Are you making the same mistake as the majority of people when “assessing water risks”?

I think we all agree that water risks are increasing.

WWF projects that global GDP exposed to high water risks will increase from ~10% today to 46% by 2050.1 Countries are projected to experience a significant reduction of GDP growth, if they leave water risks unaddressed. In Vietnam, for example, the rising level of water-related threats could reduce GDP by 6 percent annually by 2035 against a scenario in which steps are taken to address these risks.2

Globalisation has made all of us more vulnerable to water risks in other countries – even if we ourselves may be fortunate to live in a place that is (still) water secure. Droughts and competing water demand in Taiwan have resulted in a global micro-chip shortage in 2021, 2023 and now Taiwan is struggling again to make enough water available for the thirsty business.3 Supply chains can be impacted due to reduced inland shipping due to low water levels. Current water shortage in the Panama Canal, for example, is impacting 270 billion USD of global trade.4 Agriculture is extremely sensitive to water, and by 2050 around 44% of European food imports are expected to come from areas with high and extremely high drought severity (up from % in 2020).5

Water and Energy are closely linked. A shortage of cooling water can cause power outages, and measures to reduce GHG emissions at times can lead to increased water risks due to the increased water requirements, if not well planned.

While we cannot say with certainty what water risks will look like in the future, we can say with certainty that we all will be impacted by water risks – the question is just to what extent and how we can mitigate them.

Water risks are tricky – they can be managed to a certain point, until they cannot anymore. And this is when disaster strikes. We can over-abstract an aquifer to manage water shortages – like currently in Mexico City, until it runs dry. We can use far away water sources as near ones are too polluted – like in Dhaka, until even those will be too dirty to treat. We can flick broken pipes – like in London, until the whole system will fall into disrepair.

For investments and business operations – and quite frankly also for personal choices as to where to buy property – it’s imperative to understand the water risks of that location. And not just the apparent ones, but the “underlying” ones which are currently being “managed”. Else, you may see your company’s name added to the list of those with stranded assets, or those who had to close operations due to shortage of clean water and public outrage.

I think by now we all agree on the necessity to understand water risks and incorporate these into our decisions.

However, here’s where the true problem starts.

Most assessments I see and people I speak to just cover one aspect of water risks, but they sell it or use it as a complete water risk assessment. This can result in a false risk assessment and with it in costly and inefficient – or at times even unnecessary – investments to mitigate risks.

Their sole focus lies on water stress, i.e. looking at available resources and demand.

It’s a good start… but why is that not enough?

Imagine the water stress assessment tells you that there are “ample water resources to meet demands” – today and even in the future. But does this ensure water security for citizens, operations and/ or investments?

What if ….

…. the water resources in the assessment are terribly polluted. Think of burning lakes like in Bangalore, rivers which are actually flowing sewage canals or groundwater supplies polluted with arsenic. The actual water supply is suddenly much lower or would incur significant costs to treat it before being able to use it.

…. the infrastructure you rely on is not fit for purpose? It is not unusual that non-revenue water amounts to around 40% and your available water supply is suddenly cut nearly into half.

…. the governance is not functioning well, with roles and responsibilities overlapping or not assigned, corruption driving decisions etc. Water won’t be managed sustainably causing future risks and it might be a huge headache to manage your water in general.

…. there is large informal water demand, i.e. from informal settlements, illegal groundwater abstractions from industries and housing complexes etc. Water demand is now much higher and there might actually not be enough water for everyone in that location.

Suddenly the water situation doesn’t seem so secure anymore after all – but you wouldn’t know it, as your assessment only looked at one dimension of “water stress”. You would not take required actions while feeling a false sense of security.

So, what is a better approach to truly understand your water risks?

I have been working on water economics and assessing water risks for the past 14 years and have completed around half of the World Bank multi-year country water risk assessments as well as multiple water risk assessments for Multi-National Companies globally.

Based on this experience – and due to the lack of another holistic and applicable assessment framework, I developed the Water Risk Assessment Blueprint and apply that to all my assessments.

To understand the water risks of a production site, or city, we need to look beyond the fence at the water basin and understand the following:

〉Physical water risks: water stress, water pollution and water-related disasters

〉Infrastructure water risks: all infrastructure from source (e.g. surface or groundwater abstraction), water treatment and distribution, sewerage collection and wastewater treatment to discharge back into the environment. This has to include the infrastructure of the entire basin and key cities, not just the site’s infrastructure.

〉Governance risks: legal and intuitional set up, roles and responsibilities of stakeholders, degree of corruption, capacity of people working in the water sector, data management etc.

I often get asked, if it’s sufficient to just use the open-source tools, such as WWF Water Risk Filter, WRI Aqueduct.

 

These tools are absolutely great to prioritise sites for a more in-depth water risk assessment. If a company or an investment funds has hundreds of sites, it’s mostly not possible – nor required – to undertake an in-depth assessment for all. The tools, in combination with operational data and the business importance of sites, can be used to prioritise the top 10 sites to be further analysed by applying the Water Risk Assessment Blueprint.

However, the tools cannot be used for a site, city, or river basin or country level assessment, due to the following reasons (among others):

〉The usage of global datasets severely limits local accuracy.

〉Tools do not consider key supply factors which significantly affect the accuracy of local water risks, e.g. water storage, water infrastructure, water (basin) transfer schemes, dry season supply and demand differences etc.

〉While the tools ask for specific address, water risks are analysed on (sub-) river basin level (i.e. risks in central Dhaka and rural Bangladesh considered the same if they’re in the same basin).

Due to these factors, I have seen that water risks in a specific site can be quite different and that some risks flagged by the tools may not be relevant for the site – or worse – that important risks were not captured.

To summarise:

〉Water risks are becoming increasingly important and it’s essential to know your operations’ or investments’ water risks.

〉Open-source tools, such as WWF Water Risk Filter and WRI Aqueduct, are great to prioritise sites for an in-depth water risk assessment, but cannot be used to accurately understand water risks at a site/ city/ river basin or country level.

〉For an in-depth water risk assessment, physical, infrastructure and governance risks need to be considered by following the steps of the Water Risk Assessment Blueprint.

 

 

If you’d like to learn more, you have a number of options:

〉Watch the free 1-hour Masterclass on “How to assess and communicate water risks, even if you have no prior experience in hydrology or engineering”: https://bit.ly/Masterclass_optin

〉Join the Water Risk Assessment Certification, and become a certified in assessing and communicating water risks in 12 weeks: https://www.waterriskcertification.com/

〉Subscribe to the weekly Water Risk Assessment Newsletter: https://bit.ly/waterrisknewsletter

 

 

Jennifer Moeller-Gulland is the Founder and Manging Director of Water Security Collective, a Dubai-based company focusing on water risk advisory and training. Over the past 14 years, Jennifer has been focusing on water economics and assessing water risks and identifying solutions for governments, production sites and supply chains of companies in multiple countries in Asia, Africa, Latin America, USA, Europe and Middle East. Clients include the World Bank, 2030 Water Resources Group, UN and various Multi-National Companies. To train the next generation of water risk experts, Jennifer is running two trainings, the Water Risk Crash Course, and the 12 week in-depth and interactive Water Risk Assessment Certification Training.

 

 

1. WWF (2020) Water Risk Filter Brief. WATER RISK SCENARIOS

2. World Bank. 2019. “Vietnam: Toward a Safe, Clean, and Resilient Water System.”

4. https://www.bbc.com/news/business-68467529

5. WWF (2019) Drought Risks.