Had some fun troubleshooting this one, it makes sense once you know about it but takes a moment to troubleshoot. The long and short of it Azure AD does not show you if a guest user has a risky user flag but if you have a risk policy assigned to all users or guest, it will try to enforce policies such as MFA to those users. Due to the users having their tenancy they wouldn’t be able to fulfil this requirement causing a failed log in.
Guest user to your tenancy is unable to sign in, they know of nothing wrong and all sign-ins to their home tenant are fine. They could get a message like the below when accessing your resource.
And in Azure AD the sign-in might look like this, in our instance, we have MFA enforced for risky sign-ins.
If a guest user has a risky flag on their Home tenancy, this flag gets invisibility passed to your tenancy. If you have a risky user policy higher than the default, they might never know they had a risk when the user sign into yours, they get stopped. In this case, the issue is hidden by Azure AD logs requesting to enrol in MFA but as its not their home one, this is not possible.
Get the guest to confirm if there is any risky sign in with their account in their tenancy. If so contact their support structure to clear this appropriability. These risks can be found in Azure AD, Security, Risky Users. As being an ICT support professional not in the guest’s home tenant, I would not advise anyone to clear the risk without confirming and understanding what they are doing. I see this issue with a lot of small companies who may not understand but have access to clear these.
Microsoft KB on Guest protection - https://docs.microsoft.com/en-us/azure/active-directory/identity-protection/concept-identity-protection-b2b My User voice on having access to see the risky flag coming in - https://feedback.azure.com/forums/34192--general-feedback/suggestions/40307323-azure-identity-protection-risky-sign-in-flag-for-g