Verne Global

Iceland | Finance |

4 August 2017

Iceland’s Unrivalled Low Risk Profile

Written by Stef Weegels

Based in London, Stef is Verne Global's Director of Sales and heads up the company's work within Financial Services and Capital Markets.

In my fourth blogs on Iceland’s suitability as a strategic data center location, I look at some of the perceptions and myths about the country’s risk profile and identify how and why Iceland, in fact, tops the World Risk Index, with the lowest risk profile.

When deciding on data center location, firms need to consider a range of criteria. Obvious ones include initial and on-going costs, connectivity, space and availability of managed service. Equally important are factors such as regulatory regime, social/political stability, local work environment and climate.

The final decision should also include the risk profile of the data center location itself. That risk profile is one of the key reasons that Verne Global is located in Iceland. Despite certain market perceptions, in reality Iceland boasts one of the lowest risk ratings of any global location. For example, Citihub Consulting’s recent strategic data center location report rated Iceland’s risk profile as excellent – both in terms of natural hazards as well as social/political and terrorism risk.

NATURAL RISK – Iceland is Global Number One (Bottom of the Risk List!)

Many uninformed buyers may cite volcanic and tectonic activity as an unacceptable risk, yet according to the World Risk Index – compiled by the University of Stuttgart - Iceland’s exposure to natural disasters is in fact very low. 


Regarding earthquakes, crucially the plates on which Iceland sits are part of a divergent tectonic boundary, meaning the plates are moving away from each other, rather than pushing together. This means earthquakes are of such low magnitude, they are hardly noticeable due to the lack of tectonic friction. In comparison, many other countries (including the UK and US) suffer from higher natural disaster risk, according to the study .

As for volcanic activity, when Iceland’s volcanoes erupt, ash clouds are taken towards the UK (and away from the Reykjavik and the Reykjanes Peninsula where the majority of data centers are located). In fact, during the last major eruption in 2010 (Eyjafjallajökull), operations at Verne Global’s data center were entirely unaffected. The study also finds Iceland to be one of the most well equipped countries to respond to natural disasters, both in terms of infrastructure resilience and high levels of population preparedness. PWC agrees, ranking Iceland as one of the four lowest risk locations for data centers globally.

Additionally, Verne Global's Icelandic campus is located on a secure, former NATO base, where the military alliance housed mission critical operational HQ operations, including an airport and munitions facility, until 2004.

SOCIAL RISK - Compare and Contrast

In addition, firms should take into account the real-word threats which have been faced by other leading financial hubs in recent years, such as:

  • London - terrorism/flooding/lack of capacity
  • New York – severe weather/flooding/future energy-risk
  • Frankfurt – capacity/high cost of power

The latest 2016/17 edition of the Cushman & Wakefield Data Centre Risk Index highlights the realities of the risks facing various data center locations in the current climate. Based on 37 countries featured in the report, Iceland tops the global table in 1st place – compared to the UK’s ranking of 9th and the US in 10th. Boston Consultancy Group’s 2015-2016 Data Centre Qualification Index presented similar findings, rating Iceland as the best in Europe and second best in the world (after the US).

Risk and analytics firm AON estimated that around 20% of all global terror attacks during 2015 were targeted at critical infrastructure. Iceland, is once again ranked as one of the lowest risk countries in the world for terrorist attacks .

PHYSICAL FACTORS

Other key risk factors, covered by the Citihub Consulting report, which are worthy of note include: Iceland’s physical separation from major European data center markets helps reduce the concentration risk caused by reliance on these hubs which may be impacted by one or more metro-wide incidents. In addition, the availability and security of energy is a growing issue for many countries, including the UK, Germany and the US . In contrast, Iceland currently utilises only 10% of its available capacity and national energy provider, Landsvirkjun is able to provide fixed-price contracts for 15+ years.

BE PREPARED

While I would always urge firms to be aware that every location comes with some level of inherent risk, it is ultimately more about how well you recognise, minimise and manage these risks - and have detailed plans in place to ensure they are well mitigated - that truly matters. At Verne Global, we ensure that we have the most robust procedures and plans in place in the unlikely event of a natural disaster occurring. For example, we benefit from the extra security of having dual utility feeds. our unique outside air-cooling system is backed-up by laser sensors. These check for particles in the air, which can be quickly shut down and the air recycled within the facility to keep any harmful particles out.

You can read more about Iceland's low risk profile in Landsvirkjun's whitepaper on the subject. Regulatory compliance and business risks are, of course, additional key considerations – look out for coverage of these important areas in my next blog.

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