In the context of increasing climate variability and its profound impacts on water resources, robust methodologies are essential to ensure water security and sustainable management. This study uses the Climate Risk Informed Decision Analysis (CRIDA) framework to assess the vulnerability of water resources in rural mountain communities, focusing on the eastern sub-basin of the Chili River in Peru. A participatory approach was used to identify key performance indicators and conduct a hydrological stress test, revealing critical vulnerabilities to climate-related risks. This research examines the hydrological role of Andean Polylepis forests in enhancing groundwater recharge as a strategy for drought adaptation. It also highlights the dual threat of deforestation to water availability and rural livelihoods. By integrating ecological conservation into climate-resilient water management strategies, this study provides novel insights for protecting vulnerable basins and promoting the sustainable coexistence of human and environmental Andean systems in the face of climate change.