support.microsoft[.]com/en-us/topic/kb5028997-instructions-to-manually-resize-your-partition-to-install-the-winre-update-400faa27-9343-461c-ada9-24c8229763bf
Installing Win10 & 11 adds a Recovery partition, usually immediately after the Windows or system partition, and it holds the recovery wim image file. That image file contains the basic Windows files to hopefully boot & repair, and in the latest Windows versions, reinstall Windows, downloading any needed files. If you create a bootable USB stick in a backup, partitioning, or similar app, that image is also where that app gets the WinPE files it sticks on that USB stick that allow it to both boot & run -- WinPE is a mini, command line only version of Windows. The alternatives are to download a set of WinPE files from the developer, if the dev makes that available, or install the Windows ADK at about 3GB.
That Recovery partition used to take up about 500MB -- when I upgraded Win10 to 11 in March of this year the new Recovery partitions were a little short of 1GB. It turns out the reason for that increased size is a new method that's now used to update the recovery image when you install a cumulative update [Patch Tuesday]. The potential problem is that if you're running a copy of Win11 that set up a 500MB [or smaller] Recovery partition when it was installed, that partition may now be too small. According to Microsoft when you install a cumulative update that may trigger the error message: "Windows Recovery Environment servicing failed."
The easiest fix, aside from just ignoring the error, is to just delete that recovery partition, extending the Windows partition [or whatever partition is immediately before the recovery partition] to take up the freed up space where the Recovery partition used to be. You won't be able to use Windows Recovery from the boot menu, and you might not be able to create a bootable USB stick in whatever app. OTOH Windows Recovery itself is far from 100% reliable -- I've personally had very poor luck with it -- and takes much longer than restoring a backup image, which is very near 100% reliable.
That said, if you want to actually fix the problem by enlarging the Recovery partition, here's how [the instructions on the above link to microsoft[.]com will Not lead to success]. Note: this stuff may help in other situations too. The BCD [boot configuration] stores an ID for the Recovery partition. When a Windows version upgrade requires a (re)install, it can sometimes add a new recovery partition rather than using the existing, old one. If you get rid of the old recovery partition, extending the Windows partition to take up the freed space, if you shift the new recovery partition because it's before the old one you want to delete, giving that space to Windows, or if you restore a BCD [boot configuration] from backup, that can change that ID, making the recovery partition basically useless.
OK, the 1st step if you're resizing the recovery partition is to make a copy of it -- you can use image backup software, clone or copy the partition to a VHD using partitioning software etc. -- as a safety in case something goes wrong. Otherwise you'll have to mount the install.wim file from a mounted Windows setup ISO, find and copy the winre.wim file, unmount the wim file, unmount the ISO etc. -- IOW extra work. Next you want to make the partition immediately before the recovery partition smaller. Microsoft suggests 250MB -- I suggest the recovery partition should be around 1GB, so the amount of disk space you want to free up [the amount you want to make the partition smaller by] should be the difference between the recovery partition's current size and about 1GB.
Now there are a few ways to accomplish the next step... You can sort of slide the recovery partition over to the left, taking up the disk space you just freed up using AOMEI Partition Assistant or similar. You can delete the Recovery partition, then create a new one including the freed up disk space, copying over the files you previously saved from the Recovery partition, or if you cloned the Recovery partition to a VHD using AOMEI Partition Assistant, you can clone it back. Or you can delete the Recovery partition and restore an image backup you previously made of the Recovery partition. Note, you may have to enlarge the restored or cloned Recovery partition depending on the app you're using.
With the files in place on the now bigger Recovery partition, you need to make it work with Windows. To accomplish this the Recovery partition needs to have a drive letter if it doesn't already -- something you can easily do in Partition Assistant, where you can also make sure the partition label is "Windows RE tools". Then open a Command Prompt running as Admin., and type Reagentc /setreimage /path S:\Recovery\WindowsRE` where "S" is the drive letter assigned to the Recovery partition. Now you want to remove the drive letter, set the partition ID to de94bba4-06d1-4d40-a16a-bfd50179d6ac , & the gpt attributes to 0x8000000000000001. If you can't do the last 2 in whatever partitioning software you're using, you can do it in Windows Diskpart...
Open a Command Prompt running as Admin. and type Diskpart & press Enter. Type list disk + Enter, which will show you each disk with a number. You can tell which one you want by looking at the disks in an app like Partition Assistant or Windows Disk Management. Type select disk X + Enter where X is the number of the disk with your recovery partition. Type list part + Enter to see the numbered partitions on that disk, and then type sel part X + Enter where X is the number for your Recovery partition. Now type set id=de94bba4-06d1-4d40-a16a-bfd50179d6ac + Enter, & then type gpt attributes=0x8000000000000001 + Enter. Type exit + Enter to exit diskpart.
With all that out of the way, at the Command Prompt running as Admin., type reagentc /enable + Enter to turn it on, and then type reagentc /info + Enter to make sure it all worked.
