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Stage 2 Processing
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affects the order in which policies are ordered for child processes.
Stage 2 processing is a recommended setting for all deny execute exception policies, or in other words policies . Put simply Stage 2 Processing prevents that policy from getting in the way of policies that should have a specific action applied to child processes.
If you need additional information, please see: page 39 of this documentthat should be applied absolutely last. Stage 2 Processing is particularly important when used for exception blacklist policies (ie. when targetting applications not trusted by white or orange list policies) in order to prevent child processes of white or orange listed applications from being denied execution.