An information handling system includes modular processing resources, each having a main processor, system memory, and preferably a service processor resource. A management resource coupled to a service processor resource evaluates a system power budget and allocates power to a processing resource by indicating a critical power level. The processing resource determines a warning power level based on the critical power level and monitor its actual power consumption. If actual power consumption exceeds the critical power level, the processing resource is powered down. If actual power consumption exceeds the warning power level, the processing resource throttles its performance to conserve power and requests a power allocation increase. If actual power consumption is below the warning power level, the processing resource may request a reduction in allocated power.