Is water the new oil?
August 2, 2015
Restrictions of water use in California are resulting in increased appreciation of the reality and growing challenges of water scarcity and its potential adverse socio-economic impact on industry and society. Growing water scarcity is now a global challenge that needs local solutions focusing on water stewardship and water management. It also requires wide stakeholder participation and effective ways to conserve water in industry.
Although all droughts present direct and indirect risks to ecosystems and residential water supplies, the focus of Zurich’s new white paper is on risks to businesses. Many businesses rely on water as a strategic resource, and shortages may lead to significant adverse economic impact for them and for the economy. This impact may range from increased costs to procure water from alternative sources or relocate operations to business interruption or slow-down. It may even threaten business survival. Since water shortage is not a named peril for time element insurance coverage, with the exception of crop insurance, this exposure is largely uninsured. Risk managers and business leaders, who have long relied on a continued supply of water, need to revise their risk management and long-term planning processes to include the reality of water shortage.