To address the lack of adequate measures for flood risk reduction in Nepal, where recurrent flood‐related hazards have had grave consequences for many people over the past decades, we develop a flood risk assessment model for a study area in the Sindhupalchok District. The model considers direct and indirect damages that are assigned to four asset categories (hydropower plants, roads, houses, and farmlands) and two scenarios (low‐exposure‐low‐flood and high‐exposure‐high‐flood scenarios). Model results indicate the following: (a) the planned expansion of hydropower plants reflected in the high exposure scenario is responsible for a substantial increase of economic damage compared with the low scenario and (b) for both scenarios, flood damage is largely related to road closures, which result in the loss of income for villagers and the loss of customs revenues. As this study aims both to provide methods for the assessment of flood risk and to demonstrate them in a case study, we discuss future work related to model‐based flood risk assessments that are needed towards flood risk reduction in Nepal.