In line with the enormous technological development we’ve seen in recent decades, the telecommunications sector has also evolved and shares numerous similarities with data processing centers. And your risk management faces new risks. Javier Unanua, an engineer with MAPFRE Global Risks, shares an analysis from an insurance perspective.
There’s no doubt about it – we live in a digital age and there’s no escaping it: from the minute we switch off the alarm on our cell phones in the morning, to how we get around using private or public transportation, how we drive and make use of communication channels, all the stuff we buy online and how we work, at home or in the office – no aspect of our lives is untouched by the digital revolution.
This new era requires enormous capacity to transmit, store and process data, made possible by the technological advances that create more compact and powerful equipment that can store more information and process and transmit it at greater speeds than ever before.
The digital era has given way to the data economy. The EU estimates that the data economy will be worth 829 billion euros in 2025 across its 27 member countries and will employ nearly 11 million people. The wealth of nations is no longer measured solely by the density of their productive sector and industrial production – in the current post-industrial era, a nation’s wealth is measured by its ability to leverage data processing to the max.
Our clients’ businesses are benefiting from the changes and opportunities brought about by the new era, but at the same time they face challenges in open and competitive markets where information management is the key to success. They are also exposed to new risks, which we need to know about so that we can mitigate them and advise our clients on the best way to manage them.
MAPFRE Global Risks is involved in two businesses that are the main agents of digital change. We work with large telecommunications companies, which over the course of a century have gone from managing landline and telegraphy concessions to owning and operating complex communication networks that connect people, companies and devices. We also work with developers and operators of Data Processing Centers (DPC), a rapidly growing business that’s estimated as being worth 70 billion euros by 2030.
Telecommunications companies are seeing their business transform. Call centers need less space because of more compact equipment that doesn’t use copper-based technology. Central offices are leaving data processing centers associated with signal processing behind, as a support for their parent business and, on the other, as a source of new businesses and services.
We note that there is excess space in older call centers located in city centers, which in turn opens up new business possibilities. This may result in our clients housing third-party facilities, generally technological partners, in their own buildings, which exposes them to risks deriving from third-party activity.
Effective risk management must include correct fireproofing between own and third-party activity, in order to prevent the spread of damages due to a fire in the area occupied by the third party, as well as the protection of common services and easements. Coordinating risk management with new tenants is essential to minimize possible damage caused by them.
Telecommunications companies have by and large also stopped using unnecessary power stations and these are now rented out for other uses, generally to DPC operators. Some plants are no longer in use and telephone networks are concentrating their nodes in fewer buildings, which makes protecting these mission-critical installations all the more important. At the same time, greater connectivity capabilities benefit telecommunications operators by enabling them to swap out a base rendered inoperative due to an accident or problem with another one connected to the network.
Developers and operators of large DPCs serve companies around the world, opening the door to a major global business distinguished by two DPC business modes:
- The hyperscale business: a developer builds and operates a custom DPC for a large client that requires a high capacity for data storage.
- The placement or retail business: an operator provides service to several clients, partitioning their servers by client in their DPCs.
DPC risk management is focused on minimizing possible damage and guaranteeing continuity of activity, mainly due to the power outages, fire, cyberattacks and natural disasters. Loss of data stored or inability to transmit it is a major aspect that requires coverage.
Losing power
Operating a large DPC entails very high electricity and water consumption to dissipate the heat generated in electronic equipment. Large DPC operators adopt high standards in electricity and cooling supply redundancy. The measures adopted include:
- Duplication of external energy supply with two electrical connections of different substations.
- Double electrical transformation capacity.
- Using generators to double emergency power supply capacity.
- Installation of Uninterruptible Power Supply (UPS) systems.
- Ensuring redundancy in other mission-critical equipment, like cooling equipment.
The perception of society and public authorities is turning more critical due to high levels of electricity and water consumption, which could force developers to integrate renewable electricity production or even a connection to nuclear power plants into their DPC facilities from the outset.
This entails adopting a holistic risk management approach with power plants where the focus of protection is machinery breakdown and predictive and preventive maintenance and the DPC itself, with a high standard for fire protection.
Fire risk
The high corporate fire protection standards applied by DPC operators include practically total coverage of very early automatic detection systems and fire extinguishing in all rooms, processing rooms and auxiliary facilities.
Automatic water sprinklers are used to automatically extinguish fires in data processing rooms, while other technologies such as nebulized water or gaseous agents can also protect these facilities. In the case of automatic sprinkler extinguishing systems, the standards also include measures to prevent water damage from accidental discharges, such as double knock activation and the use of pre-action facilities with dry pipes.
A study by the National Fire Protection Association (NFPA) shows that reported fire damage in DPCs located in the U.S.A. is very limited. Generally, fires begin in energy installations and auxiliary services, and high fire protection standards in these spaces greatly limit the extent of damage.
Fire protection standards must address new sources of risk in a field where technology advances rapidly. The introduction of server racks with built-in lithium-ion batteries to enable better management of power supply interruptions is just one of the latest challenges to be tackled. Lithium-ion batteries are a subject of concern for professionals working in fire protection in different areas, as in some circumstances they can provoke thermal runaway fires. There are two approaches to dealing with the risk that these racks represent:
- Separating fireproof elements from other racks using batteries that exceed a given amount of energy.
- Combining measures, including improving extinguishing capacity with automatic sprinkler systems instead of using gaseous extinguishing agents in areas with lithium-ion battery racks.
Cyberattacks and natural disasters
DPCs are a target for cyberattacks, and the potential to cause damage resulting in loss of reputation and third-party liability costs are extremely high, which means availing of the correct protection measures is essential.
An analysis of claims filed by MAPFRE Global Risks telecommunications clients shows that over the last 15 years, natural disasters account for 81% of the cost of all large claims. The greatest source of damage to our clients is not their actual activity, but rather where they are located and how exposed to natural risks they are.
The MAPFRE Global Risks engineering team is witnessing the transformation of our clients in both the traditional telecommunications and DPC fields, and expertly advises them on how to elevate their risk management practices to the best international standards.
Article collaborators:
Javier Unanua is a Risk Engineer in the MAPFRE Global Risks Engineering Area. With 25 years of experience, his career in fire safety and prevention spans R&D+i, consulting and risk engineering in the insurance industry.
