risk vs uncertainty

Risks are commonly assumed to be the same as uncertainty in the area of risk management. Although there is a big difference between risk and uncertainty, many professionals often think they are the same.

This concept is not too important from a PMP or PMI-RMP exam point of view, but you must understand the difference to avoid mixing them up.

Therefore, I’m writing this blog post to explain it and I hope after reading it, you won’t have any problems distinguishing between risk and uncertainty.

Risk

A risk is an unplanned event that may affect one or some of your project objectives if it occurs. The risk is positive if it affects your project positively, and it is negative if it affects the project negatively.

There are separate risk response strategies for negatives and positives.

The objective of a negative risk response strategy is to minimize their impact or probability, while the objective of a positive risk response strategy is to maximize the chance or impact.

You might also hear two more risk terms: known and unknown. Known risks are identified during the identify risks process and unknown risks are those you couldn’t identify.

A contingency plan is made for known risks, and you will use the contingency reserve to manage them. On the other hand, unknown risks are managed through a workaround using the management reserve.

Uncertainty

Uncertainty is a lack of complete certainty. In uncertainty, the outcome of any event is entirely unknown, and it cannot be measured or guessed; you don’t have any background information on the event.

Uncertainty is not an unknown risk.

In uncertainty, you completely lack the background information of an event, even though it has been identified. In the case of unknown risk, although you have the background information, you missed it during the identify risks process.

A Real-World Example of Risk and Uncertainty

Assume two famous teams consist of renowned players, and they are going to play a football match the next day.

Can you tell me exactly which team is going to win?

No, you can’t; however, you can make an educated guess by reviewing and analyzing the past performances of each player, the team, and the results of matches they played against each other.

Then you can come up with some numbers like there is a 30% chance of Team A or Team B winning, or there is a 70% possibility of Team A or Team B losing the match.

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

Let us say again that two teams are going to play a game, and no players are selected for either team.

In this situation, if somebody asked you which team is going to win, what would your response be?

You will be clueless because you don’t know which team consists of which players, and you have no idea how the teams will perform.

Here, you don’t have any information on past performance, and cannot predict the outcome of the event, even though the rules and the stadium are the same.

This situation is called uncertainty.

Risk Vs Uncertainty

The following are a few differences between risk and uncertainty:

  • In risk, you can predict the possibility of a future outcome, while in uncertainty you cannot.
  • Risks can be managed while uncertainty is uncontrollable.
  • Risks can be measured and quantified, while uncertainty cannot.
  • You can assign a probability to risks events, while with uncertainty, you can’t.

Key Differences Between Risk and Uncertainty

The following tables shows key differences between risk and uncertainty.

a table showing differences between risk and uncertainty

Conclusion

Risk and uncertainty are different terms, but people tend to confuse them. Managing risks is easier because you can identify them and develop a response plan based on your experience. However, managing uncertainty is very difficult, as previous information is not available, too many parameters are involved, and you cannot predict the outcome.

However, to complete your project successfully, you must be very cautious, proactive, and open-minded to manage risks and uncertainty.

Here is where risk vs uncertainty posts ends. I hope now you can distinguish uncertainty from risk. Still have some doubts, post them in the comments section and I will reply to you.