Droughts pose significant challenges to agriculture, water resources, ecosystems, and societies worldwide. This comprehensive review examines the multidimensional impacts of meteorological, hydrological, agricultural, socio-economic, ecological, urban, environmental, and flash drought types. We identified the most urgent need for prediction and modeling tools to improve drought risk assessment and management. This study further examines how environmental, socio-economic, demographic, institutional, governance, and technological factors influence drought vulnerability. Key strategies to mitigate drought impacts, such as integrated water resource management, drought-resilient cropping systems, and robust policy frameworks, have been identified. This review emphasizes the importance of incorporating future climate scenarios in risk assessments and adaptive management practices to promote resilient communities and ecosystems. It argues for innovative approaches to reduce socio-economic vulnerabilities to drought and optimize policy frameworks towards adaptive drought management under current and future climate change. This research attempts to provide insights that can guide future research endeavors, policy formulation processes, and practical responses toward effective management of risks associated with droughts.