The words Risk and Uncertainty are often used interchangeably, and for good reason: The one cannot exist without the other. That does not, however, mean that they are the same thing. They are not.
Uncertainty drives risk, and risk exists where there is uncertainty. In spite of this fairly clear differentiation, I often hear people using the word “uncertainty” when they actually mean to say “risk”. The last time I heard it was when someone said to me, “Mike, we have an uncertainty in our project in that we may lose some of our key construction personnel. What can we do about it?”
What he really meant was, “We have a risk in our project in that it may be disrupted if we lose some of our key construction personnel”.
Although it was perfectly clear to me what was meant by his initial statement, using the word “uncertainty” in place of “risk” can still lead to confusion or misinterpretation at times. If you consider ISO 31000’s definition of risk, this is: “The effect of uncertainty on objectives”. Here it is clear that uncertainty is the driver of risk and is not risk itself. A dictionary definition of the word uncertainty is: “The quality or state of doubt”, but there are a number of equally suitable definitions for the word. One of my connections on LinkedIn (the same person who suggested I write this blog post, in fact) proposed that the definition of uncertainty is: “The range of possible success case outcomes (each with an associated probability of success)”. This is a perfectly acceptable definition, as it highlights the fact that uncertainty equates to a range of possible outcomes. This “uncertainty” or “range of possible outcomes” is intrinsically embedded in risk, as risk can also be described as, “A threat or opportunity resulting in an event which produces a range of possible outcomes”. (See our earlier blog post on the importance of accurately describing risk)
The difference between risk and uncertainty may be demonstrated through the picture of our Tentative Penguin above. This penguin is clearly displaying signs of uncertainty. He or She (how do you tell them apart?) is uncertain about taking another step up the icy slope. The reason he (let’s assume he’s a male for this discussion) is uncertain, is because his next step may result in him losing his grip, falling down and either hurting himself or sliding back down to the bottom of the slope. So here we can see that his “uncertainty” is founded in the range of possible outcomes of the risk, and is not the risk itself. After all, Mr Penguin is certain that his next step will be a risk for the very reason that the outcome of this step is uncertain! What I’m attempting to demonstrate here is that "uncertainty" can often be misinterpreted as "risk", where it is really only one of the ingredients that make up risk. One could say the penguin's uncertainty about the outcome of his next step is the risk, but here you need both the event of him taking a step, and uncertainty in the event outcome to make up the risk. An event without uncertainty in the outcome is not a risk, and uncertainty without an event produces no outcome, so again there is no risk.
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