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Abstract:
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"Managing risks has long played a role in the development of the water sector. Such risks can be divided into two broad groups: resource groups that include natural or human induced hazards which water managers seek to regulate, and the enterprise risks faced by any water management enterprise in the execution of its functions. Although risk management must be based on good physical science and technology, they alone cannot be the main basis for decision making. A more holistic approach, embracing the Dublin principles, is needed. It is evident
that water related risks are currently handled by sectoral and highly segmented management systems which leads to major inefficiencies and inequities in the allocation of risk, risk mitigation costs, and security benefits. There is a need to recognise that risk is not a physical phenomenon but a cultural one and that risk mitigation is an economic and social good. Risk management is a distributive issue, involving complex trade-offs and the re-allocation of real welfare between different economic, social and interest groups. Designing institutions capable of taking a more holistic and public preference
based approach to water related risks will never be easy and certainly there is no design recipe that is readily available and applicable for use everywhere. However, one potentially useful approach is to consider what risk management tools, strategies and organisational arrangements would be most appropriate from an economic efficiency perspective. From such a perspective governments would want to employ the least intrusive, costly and extensive means of risk regulation that is possible in each case. Study of the economic characteristics of hazards and related risks can help identify areas where individuals, communities or stakeholder groups are best placed to make risk-safety
trade-off decisions and can inform decisions about the appropriate spatial scale of regulatory organisations. It is not claimed that economic efficiency should be the sole basis for risk management decision making. However, it is argued that the conventional approach to institutional design based on the physical nature of the hazard and the technological means of regulating that hazard is not sustainable, effective or welfare maximising. There is a need for a new approach based on a clear understanding of the economic characteristics of the risks, or public preferences and of societies' willingness and capacity to adopt different risk management strategies."
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