You might want to check out this blog: Hydro-Flattening of River Shorelines in Lidar Based DEM Production (esri.com) "One of the tricky aspects of DEM production from lidar is related to the representation of water. It’s desirable for lakes and reservoirs to be flat, and for larger rivers to be level from bank to bank while also only flowing downward, never up. The enforcement of this behavior is commonly referred to as ‘hydro-flattening’. It’s done for cartographic, or aesthetic, purposes. Hillshades and contours, for example, will look and behave as expected when made from DEMs that have been properly hydro-flattened. Lakes and reservoirs are relatively easy to handle because they just get completely flattened. Rivers are where the greater challenge lies because they need to flow downslope, naturally following the surrounding terrain."
