Chapter 13. Responses to risk and uncertainty from a water management perspective
There are no responses to risk and uncertainty that can be universally applied. However, by examining approaches that have been tried by others it is possible to learn from one or more that have succeeded or failed elsewhere under different circumstances.
These responses have usually involved the use of various tools to identify and evaluate alternative water resources plans, policies, infrastructure designs and operating rules applicable to different regions of the developed and developing world.
One of the most direct ways of reducing uncertainty is to generate new knowledge or understanding of conditions governing water availability and quality in the present and in the future. Data collection, analytical capacity and predictive ability are all required to reduce uncertainty and therefore to facilitate decision-making about allocations, uses, mobilization and treatment. While the risk to water is not reduced, it is better understood.
Adaptive management strategies allow changing course based on new insights, help establish and sustain institutional settings and technological systems that are flexible and error-tolerant, and offer a framework for transparent decision-making processes. Funding a diversity of water storage projects, from small-scale rainwater tanks and larger-scale dams to systems that artificially recharge groundwater aquifers, to improving the soil so it can hold more water, is one option to meeting the increased need for storage.
Stored water in times of drought can lead to increased food security. Just as modern consumers diversify their financial holdings to reduce risk, smallholder farmers can use a wide array of ¡®water accounts¡¯ to provide a buffer against climate change impacts.
Limited water availability, growing and evolving demands, and competition among increasingly scarce financial and physical resources create difficult trade-offs for decision-makers who must plan effectively under considerable risk and uncertainty. Countries can take precautionary or status quo approaches towards addressing risk and uncertainty, and these reflect the trade-offs they are willing to make to address risk and uncertainty.
Policy changes only occur when the costs of maintaining the status quo exceed the transaction costs of implementing change. However, not all trade-offs need be negative. There are indeed examples of win-win situations where addressing risks and uncertainties in and outside of the water realm have led to multiple multi-sectoral benefits and to benefits for water in the long term.
Chapter 14. Responses to risks and uncertainties from out of the water box
Many of the problems faced within the water sector are caused by decisions made in other sectors, while many of the solutions to water problems can also be found within these sectors. Most decisions, within or outside the water world, involve some form of risk management.
Anticipation of future benefits or threats is an integral part of sectoral decisions and business decisions alike. These decisions do not always take water into consideration, but often have an impact on water. and an impact on the types of decisions and reactions that water managers have to choose from.
Beyond the provision of water for basic human needs, such as food, drinking and hygiene, many development efforts have an impact on water risks and uncertainties. In most cases, more development means more water use, and more water pollution arises from higher levels of economic growth.
Choosing diverse economic growth pathways could help to address risks and uncertainties related to water availability; however, very few countries have the option to do so because the trade-offs and political costs are so high and immediately felt.
In some cases, green growth entails turning a development challenge, for example, lack of access to chemical fertilizer, into a sustainable development opportunity. Following this model, existing water scarcity could provide a basis for technological innovation to help countries leapfrog towards greener growth, while avoiding the common risks faced by other countries.
Climate change represents one of the greatest uncertainties currently facing human society. At the global level, there may be a high degree of likelihood for certain types of impact such as temperature increases and sea level rise; however, impacts at the local level are far less predictable.
Most business decisions are based on an approach to risks and uncertainties. Decisions on investments and modes of production make presumptions about the future. Many decisions that are uniquely motivated by the financial bottom line can also provide effective means of reducing risks and uncertainties related to water.
Government policies such as taxation rates, or fiscal incentives for attracting investment and business in a given location, while legal frameworks can go a long way to reducing uncertainties by providing boundaries for the investment context. Governments may choose to attract investments that provide the highest value for water units, although examples of such types of decision remain unfortunately rare.
Tools such as the proper pricing and valuation of water resources can drive business decisions, particularly when water is a key input in production. They can also help to highlight trade-offs, costs and benefits/co-benefits that would otherwise not be apparent to business owners.
Win-win benefits between water and health planning can be found as the world¡¯s concern over pandemics and rapidly transmissible animal and human diseases increases. Because water acts as a vector of transmission or as a determining factor in the prevalence of certain transmissible diseases, efforts to prevent (or prepare for) global pandemics could generate benefits for managing risks and uncertainties related to water.
A number of international organizations highlight the water-food-energy nexus as illustrating the most difficult choices, risks and uncertainties facing policy-makers today. Examples abound of the various intended or unintended consequences of favouring one pillar over the other (e.g. food security versus energy security). A key challenge is to incorporate the complex interconnections of risks into response strategies that are integrated and take into account the many relevant stakeholders.
Insurance is of one of the oldest risk mitigation mechanisms. one that is applicable to all sectors, but that also helps to reduce the impacts of water-related risks. Index-based (or parametric) insurance is also emerging as a potentially powerful tool for risk management in all sectors.
Water treaties or agreements regarding water allocation in shared transboundary basins are multiplying, and are often quoted as having side benefits for reducing other risks, through the establishment of trust-building mechanisms and a certain amount of predictability in stakeholder behaviours.
Agreements and treaties signed for purposes other than water may help reduce risks and uncertainties regarding water, particularly where they provide mutual assurance of the other party¡¯s behaviour regarding natural resource use. <³¡>