ST. PAUL, Minn.--(BUSINESS WIRE)-- The Water Risk Monetizer, industry's first publicly available financial modeling tool that enables businesses to factor current and future water risks into decision making, now provides users with insights into how water scarcity impacts revenue. The tool's new assessment helps water-dependent businesses better understand the full value of water to their operations and identify revenue at risk based on current and projected water scarcity.
The Water Risk Monetizer, first introduced in
The tool is designed to help companies address the impact of water scarcity on their ability to operate, generate profit and grow. The premise for the tool in its expanded form is:
"As water scarcity increases around the world, business leaders need actionable information to help them understand and manage their current and future water-related risks," said
Developing effective water management strategies can be hindered by two major factors. First, water is often not priced to reflect its full value. As a result, many businesses are not factoring potential cost implications associated with water scarcity into business decisions. Second, businesses rely on water and often take its availability for granted and assume necessary water supplies will be available in the future. The reality is that the world's water supplies are limited. Demand is increasing and quality is declining due to the need for more food and energy, increased economic development and other factors. The tool provides businesses potential financial implications related to water scarcity risks and the likelihood that these implications will occur.
The tool assesses the potential cost or impact of water risks in ways similar to how other risks are considered in planning and capital allocation by providing:
"The new revenue-at-risk indicator illuminates the threat that businesses face from water scarcity," said
HOW IT WORKS
The Water Risk Monetizer uses scientific models developed by Trucost to quantify the potential impact of water scarcity on a facility in monetary terms.
Risk-Adjusted Water Cost (introduced
To calculate a risk-adjusted water cost, the water risk premium model correlates local water scarcity to considerations that contribute to the full value of incoming water, based on scarcity, for a specific facility, including:
Using algorithms derived from published scientific studies on water scarcity and in-stream water values, such as groundwater recharge, waste assimilation, wildlife habitat and recreational activities, the tool correlates a facility's water use to these local water scarcity considerations to calculate a "water risk premium."
The water risk premium, when added to the local price a business pays for water, quantifies the value a business should place on water based on real and future water scarcity risks (current, three-, five- and ten-year projections).
Potential Revenue at Risk (introduced
To calculate revenue at risk, this new assessment estimates the value of the revenue that could potentially be lost at a facility due to the impact of water scarcity on operations. The tool uses a revenue-at-risk model to estimate the amount of water available to the facility - its "share" of total water available to industry water users in the basin based on the facility's contribution to the local economy.
Because water is a finite resource that is shared by many users in a water basin, the amount of water that should be available to a facility may be less than what a facility needs.
The amount available also could change over time, as water scarcity increases or as a local economy grows (the tool forecasts revenue at risk over three, five and ten years). The revenue-at-risk model compares the estimated amount of water a facility requires to generate revenue (cubic meter per USD of revenue) to the facility's share of water in the basin if water were allocated among water users based on economic activity (contribution to basin-level GDP). If more water is required than the basin share of water allocated (as determined by the model), then a proportion of the facility's revenue is potentially at risk.
For more information and to try the tool, visit www.WaterRiskMonetizer.com.
A trusted partner at more than one million customer locations,
Trucost has been helping companies, investors, governments, academics and thought leaders to understand the economic consequences of natural capital dependency for over 15 years. Our world-leading data and insight enable our clients to identify natural capital dependency across companies, products, supply chains and investments; manage risk from volatile commodity prices and increasing environmental costs; and ultimately build more sustainable business models and brands. Key to our approach is that we not only quantify natural capital dependency, we also put a price on it, helping our clients understand environmental risk in business terms. For more Trucost news and information, visit www.trucost.com.
Alejandro González d’Hyver de las Deses
Communications Manager, Latin America
Phone: +52 (55) 5001 2935 or by email
Communications Manager, Brasil
Phone: +55 11 2134 2649 or by email
Communications Director, Latin America
Phone: +1 954 436 2668 or by email