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have tested this today and the answer is Mail Flow/DLP. The case study states that a sensitivity label has already been created, so all we need to do is find a way to apply this and encrypt.
When creating a DLP policy we can specify the locations, select the (already created) "Fabrikam Confidential" label and then add an action to restrict/encrypt.
When attempting to create an auto-labelling policy, we are asked to add a sensitive info type, which would need to be created. Since we have everything all ready to go in a DLP policy (and the label has already been created) then this is the quickest method.
Therefore, the answer is - Mail Flow/DLP.