Physical risks entail having too little water, too much water, or water that is unfit for use.
Scarcity can halt industrial production simply because there is not enough water for production, irrigation, material processing, cooling, washing, or cleaning. Flooding can disrupt the flow of operations because workers have to tend to the effects of the flood rather than work. Contaminated water supply may require additional investment and operational costs for pre-treatment. Availability and affordability of clean water may affect the interest or ability of customers to purchase or use certain water-intensive products and services.
Water is a fundamental business input… too much, too little, too polluted and companies may be unable to maintain consistent production.
Water scarcity can also affect businesses indirectly by affecting energy and food production. For instance, in 2001, energy production in São Paulo, Brazil was highly constrained as a result of both severe drought and government energy tariff policies. In order to prevent blackouts, the government imposed quotas aimed at reducing energy consumption by 10-35 percent. Many industries based in Brazil’s southeast were plagued by reductions in operational capacity, production delays, or increased production costs.