The implementation of Digital Twins (DTs) represents a significant advancement for the Oil and Gas (O&G) industry. A DT virtually replicates a physical asset, enabling the monitoring, diagnosis, prediction, and optimization of its outcomes. Since failures are undesirable outcomes, investigations into potential failure modes are often integrated into the development. Traditional methods, such as Failure Modes and Effects Analysis (FMEA) and Failure Mode, Effects, and Criticality Analysis (FMECA), are widely used to identify, assess, and mitigate risks. However, there is still a lack of specific guidelines for studying potential failures in complex systems. This article introduces a framework for Failure Modes, Mechanisms, and Effects Analysis (FMMEA) as a tool for identifying and assessing failures in early DT development. Exploring failure mechanisms is highlighted as essential for effective prediction and management We also propose adjustments to FMMEA for complex, predictable systems, such as using a DPR (Detectable Priority Risk) instead of RPN (Risk Priority Number) for prioritizing risks. A comprehensive case illustrates the framework’s application in developing a DT for an intelligent completion system in a major O&G company. The approach enables mechanism-oriented failure analysis and more detailed prognostic health management, providing greater transparency in the failure identification process.