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Data center operational risks

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09/22/2026 · 5 minute read

Redundancy can reduce the likelihood of disruption. But it does not necessarily reduce the financial consequences in the event of downtime, delays, or service level agreement failures.

When referencing resilience in data center operations, the focus tends to be disproportionately on the strength of the infrastructure: a strong power architecture that can allow for uninterruptible power supply (UPS), cooling resilience, disaster recovery planning, and discipline to keep operations running.

But while those resiliency measures matter, they do not eliminate the potential for loss.

Even in highly engineered environments, an operational incident can still create material financial exposure. A power outage, technology degradation, or a delay that affects service delivery can result in service level agreement (SLA) penalties, service credits, lost revenue, and reputational harm, among others. 

The reasons behind this gap are often due to one of these realities:

  • Heavy resilience investment, limited financial stress testing. You have invested heavily in resilience but have not quantified the real cost of a disruption.
  • Growing SLA exposure across a portfolio. Portfolio expansion means uptime commitments have grown, making the total potential downside larger than it appears through a site-specific view.

As portfolios grow, the issues can become harder to isolate. What may start as a site-level event can affect revenue streams, contracts, counterparties, and capital decisions elsewhere.

For data center owners and operators, operational risk can translate into financial consequences as well as reputational repercussions.

Our team of data center specialists can help you identify operational exposures, understand the financial consequences of disruption, and assess where risks may be accumulating across your portfolio. Fill out the form below to learn more.

Resilience investments may reduce loss probability, but do not eliminate potential losses

Most operators already understand the value of resilient design. N+1 power, failover systems, UPS, backup generation, and disaster recovery planning are core parts of a strong data center business continuity strategy.

But when something goes wrong, there could be substantial consequences, including:

  • SLA penalties
  • Service credits
  • Lost revenue
  • Rent abatements
  • Reputational damage

The cost of downtime is rarely limited to the outage itself. A single event can quickly move from a technical issue to a financial one, especially where uptime commitments and downstream obligations are bound by tight contracts.

SLA exposures can scale as the portfolio grows

In many data center environments, contractual obligations now come with stricter uptime expectations and sharper financial consequences — including service credits, rent abatements, and termination payouts — when service falls short.

At any single site, that exposure may appear contained and manageable. When considered across multiple assets, tenants, and agreements, it can accumulate into a more significant financial risk.

Given how interconnected these risks may be across the portfolio, the question is no longer what happens if one site misses its uptime target, but how those exposures can add up across consumers, service level and power arrangements, and revenue models.

To manage that risk, owners and operators like you may want to consider actions that can provide clearer visibility across your assets to better understand how a disruption could affect the broader portfolio. This information can provide better clarity into the potential impact of disruptions on contractual terms and the possible financial repercussions of contract breaches. 

Interdependencies exacerbate cross-portfolio risks

Operational risk changes as portfolios expand. And without sufficient cross-portfolio visibility, it may become harder to see where exposure is building and how a disruption at one site could affect another.

A single-site view can help identify local vulnerabilities. But it rarely shows how disruption can ripple across the wider portfolio.

A power or cooling issue at one site, for example, may trigger SLA penalties that, in turn, affect revenue earmarked for investments in upgrades somewhere else. A delay in one part of the portfolio can create contractual pressure in another.

The picture can get more complicated when assets across the portfolio are at different stages of their lifecycle. Data centers may call for periodical refreshes and upgrades to keep pace with client demand, which means that owners and operators are continually managing multiple priorities related to the assets, revenue, and contracts, an integrated lifecycle that Marsh defines as ARC. ARC can provide a practical way to understand how risk moves across operating, financial, and contractual relationships, especially when a single event affects more than one part of the business.

Marsh’s ARC framework

Smooth data center operations often rely on three interdependent pillars.

  • Asset. Data center hardware can age quickly, especially under high-density and AI workloads, and may call for major refreshes periodically. Managing the asset lifecycle can mean planning upgrades early to maintain performance and avoid downtime.
  • Revenue. Revenue has to keep pace with the cost of operating, upgrading, and expanding the facility. That means aligning tenant income and pricing with changing capital needs and operational demands.
  • Contracts. Data center leases often last far longer than the technology inside the building. That makes long-term contract planning essential so fixed commitments do not outlast the business model needed to support them.

To read more about Marsh’s ARC lifecycle, download our report, Unlocking the Digital Infrastructure Opportunity.

Why power is a core operational risk

Power has become one of the defining constraints in digital infrastructure. Procuring reliable power is table stakes for a data center. Continued delivery of sufficient megawatts that enable a data center to operate to the levels promised in tenant agreements is even more important.

The criticality of power for data center operations means that any delivery failures can turn power into an operational risk in its own right.

For an industry that depends heavily on power, having access to adequate supply that is reliable, scalable, and economically viable is critical to operational continuity. 

Multiple challenges can impact power availability, including:

  • Grid failure or constrained delivery
  • Interconnection failure
  • Generator failure
  • Fuel supply chain disruption
  • Failure of behind-the-meter power generation sources

While on-site and behind-the-meter arrangements can accelerate power deployment, they can also introduce new operational demands, including fuel handling, permitting, maintenance, and generation risk. Further, data centers that rely heavily on behind-the-meter arrangements may lose the grid as a fallback in case their primary power generation sources fail, which can materially change their risk profile.

Power arrangements can also create a broader commercial exposure. Power purchase agreements, interconnection obligations, and related guarantees may require credit risk mitigation as part of the overall operating strategy.

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Build a more resilient data center risk strategy

Specialist guidance can help you map your exposures, pressure-test your current program, and identify strategies to strengthen protection across the data center lifecycle. Contact us to learn more more about how to better assess data center exposures, right-size coverage, and strengthen resilience from construction through operations.

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Managing supply chain blind spots and labor shortages

Some of the most important operational exposures — supply chain dependencies and labor availability — may sit outside the four walls of a data center. 

Supply chain risks

Long-lead equipment delays, component shortages, and downstream supplier bottlenecks can disrupt maintenance schedules, expansion plans, and operating resilience. A first-tier vendor review may miss concentration risk deeper within the supply chain.

Multi-tier visibility and supply chain mapping can help operators identify those dependencies earlier in an effort to reduce the chance that a supplier issue turns into an operating issue.

Marsh’s Sentrisk can help you gain deeper visibility into multi-tier supplier dependencies and identify concentration risks that may not be visible through a contract-level review alone. Learn more about Sentrisk. 

Skilled labor availability

Mission-critical environments rely on electricians, mechanical specialists, controls professionals, commissioning expertise, facilities teams, and other technical talent that is already in short supply in many markets. In high-growth areas, labor competition can become a significant constraint.

Staffing shortages can impact operations when a site cannot perform as intended over time due to not having the right skills to maintain systems, manage upgrades, and respond effectively under pressure.

Helping you close gaps to improve operational resiliency

The team of experienced data center specialists within Marsh’s Global Digital Infrastructure Practice can help you identify operational exposures in individual sites or across a portfolio. We help you stress-test the financial downside of realistic disruption scenarios with the goal of better understanding how exposure can build across your portfolio. Our experienced specialists can help you see beyond single issues, to enable you to better understand how risks can cascade across your assets and turn into operational constraints. And we help you build risk management and insurance programs intended to mitigate and transfer exposures.

See the full picture

See how Marsh helps close risk gaps across the data center lifecycle.

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FAQs

A highly redundant site can still be exposed to the financial consequences of disruption, including SLA penalties, service credits, lost revenue, rent abatements, and reputational damage.

Downtime can create costs beyond the technical event, including contractual penalties, tenant credits, revenue loss, recovery expenses, and broader commercial consequences.

Stress-testing allows you to focus beyond solely physical damage and model realistic disruption scenarios in an effort to assess their effect on revenue, service obligations, contracts, counterparties, and continuity assumptions.

A single-site view may miss interdependencies across suppliers, power arrangements, contracts, revenue timing, and SLA obligations that can cause a site-specific issue to become a portfolio-level problem.

Power has become a strategic constraint. Reliability, interconnection timing, backup generation, fuel exposure, and on-site power complexity can all affect operational continuity and financial performance.

Mission-critical facilities depend on specialized talent to maintain high-reliability performance. In many markets, skilled labor availability has become a direct operating risk.

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Unlocking the Digital Infrastructure Opportunity

Digital infrastructure powers today’s economy and tomorrow’s innovations—but with rapid growth comes accelerated risks. Marsh’s digital infrastructure risk report outlines core risk management tools that stakeholders can leverage which may help better manage risk across the digital infrastructure lifecycle.

Our report includes:

  • Comprehensive insights across the digital infrastructure ecosystem, offering an end-to-end perspective on risk
  • Novel risk management solutions that enable you to free up your capital
  • Resilience- building strategies to support long-term success
  • Core tools to help protect your investments and enable growth across every phase of the digital infrastructure lifecycle

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