The principle of least privilege says that every user, process and system should have only the access it needs to do its job, and no more, for only as long as it needs it. It matters because excess access turns small incidents into large ones: if a phished user is a local administrator, the malware runs as administrator; if a web application's database account can drop tables, a SQL injection flaw can destroy data. Least privilege does not stop every attack, but it limits the blast radius of the attacks that succeed.
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