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News and thoughts. Read at your own risk!

Risk vs uncertainty

13/1/2017

 
Since I consult both in risk management and decisionmaking under uncertainty, I often (including this week!) get asked about what is the difference in the two terms. It's not that easy to answer without resorting to a "we're gonna define it this way, and damn the consequences if other people use the term to mean something a bit different" brute force solution.

Here's an excerpt (from the book I'm writing) on how I see the difference. Basically, it's not about "when is an uncertainty a risk" and more about "where are we in the decisionmaking process" and "is there an expected base case future trajectory (and, in particular, a set of objectives)". Warning: 1400 words.

Comments welcome. We need to be pragmatic rather than prescriptive about this.
170113_risk_vs_uncertainty_v2.pdf
File Size: 581 kb
File Type: pdf
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    Martin Pergler

    Principal, Balanced Risk Strategies, Ltd..

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