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Managing risk to meet digital infrastructure demands

Explore the challenges and strategies for managing risks in the expanding digital infrastructure sector.

07/08/2025 · 6 minute read

The insatiable demand for data storage, computing power, and scalable services has dramatically increased the need for speed to market in the expansion of the global digital infrastructure. From data centers and communications infrastructure to enabling technologies and access to power, investment in this sector is accelerating, with projections indicating that the global digital infrastructure market will exceed US$4.5 trillion by 2034.

As stakeholders — including private equity investors, owner-operators, and technology providers — chase demand and opportunities, there are numerous challenges that can derail success. Issues impacting the ability to bring adequate hybrid power solutions online, supply chain constraints on critical components, construction complexities, and increasing pressure on service level and power purchase agreements, have heightened the velocity of risk within the sector. And considering the highly interconnected risks throughout the digital infrastructure ecosystem, unnecessary friction or delays can lead to massive lost opportunities.

5 primary challenges impacting digital infrastructure development

Stakeholders must navigate a labyrinth of challenges throughout the digital infrastructure ecosystem, from securing financing and managing construction timelines to ensuring compliance with evolving regulations and addressing sustainability concerns. Challenges for stakeholders typically fall into five key categories:

  • Speed to market. There is an urgent need to deploy digital infrastructure at a pace that matches demand. As companies strive to capitalize on emerging opportunities, the pressure to expedite construction and deployment often results in accelerated timelines for negotiations, agreements, and project execution. This urgency can introduce vulnerabilities, particularly in service level agreements (SLAs), power purchase agreements (PPAs), and compliance with evolving regulatory standards. Moreover, considering the complexity of digital infrastructure projects, investors, owners, and developers often grapple with intricate contractual relationships, adding layers of complexity that can exacerbate risks if not managed effectively. 
  • Capital and development. The sheer scale and complexity of digital infrastructure projects require substantial capital investment. Financing often involves multiple investors with varying financial returns expectations and distinct priorities and risk tolerances, which may complicate the negotiation process and lead to conflicts when expectations regarding project timelines and financial returns are not clearly communicated. As projects grow more complex, sophisticated financial strategies and partnerships become critical. Misalignment in these areas can result in funding shortfalls and project delays, potentially jeopardizing the entire venture.
  • Regulations and geopolitics. Regulatory frameworks are evolving continually, often in response to environmental concerns and technological advancements. Navigating a patchwork of local, state, and federal regulations can complicate project execution, leading to delays and increased costs. Changes may necessitate a complete reevaluation of a project to ensure compliance, impacting project timelines and potentially resulting in financial penalties. The complexity of regulatory compliance is compounded by the need to engage with multiple stakeholders, including local governments and utility providers. Geopolitical factors further complicate the landscape, influencing site selection, resource availability, and operational agreements. Stakeholders must remain vigilant to both global trends and local requirements as they negotiate land use and power access agreements and apply for tax incentives. 
  • Energy and sustainability. As digital infrastructure, particularly data centers, expands, energy demand is escalating. In the US alone, data centers are projected to consume between 6.7% and 12% of the country’s total electricity by 2028, up from 4.4% in 2023. The criticality of power availability is prompting stakeholders to reevaluate their energy sources. The industry is moving away from traditional grid reliance and exploring alternative energy solutions, including renewable sources, such as solar and wind, as well as on-premises power generation. There is also a push to optimize cooling mechanisms to reduce energy consumption and enhance the overall resilience and sustainability of digital infrastructure projects. 
  • Emerging technologies and supply chain. The rapid pace of technological advancements, including innovative solutions intended to introduce efficiencies and address challenges, introduces a new set of risks for the industry. Increased reliance on advanced technologies necessitates a diverse array of components sourced from global suppliers. Complex and interconnected global supply chains have become increasingly vulnerable, particularly amid geopolitical tensions. Disruptions can lead to delays and increased costs, underscoring the need for strategic planning and risk mitigation.

In this high-stakes industry, the consequences of missteps or delayed action can be severe. Failure to adequately assess and address these risks can result in significant financial repercussions, including missed opportunities and diminished returns on investment. Stakeholders must adopt a proactive approach to identify, quantify, and manage their risks effectively. Given the industry’s fast pace, risk management strategies must be adaptive, allowing for a nimble response to evolving challenges.

Enabling growth and derisking innovation

Considering the vast range of risks associated with these large-scale projects, stakeholders must understand and address the individual challenges and risk interconnections across all elements of the digital infrastructure ecosystem. Getting ahead of risk requires insight and diligence in four key areas:

  • Understand risks and interconnections for all stakeholders. Success requires investment in understanding the full range of risks that could derail success or performance of any and all components of the digital infrastructure ecosystem. From semiconductor and virtualization software to renewables and backup power, understanding event triggers and the interdependence among various risk segments throughout the lifecycle of a project is crucial. 
  • Strengthen and de-risk contractual frameworks. Given the intricate nature of digital infrastructure projects, stakeholders must prioritize robust contractual agreements. This includes negotiating SLAs and PPAs that clearly delineate responsibilities, performance expectations, and risk-sharing mechanisms. Establishing clear terms upfront can help minimize disputes and ensure accountability among all parties involved.
  • Drive cross-stakeholder solutions. Building strong partnerships with key stakeholders, including local governments, regulatory bodies, and energy providers, is essential for navigating the regulatory landscape and securing necessary resources. Open communication and collaborative implementation of risk transfer solutions can lead to innovative programs that address operational challenges and sustainability goals. 
  • Diligently manage operational complexities. Rudimentary, reactive, or unstructured approaches to core development and ongoing operational risks can lead to excessive costs, administrative friction, and even uncovered loss scenarios. Learned approaches from experienced owner/operators, investors, and even emerging energy providers can provide blueprints to ensure all stakeholders are on top of risks that could derail success.

The digital infrastructure industry is at a critical juncture. The intense pressure to expand is met by a rapidly evolving landscape of risks that, unless properly addressed, can derail projects and undermine investments.
 

As the velocity of risk accelerates alongside the unprecedented speed of development, there is intense pressure for decisive action. Navigating evolving and emerging challenges will require collaboration across multiple industries to address critical challenges, including energy and power availability, construction complexities, persistent cyber threats, and many more.
 

United cross-industry collaboration can help navigate this dynamic risk environment and allow digital infrastructure to advance at a speed that addresses today’s and tomorrow’s needs.

As the digital infrastructure industry evolves and experiences rapid growth, so does the associated and complex risk landscape. Staying ahead of these challenges can minimize the risks of project interruptions and help protect investments. For more information, complete the form below.

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