The adaptive demand management/financial risk model is developed to evaluate the supply and financial risk experienced by individual water rights holders due to water rights shortfalls in the Upper Colorado River Basin. In addition, the model is capable of evaluating the impact of adaptive mitigation measures, such as informal water leases and index-based ‘rights shortfall insurance’, on water users’ supply reliability and financial stability objectives. Inputs to the model are derived from outputs from the StateMod model, including water demands, deliveries, and rights “calls” (i.e. limits on withdrawals). The demand management/financial risk model also includes land use inputs and spatial information about water rights structures included in StateMod. The workflow follows a recursive protocol with StateMod, where the demand management/financial risk model uses water rights shortfall output from StateMod to resolve agent-based decisions to purchase insurance or engage in the informal water leasing market. These decisions are used to generate new water user demand inputs to StateMod, which can be iterated back and forth between the models to simulate adaptation to changing environmental conditions through the use of informal water leases and financial hedging tools. Major outputs include financial risk and water supply reliability metrics for individual users, subject to a wide envelope of hydrologic/demand conditions.