A new free online financial modelling tool recently introduced by Ecolab and Trucost is helping businesses by providing information that helps factor water-related risks into business decisions.
By quantifying water-related risks in financial terms, the Water Risk Monetizer bridges the gap between today’s low market price for water and the water risks that affect businesses around the world. The tool can help businesses worldwide think differently about the value of water to their organisation by providing actionable information that supports business growth and helps ensure best use of this limited natural resource.
The Monetizer is an easy-to-use global tool to help businesses around the world assess water-related risks in financial terms based on readily available information about current water use and production projections at individual facility and enterprise levels. The information provided can be used to help businesses around the world better understand water risks and the potential cost implications of water scarcity at a particular facility.
Key features of the Water Risk Monetizer include the ability to review monetized risk information on a facility-by-facility basis and download the data to an Excel file or PDF document. The Monetizer data can be used to factor water risk into business decisions that can reduce the potential impact of water-related risks and help to assess different business models, determine how water costs or scarcity may affect growth plans and help inform business goals.
The tool provides directional guidance about water risks and possible water costs in the form of a water risk premium. The premium quantifies risk in financial terms to make it easier to factor the potential cost or impact of water risks into business decisions in the same way other risks are considered in business planning and capital allocation.
The water risk premium can be used to estimate possible increases in annual water operating costs in facility budgets, to calculate the return on an investment (ROI) of a particular project or program aimed at reducing water use or to make the case to increase water efficiency.
At an enterprise level, the Water Risk Monetizer can be used to evaluate and prioritize locations that are high priority (at highest risk) for investing in water efficiency and stewardship projects.
At a facility level, proposed projects can be evaluated using the water risk premium to determine a risk-based return on investment to help prioritize projects. The water risk premium should be used as one data point in a comprehensive risk assessment process and is intended to be refined based on local conditions and individual business specifics.
The tool is designed for use by a range of business decision makers, including:
- Business site decision makers (corporate level) – individuals and teams setting enterprise business strategy (supply chain, operations, quality, engineering, sustainability)
- Facility and operations managers (site level) – individuals and teams responsible for improving performance at the site level
- Business consultants – third party experts helping to shape corporate strategy and decision making
- Nongovernmental organizations – organizations influencing global water stewardship practices
Unlike other publicly available water risk tools which focus on quantitative and systematic assessments of water risk, the Water Risk Monetizer also leverages existing data and scientific methodology to monetize water risks.
The Trucost model also calculates the full value of water scarcity. Because most markets do not price water based on its full value, the Water Risk Monetizer caps the full value of water at a level that better reflects current global market pricing.
The Monetizer addresses the business risk related to the price paid for water. However, there are other water-related business risks and costs that this first version of the tool currently does not address quantitatively, for example, the water risk in supply chains, loss of revenue from business disruptions, brand reputational loss, etc.
Suggested uses of the Water Risk Monetizer include:
- Incorporate a risk-adjusted cost of water into a facility budget, financial projections, business scenarios, project proposals, etc.
- Make the case for proactive water management strategies (solutions, technologies, programs, etc.)
- Identify operations/locations at greatest risk
- Monetize rate of return for water management improvement projects
- Select where and how to increase production
- Determine where to expand to meet demand in new regions
Visit www.WaterRiskMonetizer.com to access the free online tool which is available for public use at no cost.
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