The need for high precision calculations with 64-bit or 32-bit floating-point arithmetic for weather and climate models is questioned. Lower precision numbers can accelerate simulations and are increasingly supported by modern computing hardware. This paper investigates the potential of 16-bit arithmetic when applied within a shallow water model that serves as a medium complexity weather or climate application. There are several 16-bit number formats that can potentially be used (IEEE half precision, BFloat16, posits, integer and fixed-point). It is evident that a simple change to 16-bit arithmetic will not be possible for complex weather and climate applications as it will degrade model results by intolerable rounding errors that cause a stalling of model dynamics or model instabilities. However, if the posit number format is used as an alternative to the standard floating-point numbers the model degradation can be reduced to a tolerable minimum. Furthermore, a number of mitigation methods, such as rescaling, reordering and mixed-precision, are available to make model simulations resilient against a precision reduction. If mitigation methods are applied, 16-bit floating-point arithmetic can be used successfully within the shallow water model. The results show the potential of 16-bit formats for at least parts of complex weather and climate models where rounding errors would be entirely masked by initial condition, model or discretization error.