policy ensures all users accessing your nonprofit’s Azure resources must use MFA, significantly reducing the risk of compromised accounts.
Use Case: Securing critical administrative accounts and volunteer logins from unauthorized access.

Restrict Role Assignments (Least Privilege Principle)

Ensures users and service accounts have the minimal necessary privileges. It restricts high-level roles (like Owner or Contributor) from being broadly assigned.
Use Case: Protecting your cloud environment from accidental or malicious changes.

3. Resource Deployment Restriction Policies

Allowed Locations Policy

Restricts resource creation to specific Azure regions or locations, aligning deployments with compliance regulations or cost considerations.
Use Case: Ensuring data residency compliance by keeping sensitive data in approved geographic locations.

4. Tagging Enforcement Policies

Require Specific Tags (e.g., Department or Owner)

Mandates tagging of all Azure resources with essential organizational metadata such as department, owner, or cost center.
Use Case: Facilitating easy cost tracking, resource organization, and accountability within your nonprofit.

Auto-Inherit Tags from Resource Group

Automatically applies tags from resource groups to resources created within them, ensuring consistency without manual effort.
Use Case: Simplifying tag management, particularly useful in large projects or across multiple teams.

5. Audit Logging and Monitoring Policies

Enable Diagnostic Logging

Automatically configures diagnostic logging for critical Azure resources (VMs, databases, Key Vault), sending logs to a centralized storage or Log Analytics workspace.
Use Case: Providing essential visibility into activities, simplifying compliance audits, and speeding incident response.

Enable Azure Defender on Critical Resources

Ensures Azure Defender (part of Microsoft Defender for Cloud) is enabled for vital resources, providing real-time threat detection and security recommendations.
Use Case: Identifying and mitigating potential threats early, critical for nonprofits lacking dedicated cybersecurity teams.

6. Backup and Disaster Recovery Policies

Ensure Azure Backup for Virtual Machines

Requires Azure Backup is configured for all virtual machines, preventing data loss from accidental deletion or corruption.
Use Case: Guaranteeing critical services and data (financial records, donor databases) are protected from unexpected incidents.

Implement Disaster Recovery with Azure Site Recovery

Ensures Azure Site Recovery (ASR) is set up for essential workloads to provide quick recovery during outages or disasters.
Use Case: Maintaining operational continuity for essential services like public-facing websites or databases containing sensitive data.

Conclusion

Azure Policy empowers nonprofits to effortlessly align their cloud environments with critical compliance standards, data protection guidelines, and cost management strategies. By proactively adopting and customizing Azure Policies—such as enforcing encryption, strengthening access control, restricting resource deployment, ensuring comprehensive tagging, and mandating audit logging and backups—nonprofits can mitigate risks, optimize resources, and maintain donor trust. Leveraging Azure Policy isn't just about achieving compliance; it's about unlocking peace of mind, enabling your organization to dedicate more resources and attention to the impactful work that truly matters.