The risks, which vary by industry and geography, include increased cost of production, fines and business constraints due to regulatory requirements, legal costs from possible litigation, investment risk from shareholder demands, changes in the competitive landscape as companies adapt to water constraint, and possible brand and reputation damage.

Use of contaminated water in the production process, or failures in the production process that cause the release of contaminated water may not only result in business interruption losses, but also may lead to losses due to contaminated product recall costs, possible environmental damage, remediation costs, loss of brand, and future sales.

"Increased public awareness of water supply shortages may subject corporations to class action suits,” noted Aisha Tittle, associate consultant, Marsh Risk Consulting.

"Organizations need to develop a strategy to better understand and prepare for water-related challenges,” added Ariela Abecassis, consultant, Marsh Risk Consulting. “Companies that have identified and planned for potential risk scenarios are able to recover faster, reduce costs, and demonstrate effective risk management that can increase shareholder confidence.”

Property and general liability policies typically contain pollution exclusions, so a close review of the definition of “waste” in the policy is crucial.

The increased oversight of water-related risks from regulators, investors (including institutional investors in both the public and private sectors), and other public-interest also has implications for directors and officers (D&O) liability insurance.

"Companies should also investigate environmental insurance options, including environmental impairment liability policies and contractors’ pollution liability,” said Jan Molina, vice president, Marsh Canada Limited.

Many of these challenges and opportunities will demand integrated management, operational and financial expertise, effective policies, and risk management leadership.