Risk assessments can be used to identify specific hazards, analyse the risk associated with them, and determine appropriate ways to eliminate or control those hazards. If not properly managed, water-related risks can disrupt our societies and have catastrophic impacts in terms socio-economic and ecological wellbeing. The timely assessment of those probable risks and identifying appropriate options to mitigate them will help decision-makers in taking more informed action. This tool provides information on the different risk categories and methods to conduct water-risk assessments.
Risk is generally defined as the possibility of loss or having an undesired outcome resulting from exposure to hazard(s). Water-risks broadly refer to those risks that are associated to various water-related challenges, i.e., water scarcity, water stress, pollution, ecological and climate hazards (flooding and drought). These challenges are multidimensional, that not only put an individual to the risk but also tend to have severe impact on overall social conduct, business as well as economy. The intensity and severity of water risk has exacerbated due to overgrowing population and climate extremities all around the globe affecting every aspect of society but some sectors, especially those with high water usage dependency, e.g., agriculture, industries, mining, water supply and energy, are even more so vulnerable.
In context of corporate water stewardship (Tool C5.05), the terminologies of water-related challenges, i.e., water scarcity, water risk and water stress has been used interchangeably by various corporate water tools and initiatives. WRI Aqueduct and WWF Water Risk Filter are widely accepted and commonly used tools to assess water risk, including in business sector. These tools employ a similar foundation of water risk framework illustrated in Fig. 1.
Figure 1. Relation between water challenges to water risk (Adapted from CEO Water Mandate, 2014)
Both water risk tools classify water risks into following main categories but have different risk sub-categories and indicators.
- Physical (quantity/ quality) risks refer to the lack or overabundance of water and water that is of unfit quality
- Regulatory risks relate to how water resources are publicly managed and how water use rights are distributed
- Reputational risks are linked to how key stakeholders –communities, customers and NGOs– perceive a water actor, typically utility providers and government regulatory agencies, manage water related decisions.