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Creating a device compliance policy with the required encryption setting and assigning it to all mobile devices is the correct answer because this action directly addresses the specific compliance requirement for encryption. A device compliance policy is designed to enforce organizational requirements, such as encryption, by evaluating whether devices meet those criteria before permitting access to company resources. By assigning this policy to all mobile devices, you ensure that only those devices that are compliant with the encryption requirement can access sensitive information, thereby maintaining the organization's security posture and compliance with regulatory standards.

While enrolling all mobile devices in Microsoft Intune is an important step for devices to be managed and monitored, without the specific compliance policy, devices would not have to adhere to the encryption requirement. Simply enrolling devices does not ensure they are compliant with any security policies.

Creating an Azure AD Conditional Access policy is also beneficial for controlling access based on device compliance, but it works best in conjunction with a device compliance policy. Without the compliance policy in place to define the encryption requirements, the conditional access policy would not be able to function correctly in enforcing the encryption standard.

Setting up a Mobile Device Management (MDM) policy in Microsoft Endpoint Configuration Manager is relevant for managing and securing mobile devices, but it may not directly enforce the compliance requirement for encryption as