03.04.08: Authorized Software – Allow by Exception

To meet the 03.04.08: authorized software – allow by exception requirement, you must run a default-deny approach for software execution and only permit unapproved software through a documented, time-bounded exception that is formally reviewed, approved, monitored, and revoked when no longer needed. Build the workflow, enforce it technically, and retain evidence for assessments. ¹

Key takeaways:

• Default-deny is the posture; exceptions are controlled, justified, time-limited, and revoked.
• Your control must combine process (approvals, risk acceptance) and technology (application control/allowlisting enforcement).
• Auditors look for proof: exception tickets, approvals, expiry handling, and enforcement logs tied to the authorized software baseline.

03.04.08 sits in the “authorized software” family of controls: you are expected to prevent arbitrary software from running in environments that handle CUI, while still enabling business operations that occasionally require nonstandard tools. The practical challenge is not writing a policy that says “only approved software may run.” The hard part is operationalizing exceptions without creating a shadow IT backdoor.

A workable program has three features. First, it establishes an authorized software baseline (what is allowed to execute by default) and enforces it with technical controls that are hard to bypass. Second, it provides a fast, reviewable exception path for legitimate needs (e.g., a niche engineering tool, a one-time firmware utility, a vendor support executable). Third, it treats exceptions as temporary risk decisions with ownership, expiration, monitoring, and cleanup.

This page gives requirement-level guidance you can implement quickly: who owns what, what to build in the workflow, what evidence to retain, and what examiners tend to challenge for the 03.04.08: authorized software – allow by exception requirement. ¹

Regulatory text

Requirement: “NIST SP 800-171 Rev. 3 requirement 03.04.08 (Authorized Software – Allow by Exception).” ¹

Operator meaning (what you must do):

• Run an “allow” model where software is executed only if it is authorized, and any deviation is permitted only by exception. ¹
• Make the exception path intentional: documented justification, approval authority, defined scope, and conditions (including an end date) so the environment does not drift into “everything is allowed.” ¹

Plain-English interpretation

You need two lanes:

1. Authorized lane (default): A defined set of approved software is permitted to execute on systems in scope.
2. Exception lane (controlled): If someone needs software that is not on the authorized list, they can run it only after a formal exception is granted under strict conditions, with an expiration and a plan to either onboard the software into the authorized baseline or remove it.

Exceptions are not a courtesy. They are risk acceptances. Treat them like any other security exception: owned, reviewed, time-bounded, and auditable.

Who it applies to

Entities: Federal contractors and other organizations operating nonfederal systems that handle CUI and implement NIST SP 800-171 Rev. 3. ¹

Operational scope (typical):

• Endpoints and servers that store, process, or transmit CUI.
• Admin workstations used to manage CUI systems.
• VDI/Citrix, jump boxes, and privileged access workstations touching CUI zones.
• Build systems or packaging systems that produce artifacts deployed into CUI environments (because “build-time” software often becomes “run-time” risk).

Teams involved:

• CCO/GRC lead: owns the requirement interpretation, risk acceptance rules, evidence standards.
• IT/SecOps: owns allowlisting/application control tooling and monitoring.
• System owners: approve business justification, confirm scope, confirm removal when done.
• Procurement/third-party risk (as needed): where exceptions involve third-party-provided executables or agents.

What you actually need to do (step-by-step)

Step 1: Define “authorized software” for your environment

Create an Authorized Software Standard that is specific enough to enforce:

• What counts as “software” (installers, portable executables, scripts, browser extensions, drivers, agents).
• How software becomes authorized (packaging, security review, licensing confirmation, signing checks, source verification).
• How authorization is recorded (CMDB, endpoint management catalog, software allowlist repository).

Practical tip: if you can’t name where the authoritative list lives and who updates it, you don’t have an authorized baseline.

Step 2: Pick an enforcement method and make it default-deny where feasible

You need technical controls that match your risk. Common patterns:

• Application allowlisting / application control on endpoints and servers.
• Script controls (PowerShell, macros) aligned to your execution policy and monitoring.
• Restrict local admin rights so users can’t self-authorize by installing.
• Controlled software distribution (managed app store, endpoint management push).

Control intent: prevent execution first, then provide a safe path to allow by exception. ¹

Step 3: Build an “allow by exception” workflow that can survive an audit

Implement an exception process in your ticketing/GRC system with minimum required fields:

Exception request (required):

• Requestor, system owner, affected assets (hostnames, groups, OU, tags).
• Software identity: name, version, publisher, hash, signing info, download/source location.
• Business justification (why it’s needed; why an authorized alternative won’t work).
• Data exposure: will it touch CUI; where; what permissions.
• Duration/expiry condition (date or event-based trigger).
• Compensating controls (isolated host, no network egress, least privilege, monitoring).

Review and approval (required):

• Security review (malware scanning, reputation checks, sandboxing if applicable).
• Risk acceptance owner (named person/role) and approval record.
• Conditions of approval (scope constraints, monitoring requirements, removal plan).

Implementation (required):

• How the exception is enforced (allow rule in the control tool; group membership; policy assignment).
• Evidence of deployment and effective date.

Closure (required):

• Confirmation of removal, or conversion to authorized software with full onboarding.
• Post-exception review notes (what happened, any incidents, lessons learned).

Step 4: Time-bound every exception and enforce expiry

You need a mechanism that makes exceptions naturally die:

• Exception record has an expiry.
• The enforcement rule is tied to that expiry (automation preferred, but a governed manual process is acceptable if it is reliable and evidenced).
• Renewal requires re-approval, not silent extension.

Auditor focus: “Show me an exception that expired and how you removed access.”

Step 5: Monitor exceptions as higher-risk objects

Treat exception-enabled software as “elevated monitoring”:

• Alert on execution events for the exception software.
• Review logs for anomalous use (unexpected hosts, unexpected users, out-of-window execution).
• Validate scope: exceptions should not spread beyond approved assets.

Step 6: Run recurring governance to prevent exception sprawl

Establish a recurring review meeting or queue triage:

• Open exceptions, upcoming expirations, renewals.
• Exceptions older than expected.
• Candidates to graduate into the authorized baseline (formal onboarding) versus deprecate.

If you use Daydream, this is where it fits cleanly: track exception risk acceptances, approvals, expirations, and evidence in one place, mapped directly to the 03.04.08 requirement so you can answer assessor questions without stitching screenshots together.

Required evidence and artifacts to retain

Keep evidence that proves design and operating effectiveness:

Policy/standard artifacts

• Authorized Software Policy/Standard referencing allow-by-exception behavior. ¹
• Roles and approval authority matrix (who can approve what).
• Exception procedure (workflow steps and required fields).

Operational artifacts (most requested)

• Authorized software inventory/baseline (current and historical snapshots).
• Exception tickets/records with:
  • justification, scope, approval, expiry, compensating controls
  • implementation proof (config change record, allowlist rule ID)
  • closure proof (removal confirmation)
• Logs from application control/endpoint tooling showing:
  • blocks of unauthorized software
  • allowed executions tied to exception rules
• Periodic review outputs (meeting notes, queue exports, exception review sign-offs).

Mapping artifacts (assessment readiness)

• SSP/control narrative for 03.04.08 describing the technology and the exception workflow. ¹
• Evidence index that links each control element to where proof is stored.

Common exam/audit questions and hangups

Assessors and auditors typically drill into these points:

• “Where is your authorized software list, and who approves changes?”
• “Demonstrate that unauthorized software is blocked on a representative CUI endpoint.”
• “Show three exceptions end-to-end: request, review, approval, enforcement, expiry/closure.”
• “How do you prevent exceptions from becoming permanent?”
• “How do you constrain scope (one host vs. whole fleet)?”
• “What monitoring exists specifically for exception software?”

Hangup pattern: teams can produce a policy, but cannot produce a clean exception sample with an expiry and closure.

Frequent implementation mistakes and how to avoid them

Mistake	Why it fails	What to do instead
“Exception” approvals happen in email/Slack	No consistent fields, weak audit trail	Require a ticket/GRC record with mandatory fields and approver identity
No expiry, or expiry not enforced	Exceptions accumulate; posture becomes allow-all	Make expiry required, and tie removal to automation or controlled change tasks
Allowlisting by “folder path” for convenience	Attackers drop payloads into allowed paths	Prefer publisher/signature rules or hashes; scope narrowly
Exceptions granted to entire departments	Scope creep, hard to monitor	Tie exceptions to named assets and specific users/roles
No closure step	You cannot prove exceptions end	Add closure evidence as a required workflow state
Confusing “installed software inventory” with “authorized to execute”	Inventory is passive; execution control is active	Maintain an authorized execution baseline plus enforcement telemetry

Enforcement context and risk implications

No public enforcement cases were provided in the source catalog for this requirement, so you should plan around assessment and contract risk rather than citing enforcement outcomes.

Risk if you get 03.04.08 wrong:

• Malware execution and persistence become easier, especially via “temporary tools” and portable executables.
• Lateral movement risk increases when exception software includes remote admin tools, scripting engines, or unsigned binaries.
• Assessment failure mode: inability to demonstrate default-deny plus a controlled exception lane. For federal contractors, that creates commercial and contractual exposure tied to your ability to represent alignment with NIST SP 800-171 Rev. 3. ¹

Practical 30/60/90-day execution plan

First 30 days (stand up the control)

• Name owners: GRC control owner, IT/SecOps technical owner, exception approvers.
• Publish an authorized software baseline location and change process.
• Implement the exception intake form in your ticketing/GRC tool with required fields, approvals, and expiry.
• Pick initial enforcement scope (start with a pilot group of CUI endpoints or a high-value enclave) and validate that unauthorized execution is blocked.

Days 31–60 (make it enforceable and auditable)

• Expand technical enforcement to additional in-scope endpoints/servers.
• Implement monitoring for exception software execution and blocks.
• Run a tabletop on the workflow: submit an exception, approve it, deploy it, expire it, remove it. Fix friction points.
• Build an evidence pack template for assessors: baseline snapshot, three exception samples, logs, review notes.

Days 61–90 (operationalize and reduce exception volume)

• Establish a recurring exception review cadence and renewal criteria.
• Convert repeat exceptions into formally authorized software or remove them.
• Tighten rules from permissive (path-based) to stronger controls (signature/hash) where possible.
• Integrate third-party risk touchpoints for vendor-provided agents/tools that frequently drive exceptions.

Frequently Asked Questions

Do we need full application allowlisting to meet 03.04.08?

The requirement expects execution to be constrained to authorized software with exceptions controlled through a defined process. Application control/allowlisting is the most direct way to prove that, but the key is that enforcement is real and exceptions are documented, approved, and time-bounded. ¹

What counts as “software” for exceptions: scripts, macros, browser extensions?

Treat anything that can execute code or materially change system behavior as in scope for authorization and exceptions. If your current tooling can’t enforce a category (like extensions), document the decision, add compensating controls, and track it as a gap with an action plan. ¹

How strict should exception scoping be?

Scope exceptions to the minimum set of assets and users needed for the business task. Broad scoping is the fastest way to turn an exception into a permanent policy hole.

Can we approve exceptions indefinitely if the business requires it?

If the need is ongoing, treat it as a candidate for full authorization into the baseline rather than a perpetual exception. If you do renew, require re-approval and re-validation each time so the risk decision stays intentional. ¹

What evidence do assessors ask for most often?

They usually want the authorized software baseline, proof of technical enforcement (block/allow logs), and a few complete exception records showing request, approval, implementation, expiry, and closure. ¹

How does third-party software fit into “allow by exception”?

Third-party tools often arrive as executables, agents, or support utilities that are not on your baseline. Route them through the same exception workflow, and include the third party and source verification details in the request record.

Footnotes

1. NIST SP 800-171 Rev. 3