Anytime after completing the quest "Strength in Numbers", speak to Mercedes. She leads the men of the Enlistment Corps. She has heard of the Arisen and of how you hold dominion over the pawns. She has ordered pawns to take up swords and fight herself, but they are a clumsy lot. She cannot call them into this world as you do though, nor make traveling companions of them. She wonders what manner of magick lets you command them so.

She tells you that the dragon has come, and she will welcome any help be it pawn, Arisen, farmer or fishwife. She wants you to make use of the encampment as you please, and asks you if you are in need of rest. Choose "Yes".

You awaken to the sound of battle, in the Enlistment Corps Base.

A Rude Awakening
Battle the Hydra

You want to grab onto the Hydra and climb on the center neck to its middle head, then attack the head to cut it off. The head is the Hydra's weakness, so don't waste time attacking the lower body, as that is futile. You MUST focus on severing the head, save all your stamina for that effort. Don't let the Hydra swallow you while attempting to climb it, try approaching the Hydra from the side.

Once you sever the head, the Hydra dies. Mercedes is impressed. She says that Ancient tales of the Arisen are well and good, but make a gift of this head to the Duke, and you might earn yourself a real title. The Duke will want to know of this attack in any case. Mercedes had hoped to gather a larger force before leaving for the capital, but a Hydra's head and the Arisen who claimed it make up the difference amply. Accept her quest, and she tells you to meet her at the Waycastle.

This completes the quest, A Rude Awakening.