By Andreas Charalambous, Omiros Pissarides, and Evangelos Tryfonos

Preventive risk management is of paramount importance, as it mitigates potential negative consequences and enhances the long-term stability of an economy. Taking into account the significance of timely identification and assessment of risks for political and strategic decision-making, the Cyprus Economy and Competitiveness Council has conducted the third annual risk assessment survey of the Cypriot economy.

The survey involved 50 executives from the private and public sectors, who were asked to provide assessments of 18 potential risks, based on the probability and severity of their consequences, as well as the timeframe within which they are expected to occur.

The four most important risks identified this year are linked to the need to develop a strategy for the green and digital transitions.

Prolonged drought and possible shortages in water resources have been identified as the greatest risk, with adverse impacts, primarily, on agriculture and tourism.

Cyberattacks on critical infrastructure are a big danger considering that digital security is linked to the stability of the economy.

Deterioration of climatic conditions, although not considered an immediate threat, is recorded as a long-term risk with significant consequences.

And last, failure of digital transformation, which affects the competitiveness, as well as the degree of innovation and technological uptake, of the economy.

Focusing on the primary risk that has been recorded, the government must prioritise sustainable water management, through a multi-dimensional strategy, which should include:

(a) Improving the existing distribution network, through upgrading the water supply infrastructure, aiming to prevent leaks and losses.

This would include repairing dams and reservoirs, as well as ensuring efficient distribution systems, through smart technologies that would enable the Water Department to monitor and intervene promptly to rectify problems.

(b) Investing in desalination facilities. The expansion of Cyprus’ existing desalination plants is considered necessary to meet immediate needs, as is the creation of new units for future needs.

Due to their high and increasing electricity consumption, renewable energy sources should be integrated to the maximum extent possible into existing and new desalination units.

(c) Promoting water conservation, through information campaigns, targeting both citizens and businesses.

Providing incentives for the use of water-saving technologies in agriculture, industry and households is highly recommended, as is directing agriculture towards products that require less irrigation.

(d) Reassessing pricing policies, aiming to limit excessive consumption, while paying particular attention to avoid unintended negative consequences for economically vulnerable groups and businesses.

(e) Regulating water consumption, through the implementation of rules, in particular, but not only, for high-demand sectors, while simultaneously promoting sustainable tourism practices in order to achieve a balance between economic development and the protection of water resources.

(f) Diversifying water sources, including the exploration of alternative sources, such as rainwater harvesting and wastewater recycling, focusing on reducing dependence on traditional sources.

Given the high likelihood that droughts will increase in the future, the government must devise and implement a long-term strategy to mitigate the upcoming water crisis and ensure a sustainable future for the country and its citizens.

Political forces and social agents should actively support this effort, as this is a problem that excludes no one.

Andreas Charalambous, Omiros Pissarides and Evangelos Tryfonos are economists and the opinions they express are personal