16 August 2026
Executive Summary
Severe drought in northern Italy is exposing another supply-chain dependency that businesses frequently overlook:
The water required to produce the product.
Italy is Europe’s largest rice producer, with approximately 235,000 hectares planted in 2025, much of it concentrated around the Po Valley.
But exceptionally low water availability is forcing some farmers to abandon sections of their fields in an attempt to preserve the remainder of their crop.
The Po River Basin Authority has classified drought severity at a high level, while Lake Maggiore has reached extreme drought conditions and the Po near Cremona recently fell to a record low for the time of year.
This creates a broader corporate risk lesson.
A supplier can have land, machinery, employees and inventory contracts — and still be unable to produce because the water is no longer available.
UK Impact
The issue extends far beyond companies purchasing Italian rice.
Water is an essential industrial input for sectors including:
- Food and beverage.
- Agriculture.
- Pharmaceuticals.
- Chemicals.
- Semiconductors.
- Textiles.
- Paper manufacturing.
- Mining.
- Power generation.
- Data infrastructure.
UK companies conducting supplier due diligence will routinely assess financial stability, sanctions exposure, logistics and quality control.
Water availability is much less frequently examined.
Yet prolonged water scarcity can reduce production, increase costs or place industrial users in competition with agriculture, households and electricity generation.
Global Impact
The current Italian drought illustrates how quickly water stress can become an economic problem.
Reuters reports that farmers have introduced rotating irrigation schedules to ration available supplies, while some growers are sacrificing parts of their fields to protect the remainder.
Losses in the important rice-producing province of Pavia could exceed €100 million, according to local agricultural estimates.
The problem is also part of a wider European drought.
Reuters reports that current conditions are disrupting agriculture, river transport and power production across parts of the continent.
For businesses, this means water risk should no longer be viewed purely as an environmental issue.
It is increasingly an operational continuity risk.
Our View
Businesses should begin incorporating water dependency into supplier risk assessments.
Companies should ask:
- How much water does the supplier require?
- Where does that water come from?
- Is the source vulnerable to drought?
- Does production depend upon river abstraction?
- Are groundwater restrictions possible?
- Who receives priority during severe shortages?
- Can production continue with reduced water availability?
- Are alternative manufacturing locations exposed to the same watershed?
- Are alternative suppliers genuinely geographically diversified?
- Could water restrictions trigger force majeure or contractual disputes?
A factory does not need to burn down to stop producing.
Sometimes the building, machinery and workforce can all remain completely intact.
The missing component can simply be water.
Risk Indicator: ELEVATED
Disclaimer
The information contained within these Market Alerts is provided for general market awareness and informational purposes only. It does not constitute financial, legal, investment, regulatory or insurance advice. Whilst every effort has been made to ensure accuracy at the time of publication using multiple reputable and independently verified sources, geopolitical events, legislation, regulation and market conditions may change rapidly. Readers should obtain appropriate professional advice before acting upon any information contained herein.
Invictus Risk Solutions LLP – Helping organisations stay ahead of emerging risks through informed insight and independent analysis.