As data centers evolve in size and complexity, multiple areas of potential risk continue to arise that can cause incidents resulting in an insurance claim.
Some of the most common risks include:
- Accidents that damage the facility
- Potential for workplace injuries
- Business risks from downtime events that impact the data center’s or its customers’ business continuity.
Organizations depend on 24 x 7 x 365 IT infrastructure availability to ensure that services to customers/end-users are available whenever needed. Providing this availability comes down to not only the design and construction of facility infrastructure, but also how that facility is managed on a day-to-day basis to safeguard the business-critical infrastructure.
There is an increasing dependency on modern data centers as end users as more companies outsource to the cloud or house their primary or backup networks offsite. This increasing dependency of end users on centralized, outsourced infrastructure presents opportunities
While there are physical ways that data centers can optimize their safety - like solid construction, fire protection systems and sufficient proximity to flood and earthquake-prone areas – this still leaves out some very important considerations.
Third Party (Liability)
- Service interruption – customer losses incurred as the result of unplanned outages
- Data security – unauthorized access or disclosure could break service provider obligations
- Damage to property of others – Infrastructure service providers’ facilities typically house multiple customers’ assets with values in the millions of dollars
- Premises liability – responsibility to ensure properties remain free of unsafe conditions
First Party (direct losses to insured)
- Property damage – loss or damage to insured property
- Business interruption – service interruptions create potential for direct loss of income
- Extra expense – the costs to resume operations after a loss event can include, additional staff, overtime costs and leased equipment
- Equipment breakdown – machinery or equipment may cause serious service interruptions
Employee health and safety – providing a safe workplace is the responsibility of all employers
Regulations – these create compliance risks at all levels of the data supply chain
Management and operations are critical
Utilising 20 years of incident report data, Uptime Institute determined that human error is responsible for around 70 percent of all data center incidents. To put that in perspective, fire as a root cause was just 0.14 percent, which means bad operations practices are 500 times more likely to negatively impact a data center than fire.
Moral of the story? As with any human venture, there will always be risk. Effective operations and insurance provide a means of risk transfer, particularly useful on high severity cases.