AWS CloudFormationdynamic referencesprovide a secure mechanism for retrieving sensitive values from AWS Secrets Manager at stack creation or update time. According to the AWS Certified Security – Specialty documentation, dynamic references ensure that sensitive data such as database credentials arenever stored in plaintextin CloudFormation templates, parameters, stack metadata, or logs.

When a dynamic reference to Secrets Manager is used, CloudFormation retrieves the secret value at runtime and passes it securely to the resource that requires it. The secret value is not exposed to users who view the template, stack, or change sets.

Option B is insecure because parameters can be exposed through the CloudFormation console and APIs. Option C is incorrect because SecureString parameters are a feature of AWS Systems Manager Parameter Store, not Secrets Manager. Option D is invalid because KMS encrypts data but does not store secrets or manage secret rotation.

AWS best practices clearly state thatCloudFormation dynamic references to Secrets Managerare the recommended solution for securely handling sensitive configuration values.

AWS Certified Security – Specialty Official Study Guide

AWS CloudFormation Security Best Practices

AWS Secrets Manager Documentation