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What is the difference between risk and uncertainty?

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In project risk management, can we say that all uncertainties are risks and that all risks are uncertainties? Personally I can't think of a risk that is certain, and I cannot think of an uncertainty that is not risky to the project. Some of my colleagues don't agree with me, and they insist that they are different, but they fail to explain how. Is there anyone here who can explain how a risk is different from an uncertainty (if they are different!)?
asked 6 years ago by anonymous

1 Answer

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Let me explain it to you this way, you don't plan for uncertainties, you plan for risks, and consequently, you don't manage uncertainties, you manage risks. Let me discuss this more...

Uncertainty is an attribute of a risk. In other words, there is a level of uncertainty associated with every risk (and everything else in life, for that matter), and the more information we have about the risk, the less uncertainty we have (we can say that risk information is inversely proportional to risk uncertainty).

So, the more uncertain a risk is, the less we know about its impact, its probability, and its proximity. Usually, the risk uncertainty is diminished the further we move into the project, because more information will be available.

Risks that are very uncertain are very confusing for the project manager, especially when it comes to preparing the contingency plans for those risks: how much will these risks cost? when will they happen? what will happen if they materialize (if we don't know what will happen how can we plan for these risks)? what are the odds of them happening?

Now can a risk have zero uncertainty? No, otherwise it won't be called a risk, a risk with a probability of 1 (will definitely happen) and a fixed date and a fixed cost should be addressed even before the project starts so that it won't be a risk during the project. For example, if we know for sure that the taxes on the materials that we are buying (for our project) are going to increase and we know the exact time of the tax hike, then we should account for these extra costs in our cost management plan (i.e. project budget).
answered 6 years ago by MaplePM (46,940 points)

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