C9.1 Risk assessment and management
Risk assessments are needed to:
- Inform decisions on appropriate response levels and mitigation strategies to deal with water related natural and human induced hazards (resource scarcity, water quality, non-average climatic events, public health, ecosystems change).
- Evaluate the risks faced by water service providers and regulatory agencies in undertaking their functions (design and construction, operating failures, market, financial political and legal risks, compliance risks).
- Analyse the nature and distribution of potential harms from water management actions (eg dam building), policies and practices. Potential harms include not only the physical effects on interdependent water resources, related ecosystems and other waste receiving media, but also any detrimental socio-economic impacts. This more holistic risk assessment is critical for IWRM.
Conventional risk assessments link qualitatively the probability and magnitude of a hazard event with the costs of consequences (expressed in monetary terms) if the event actually occurs. These can then be incorporated into an economic assessment (C2.8) to aid decision-making.
However, it is increasingly recognised that risk is a cultural concept and that risk assessment has to include evaluations of public perceptions of dread 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? (eg 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 (eg 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 incentive, land use planning, information provision, community participation and action (see C4, B1.3, C6, C7).
- What organisations need to be in place? eg stakeholder fora, coordination mechanisms as well as hazard regulators and safety providers.
- 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 (eg insurance).