Sometimes the categories are no longer valid and appear as white squares.
Also, each category cannot be assigned unless it is re-created.
If there are a lot of categories, then this process can take sometime.
Microsoft provided a solution to resolve this tedious behavior, but it is one of those hidden features.
1. Ensure that Outlook is open and the Mail tab is selected.
2. Right-click on the account that contains the categories and click on the Data Properties… item.
3. Click on the Upgrade to Color Categories… button to continue the process.
4. A dialog prompt appears that informs that upgrading Follow Up Flags and Calendar Labels takes a long time. Click Yes to proceed.
All the category colors should now be restored and can be assigned as normal again.