At a Glance
Microsoft Entra ID manages app registrations and enterprise applications that access critical business resources. When governance is weak, organizations face serious risks including unmonitored API permissions, orphaned applications, and compromised identity infrastructure. These risks directly impact compliance with regulations such as NIS2 and DORA, which now treat identity management as a core security pillar.[1]
Entra ID app governance provides the controls needed to secure applications across their entire lifecycle. This includes assigning clear ownership, enforcing least privilege access, automating approval workflows, and continuously monitoring for risks. Modern enterprises recognize that governance is not optional. It is a foundational requirement for maintaining secure, compliant, and resilient identity environments.
Organizations with multiple tenants or complicated integration solutions face increased governance complexities. The lack of insight into application inventory, slow rotation of secrets, and high permissions become attack vectors. With effective Microsoft 365 governance in addition to native capabilities in Entra ID, these become manageable and auditable processes.
1. What Entra ID App Governance Changes for Enterprises
The Core Shift
App registrations accumulate naturally as organizations grow. Developers create apps to integrate services, extend functionality, and automate workflows. Without governance structures, this growth becomes invisible. Apps lack owners, their purposes become unclear, and risks go unnoticed until incidents occur.
Entra ID app governance changes this by establishing centralized control. Every app must have clear owners, defined permissions, and scheduled reviews. Organizations adopt a zero trust approach where every app is treated as a potential risk unless explicitly verified and approved.[3]
This shift extends beyond technical controls. Management must now understand which applications access Microsoft 365 data and what permissions they hold. Boards are expected to explain how app registrations are monitored and how unauthorized access would be detected. Failure to demonstrate this carries legal consequences under emerging regulations.[1]
Legal Obligations and Timelines
Regulations like NIS2 require organizations to implement risk-management measures across their entire identity infrastructure. Apps are no longer treated as optional conveniences. They are now recognized as critical assets that must be governed with the same rigor as user accounts.
Key obligations include:
- Register all applications with clear business purposes and assign ownership to accountable individuals
- Implement approval workflows where high-risk applications require security team review before deployment
- Define API permissions using least privilege principles and review them quarterly
- Monitor application activity continuously and escalate suspicious behavior within defined timeframes
- Maintain audit logs showing who approved applications, when permissions changed, and which applications were revoked
- Support incident response by rapidly revoking compromised applications and reviewing their access history
National implementation laws in Europe confirm that IT leadership bears personal responsibility for application security. This responsibility includes regular training on risks and documented evidence of oversight.[1]
Scale, Enforcement and Sanctions
Today, regulators carry out very thorough audits concerning application governance. They could ask very particular questions like how many unowned applications there are in the environment, whether secret rotation is enforced, or how long it would take to realize whether a malicious app has accessed sensitive data.
Fines for poor governance can be as high as GDPR penalties, depending on the severity of the failure and the organization’s size. Failure to meet the minimum application governance criteria often leads to operational disruption as regulators issue binding remediation orders. The most intense scrutiny falls to organizations operating in critical infrastructure sectors.
For enterprises leveraging Microsoft 365 security, the stakes are exceptionally high. Applications very commonly bridge identity systems, access email and cloud storage, and drive automated workflows. A compromised app can readily spread across the organization, opening the doors for attackers to get access to thousands of users, not to mention sensitive files.
Entry Into Force and Immediate Action Required
Compliance deadlines are no longer distant targets. Germany’s NIS2 directive implementation law entered force on December 6, 2025, with registration deadlines as early as January 2026. Other European countries including France, Spain, and the Netherlands are implementing similar laws with comparable timelines.[1]
Organizations must act immediately. The time available to audit app inventory, assign owners, and implement controls is measured in weeks and months, not years. Delays increase the risk of regulatory penalties and operational incidents.
2. What Entra ID App Governance Reveals About Enterprise Identity Risk
“Most organizations do not intentionally ignore application risks. Poor governance emerges when app registrations grow faster than oversight structures, and when nobody has centralized visibility into which applications exist, who owns them, and what permissions they hold.”
Complexity and Rapid Change
Entra ID provides a rich landscape of identity capabilities, including conditional access, identity protection, and privileged identity management. Applications integrate with these capabilities in complex ways. A single app might use service principal credentials, call multiple APIs, and operate on behalf of different users depending on context.[3]
This complexity is compounded by rapid change. Microsoft regularly updates platform capabilities, introduces new permission types, and evolves Microsoft 365 security recommendations. Apps built months ago may not reflect current best practices. Consent flows that seemed reasonable during initial development can become security vulnerabilities as data sensitivity and threat landscape change.
Governance must accommodate this reality through continuous assessment and updating of app security measures rather than one-time hardening projects. Organizations struggle with this because application teams have different priorities than security teams. Teams that built an app years ago may no longer be available to review and update it.
Gaps in Visibility, Documentation and Incident Readiness
Entra ID audit logs capture application activity in detail. However, many organizations lack the tools or processes to correlate this data into meaningful insights. Common visibility gaps include:
- Limited inventory of which applications exist in the tenant, who created them, what they do, and whether they are still used
- Weak understanding of which sensitive data each application can access, particularly data shared through Microsoft Graph and SharePoint APIs
- Insufficient logging retention and analysis, making it difficult to investigate whether a compromised app accessed sensitive information
- Unclear runbooks for handling incidents where an application is suspected of being compromised, including how quickly the organization can revoke all access
These gaps create serious risks. If an attacker compromises an application’s credentials, the organization may not discover this for weeks or months. In that time, the attacker could collect vast amounts of data or modify sensitive information.*
Supply Chain and Third-Party Risk
Many applications are not built internally. They come from ISVs, partners, and cloud service providers. Managing third-party applications introduces additional complexity. Organizations must assess whether vendors follow secure development practices, whether they store customer data securely, and how they handle secrets rotation.
When a third-party application is compromised, the impact spreads across many customers. Organizations must be prepared to quickly assess whether they are affected, revoke the application’s access, and investigate what data was exposed.
3. How Entra ID Supports App Governance
Native Security and Compliance Capabilities
Admin consent requirement: By default, Entra ID allows users to consent to applications. This creates risk because users may grant excessive permissions or approve malicious applications. Switching to admin consent requirement ensures that M365 security teams review all permissions before applications are allowed to access data.[2]
Conditional access policies for apps: Conditional access rules can require modern authentication, enforce device compliance, or restrict app access from specific locations. Policies can require additional verification when applications try to access sensitive data or when they operate from unusual contexts.
Periodic access reviews: Entra ID supports automated reviews where application owners confirm that permissions are still needed. These reviews can be scheduled quarterly or more frequently for high-risk applications. Unused permissions are automatically removed.
Privileged identity management (PIM) for app owners: PIM ensures that the ability to manage sensitive applications is time-limited and audited. App owners do not hold permanent rights to approve access. Instead, they request temporary elevation when needed.
Entitlement management and access packages: Organizations can define which applications should be bundled together for different user roles. Access packages automate the process of granting all necessary application permissions when a user joins a team or project.
Using Management Platforms to Build Continuous Oversight
Native Entra ID features provide the foundation, but organizations often need additional tools to achieve continuous, scalable M365 governance. Third-party management platforms focus specifically on application governance and offer capabilities that complement Entra ID.
These platforms typically deliver:
- Centralized application inventory that consolidates data from Entra ID with metadata about owners, business purpose, and risk classification
- Automated policy enforcement that prevents unsafe configurations such as public client applications with sensitive permissions or applications with unused credentials
- Real-time drift detection that identifies when applications deviate from approved security baselines and triggers remediation workflows
- Unified reporting that demonstrates control effectiveness to auditors and regulatory bodies
- Integration with incident response systems so that compromised applications can be rapidly isolated
These tools transform application governance from a manual process to a continuous operation aligned with zero trust principles. Organizations that invest in both Entra ID P2 licensing and complementary M365 governance platforms gain significant advantages in compliance and security posture.[4]
Building Application Security Into Incident Response
Incident response processes must explicitly include procedures for handling compromised applications. Organizations should define:
- Who has authority to revoke an application’s access immediately during a M365 security incident
- How to audit which data the compromised application accessed and when
- How to notify users and data owners if an application’s credentials were exposed
- How to rebuild or replace applications that cannot be immediately restored to a secure state
Applications should be included in the same incident classification and response timelines as user account compromises. A compromised application with broad permissions may be more dangerous than a compromised user account because it can operate continuously without triggering the behavioral anomalies that alert security teams to user account breaches.
4. Key Takeaways for CISOs, IT, and Compliance
For Covered Organizations and Their Boards
- Treat application registrations as critical identity assets. Map all applications in your inventory and classify them by sensitivity and blast radius. Organizations that cannot quickly list their applications should assume they have significant M365 governance gaps.
- Move from project-based security reviews to continuous monitoring of application permissions, secret expiration, and owner assignments. Report these metrics monthly to leadership.
- Ensure your incident response and NIS2 reporting processes explicitly cover applications. Define timeframes for detecting, responding to, and reporting application-based M365 security incidents.
For IT and Security Teams Operating Entra ID
- Enforce admin consent across your environment. This single change eliminates a major vector for application-based attacks and improves visibility into what applications are deployed.
- Implement conditional access rules that require additional verification for applications accessing sensitive data such as email with retention requirements or SharePoint sites containing intellectual property.
- Establish quarterly access reviews for all applications classified as high or medium risk. Require application owners to confirm that permissions are still necessary.
- Integrate application activity monitoring into your security operations center (SOC) processes. Alert on unusual patterns such as mass file downloads, permission changes, or access from unusual geographic locations.
- Plan and test recovery procedures for application outages. Define which applications are critical to business continuity and ensure you can rapidly restore them if credentials are compromised.
For Vendors and Service Providers Around Entra ID
- Expect customers to ask detailed questions about how your applications integrate with Entra ID and what permissions they require. Be prepared to justify each requested permission and explain how you minimize access to sensitive data.
- Provide clear documentation showing how your application handles secrets, rotates credentials, and supports conditional access policies.
- Support customer audit requirements by providing activity logs, access reports, and compliance documentation demonstrating how you secure customer data.
5. The Bottom Line
Entra ID application governance marks a critical evolution in identity security. Applications are no longer treated as optional tools. They are recognized as first-class identity assets that must be secured, monitored, and governed continuously.
Organizations that combine Entra ID’s native capabilities with strong Microsoft 365 governance processes and complementary tools will build resilient, compliant identity environments. Those that treat application governance as a checkbox exercise risk regulatory penalties, data breaches, and operational disruption.
Regulations like NIS2 make clear that strong M365 governance is now mandatory, not optional. For enterprises operating in Europe or managing European customer data, the time to act is now. Immediate steps include conducting a complete application inventory, assigning clear ownership, and implementing approval workflows for new applications.
The investment in application governance returns dividends through reduced breach risk, faster incident response, and successful regulatory audits. Organizations should begin implementation immediately.
References
[1] Microsoft. Security best practices for application properties in Microsoft Entra ID. https://learn.microsoft.com/en-us/entra/identity-platform/security-best-practices-for-app-registration
[2] AppGov Score. Microsoft Entra ID App Governance: How to Clean Up Apps. https://www.appgovscore.com/blog/entra-id-application-cleanup-best-practices
[3] Microsoft. Govern access for applications in your environment. https://learn.microsoft.com/en-us/entra/id-governance/identity-governance-applications-prepare
[4] Dynamic Group. Understanding Microsoft Entra ID P1 and P2 licenses. https://www.dynamicgroup.net/en/news/understanding-microsoft-entra-id-p1-p2-licenses/