In the process of managing water, decision makers have to confront and plan for a variety of risks. Risk assessment provides a tool to identify specific hazards, analyse the risk associated with them and determine appropriate ways to eliminate or control those hazards. Risk assessments can be conducted on three different levels: in relation to natural and human induced hazards; in relation to the risks faced by water utilities and regulatory agencies in their work; and finally in relation to the potentially harmful effects of water management decisions. Some risks are the result of human actions whilst others arise from natural causes. Even in the case of those arising from natural causes the consequences can be impacted by human actions and interventions.
Risk assessments for decisions on appropriate responses and mitigation strategies for water related, natural and human induced hazards generally deal with hazards like water scarcity, water quality, non-average climatic events, public health, or ecosystems change. When evaluating the risks faced by water service providers and regulatory agencies in undertaking their functions, the assessments usually look at risks related to design and construction, operating failures, market, financial, political, and legal risks, and compliance risks. Regarding the nature and distribution of potential harms from water management actions (such as dam building), policies and practices, risk assessments take into account the physical effects on interdependent water resources, related ecosystems (see C2.04) and other waste-receiving media, but also any detrimental socio-economic impacts (see C2.03).
Conventional risk assessments define risk as the probability of occurrence of an event multiplied by the consequences associated with that event: Risk = Probability x Effect. Effect, in this case, means the monetary costs that the consequences of said event would have, if it actually occurred. There are several ways to calculate the monetary effects of an event and the choice of valuation technique has important consequences for the results of the risk assessment. This calculation can then be incorporated into a broader Economic Assessment (C2.06) to aid decision-making.
However, it is increasingly recognised that risk is a cultural concept. Accordingly, risk assessment has to include evaluations of public perceptions of the risk, and of public priorities for harm reduction. There are now models in which the assessment starts with human needs and preferences, and then consider alternative courses of action available to address these needs within the financial and human capital constraints that always exist.
Risk management ideally needs to address five key questions:
What principles should govern risk mitigation decisions? A precautionary approach, uniform safety standards or subsidiarity principles? Should decisions on risk bearing and mitigation be made by private individuals or communities or professional experts? Who should pay for risk mitigation?
What is the appropriate scale and strictness of regulation? These should depend on the nature of the hazard and the socio-economic characteristics of the related risks.
What is the appropriate mitigation strategy? The option range includes complete hazard avoidance, structural measures, soft hazard reduction measures (e.g. catchment management), vulnerability reductions, risk pooling, loss bearing or sharing, and post-event harm alleviation.
What are the appropriate policy tools? These include direct government provision of safety, regulations, economic incentives, land use planning, information provision, as well as community participation and action (See Tools B2.02; B3.03).
What organisations need to be in place? Stakeholder fora, coordination mechanisms, hazard regulators, and safety providers.
Risk management is further elaborated in Disaster Risk Management Plans (C4.06).
- Sectoral and segmented risk assessments can create major inefficiencies and inequities in the allocation of risk, mitigation costs, and benefits of increased security.
- Risk needs to be seen as a social as well as physical issue. Stakeholder preferences must play a role in establishing risk mitigation priorities and practices (although these are not necessarily rational or well informed).
- Risk mitigation has to be viewed as an economic good; safety is not a free good as it inflates demand and creates a dependency culture.
- Decisions about which hazards to address (and how and where) have distribution equity implications and thus need to be treated with political sensitivity.
- Designing institutions which can take a holistic and demand driven approach to risk is a complex and difficult task.
- Risk reduction is not the same as hazard reduction; risk mitigation has to consider the reduction of vulnerability and methods to make loss/harm bearing easier (e.g. by providing insurance to mitigate financial impacts).