Risk vs Uncertainty in Project Management

risk-vs-uncertaintyOften in project management of more specifically I should say that in risk management it is common practice to use the term Risk interchangeably with Uncertainty. Though, there is a difference between the definition of Risk and Uncertainty; however, very often ignored by many professionals.

Therefore, today in this blog post I will try to distinguish Risk from the Uncertainty.

Risk

As per PMI “Risk is an uncertain event or condition that, if occurs, has an effect on at least one project objective.” Risk impact may be positive or negative and more importantly it can be measured, or more appropriately I should say – It can be guessed.

You can refer my previous blog about Type of Risks and Risk Related Terms to know more about Risks. Here, I will discuss about uncertainty in more depth.

Uncertainty

Uncertainty is a lack of complete certainty. In uncertainty outcome of any event is completely unknown and cannot be measured, or guessed.

Got it, or not yet clear…. OK, let me make it more clear for you:

Let us say that there are two well-known football teams consist of renowned players, and they are going to play football match next day. Can you tell me exactly which team is going to win? Obviously not; however, you can make an educated guess by reviewing and analyzing the past performance of each individual player and the team. Here you can come up with some number like, there is 40% chance of winning of Team A or Team B; or there is a possibility of losing match by Team A or Team B by 70%.

Now, let us put the same football match in different scenario–

Let us say again that two football teams are going to play a game, and no team player is selected for either teams. In this situation if somebody asks you that which team is going to win? What would you reply? You’re completely clueless about everything, you don’t know which team consist of which player, and how will the teams perform, etc. In this situation you are totally clueless and hence cannot predict the outcome of the event. This situation is called uncertainty.

I hope that now picture about the risk and uncertainty is clear to you.

:)

Comments

  1. Ian Edwards says

    The football analogy is a good one and encapsulates today’s modern management attitude to uncertainty perfectly where uncertainty is just flagged as another risk, an unmeasured one, and thus can be ignored, if its recognised at all.

  2. Ritesh saxena says

    Both risk and uncertainty are inevitable in today’s scenario of Project Management. one has to driven his path midway.

  3. Naveen says

    Hi Fahad,

    Can you please help in providing details/difference of Perform Qualitative and Quantitative risk analysis?

    Thanks,
    Naveen

    • Fahad Usmani says

      In Qualitative risk analysis, you prioritize the risks by multiplying their probabilities and impact. And in Quantitative risk analysis, you numerically analyse the risks. Here, you find the cost of each risk (if it occurs individually) and then you add it up to get the overall effect on the project.

  4. Angel says

    In my view uncertainty is imperfect knowledge. Throughout a project we strive to improve definition (reduce uncertainty) to improve chances of success (reduce risk of failure.) There are key uncertainties in projects that you must understand well before making strategic decisions.
    Cost estimating is a good example to illustrate uncertainty.It is very difficult (if not impossible) to estimate the final cost of a complex project to the last cent. Do you remember what happened the last your did a remodelling job at your house? If you did not understand the uncertainty well, you may end up regretting the decision of remodeling the kitchen yourself. That is why you do the front end work: develop the scope, prepare the plans, get quotes, etc. it is to reduce uncertainty.
    Uncertainty analysis helps us understand the expected ranges of outcomes & test against project objectives to make informed decisions. For example, we can test whether a project is resilient to various cost grow scenarios and make an informed decision to sanction the project. We can then characterise the risk or opportunity.

  5. Yustack J. Kalumyana says

    Risk: We don’t know what is going to happen next, but we do know what the distribution looks like.

    Uncertainty: We don’t know what is going to happen next, and we do not know what the possible distribution looks like.

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