Drought is the most complex but least understood of all natural hazards. It is broadly definedrnas â€œsevere water shortageâ€. Low rainfall and fall in agricultural production has mainly causedrndroughts. Drought causes loss of life, human and animal suffering and damage to economyrnand environment. The present study area is prone to extreme climate events such asrndrought. Successive years of low and erratic rainfall have left large areas of the southernrnzone in severe drought that resulted in crop failure, water shortage and has raised seriousrnfood security concerns in the region. Drought assessment and monitoring based on availablernweather data are tedious and time consuming. Beside that the data are not available in timernto enable relatively accurate and timely large scale drought detection and monitoring. But,rnthe satellite sensor data are consistently available, cost effective and can be used to detectrnthe onset of drought, its duration and magnitude. In the present investigation an effort hasrnbeen made to derive drought risk areas facing agricultural as well as meteorological droughtrnusing an eight-year time series of decadal satellite SPOT NDVI (Normalized DifferencernVegetation Index) and rainfall data (1998-2005) respectively. A deviation of the currentrnNDVI with the long-term mean NDVI, and the Vegetation Condition Index (VCI) derivedrnfrom the SPOT used in this study for drought detection, monitoring and real timernprediction. In this study, it is indicated that large proportion of the area, i.e. 31.45%rn(3009km2) is at moderate drought risk level, whereas 17% (1568km2) of the area accountedrnfor high drought risk. It is also shown from the result Enderta, Hintalo Wajirat, eastern part ofrnRaya Azebo and southern part of Alamata Woredas were more susceptible to drought. Thernresults indicate that the two remote-sensing indices used, DEVNDVI, and VCI arerncomplementary and were found to be sensitive indicators of drought conditions. Moreover,rnSPOT NDVI at 1km by 1km resolution, which incorporates the long-term NDVI, is also thernbest option for drought risk assessment.rnKeywords: Drought, NDVI, VCI, Risk assessment