Reducing the Vulnerability of Societies to Water Related Risks at the Basin Scale (Proceedings of the third International Symposium on Integrated Water Resources Management, Bochum, Germany, September 2006). IAHS Publ. 317, 2007, 297–302.
Conditional Value-at-Risk analysis of flooding in the Lower Mekong Basin
BRIAN WEBBY1, PETER ADAMSON1, JOHN BOLAND2, PHIL HOWLETT2 & ANDREW METCALFE1
1 The University of Adelaide, Adelaide, South Australia 5005, Australia
2 Centre for Industrial and Applied Mathematics, The University of South Australia, Mawson Lakes, Adelaide, South Australia 5095, Australia
Abstract In large monsoonal rivers like the Mekong the annual flood is at the core of the traditional socio-economic fabric of the riparian peoples. Great empires, like that of the Khmer in Cambodia during the Angkor period (800–1400 AD), had their economic base in agricultural productivity, which was achieved through efficient water management on the natural flood plain. Such riverine regions have historically been transformed throughout SE Asia into the most productive and densely populated landscapes of the subcontinent. Their prosperity is flood dependent, such that in this Asian context, flood risk and the associated loss is not the exclusive concern of extreme values above a critical threshold, but is also related to episodes that fall significantly below expectation. Here, we apply the concept of Conditional Value-at-Risk (CVaR) to the assessment of financial loss in the agricultural sector in the Mekong Delta when the annual flood hydrograph departs significantly from its average. CVaR is used to identify the budget required for insurance policies covering potential crop losses—a basis for rural income stabilisation in the Delta.
Key words Conditional Value-at-Risk; flood benefits; flood costs; Lower Mekong Basin