Intensification in the pursuit of renewable energy sources, hydropower stands as a critical component in this quest. However, harnessing the power of flowing water is an endeavor replete with complexities and challenges. This comprehensive review offers a deep, discerning exploration into the risks intrinsic to hydropower projects. These risks are classified as multifaceted, spanning from technical nuances—including design imperfections and operational snags—to wider reaching issues encompassing environmental, social, economic, and political dimensions. On the environmental ledger, we highlight threats to biodiversity, potential habitat disruptions, and ramifications for water quality. Socioeconomically, the article attempted to shed light on the profound implications tied to the displacement of communities, effects on cultural values, and perturbations in local job markets. Politically, the intricate landscape of regulatory flux and the potential for stakeholder disputes are also discussed. Central to this review is the emphasis on the integration of risk management practices throughout the planning, construction, and operational phases of hydropower projects—a strategic integration posited as fundamental for ensuring these projects’ long-term sustainability and success. Navigation through these treacherous waters, this review not only identifies but also seeks to address the challenges. It spotlights emerging best practices in engineering, the nurturing of community relationships, and the strategic crafting of policies that are not only robust but also socially equitable. Beyond these insights, the paper identifies fertile grounds for future research and underscores the essential role of innovation and interdisciplinary collaboration as pivotal tools in charting a sustainable course for hydropower’s future role in the energy landscape.