The correct option is Roll out sensitivity labels gradually in phased stages across the organization.

A phased rollout lets you pilot labels with a small set of users and business units and collect feedback before broader deployment. It allows you to refine label names and policies and to validate how labels interact with different applications and business processes. Rolling out gradually also reduces operational risk and gives you time to provide training and support to affected teams.

Use Azure Information Protection to classify and protect content is not the best choice because Azure Information Protection has been largely superseded by Microsoft Purview sensitivity labels and modern label management happens in the Purview compliance portal. The older AIP tooling may still exist for some legacy scenarios but it is less likely to be the recommended approach on current exams.

Apply all sensitivity labels across the entire organization at once is incorrect because deploying labels to everyone at once prevents testing and will likely cause widespread disruption and inconsistent labeling. A one step global deployment does not allow you to iterate on taxonomy or policy settings based on real world feedback.

Assign sensitivity labels only to the highest priority business units is incorrect because that approach leaves parts of the organization unprotected and it does not validate how labels perform across diverse workflows. A proper phased rollout includes representative pilots across different teams and systems so you can address issues before expanding.

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