During recent years, a great deal of attention has been focused on the financial risk management of natural disasters. One reason behind is that the economic losses from floods, windstorms, earthquakes and other disasters in both the developing and developed countries are escalating dramatically. It has become apparent that an integrated water resource management approach would be beneficial in order to take both the best interests of society and of the environment into consideration. One improvement consists of models capable of handling multiple criteria (conflicting objectives) as well as multiple stakeholders (conflicting interests). A systems approach is applied for coping with complex environmental and societal risk management decisions with respect to flood catastrophe policy formation, wherein the emphasis is on computer-based modeling and simulation techniques combined with methods for evaluating strategies where numerous stakeholders are incorporated in the process. The resulting framework consists of a simulation model, a decision analytical tool, and a set of suggested policy strategies for policy formulation. The framework will aid decision makers with high risk complex environmental decisions subject to significant uncertainties.