SQL1 will have TDE enabled automatically: No 📄 SQL1 is an existing resource in RG3, which is governed by a DeployIfNotExists policy (Policy2). When this policy is applied, it will evaluate existing resources and mark SQL1 as non-compliant because TDE is disabled. However, the policy does not automatically fix the resource. A user must explicitly create and run a remediation task to trigger the deployment that enables TDE. Because this additional manual step is required, the process is not fully automatic.

The deployment of SQL2 will fail: Yes 🛑 SQL2 is a new database being deployed to RG1. This resource group has Policy1 assigned, which has a Deny effect for resources without TDE enabled. The Deny effect is evaluated during the deployment request. Since the template for SQL2 specifies that TDE is disabled, the policy will block the creation request, causing the deployment to fail.

SQL3 will be deployed and marked as noncompliant: No ❌ SQL3 is a new database being deployed to RG2. This resource group has two policies: Policy1 (Deny) and Policy2 (DeployIfNotExists). When multiple policies apply to a resource creation request, the most restrictive policy takes precedence. The Deny effect from Policy1 is more restrictive than DeployIfNotExists. Therefore, just like with SQL2, the deployment will be blocked by Policy1 and will fail. The resource will not be created.

Microsoft Azure Documentation | Remediate non-compliant resources with Azure Policy:

Relevance: This document explicitly states that for existing resources, a DeployIfNotExists policy requires a user to create a remediation task to correct the non-compliant resource.

Quote/Paraphrase: "To make existing resources compliant, you need to trigger a remediation task... When the deployIfNotExists policy definition is successfully assigned, the policy assignment begins evaluating resources... Policy does not automatically start the remediation task." This supports the answer that TDE on SQL1 is not enabled automatically.

Microsoft Azure Documentation | Understand Azure Policy effects:

Relevance: This document details the behavior of each policy effect, including Deny, and the order in which they are evaluated.

Section: Deny: "The deny effect is used to prevent a resource request that doesn't match defined standards... The request is failed." This supports the answer that the deployment of SQL2 will fail.

Section: Order of evaluation: "If more than one policy definition's effect evaluates to Deny, the resource request is Denied... a DeployIfNotExists policy is evaluated after the Resource Provider has handled the request and returned a success code." This confirms that Deny takes precedence and will fail the deployment of SQL3 before a DeployIfNotExists policy could act.