Risk vs Uncertainty
Risk and Uncertainty are concepts that talk about expectations in future. Risk is an inherent factor in life and No risk, no gain, is what is taught at B-schools, but what is the difference between risk and uncertainty? This is a baffling question that still confuses people, and this article intends to clarify the myths surrounding these two words by highlighting the meaning and usage of these two words.
Life begins with risk, and probably there is no human endeavor that does not involve some amount of risk. All activities carry some risk, but some are inherently more risky than others. For example, trying to climb Mount Everest is obviously a risky adventure, but even you step out to drive your car around in the city, there is some risk of accident. There are many definitions of risk, and though each talks about different things, they all agree on one point and that is future problems or mishaps that can be avoided or reduced when undertaking an activity.
In common parlance, risk and uncertainty seem to be one and the same thing. It is a word that connotes actions or events over which one has no control and may occur in future. Uncertainty has an X factor implicated whenever it is used in the sense that it can never be measured or quantified. When you do not know the outcome of any activity, you are uncertain about it. If for example, something is taking place for the first time, you are not aware of what its consequences can be.
Difference between Risk and Uncertainty
Thus it is clear then that though both ‘risk and uncertainty’ talk about future losses or hazards, while risk can be quantified and measured; there is no known way of ascertaining uncertainty. Risk is thus closer to probability where you know what the chances of an outcome are. In gambling for example, if you are taking a risk on a particular number in a game of roulette, you know that the probability of that number finally appearing is 1/29 or the number being present in the game, while uncertainty is reflected when you are not sure of the outcome as in the case of putting money on a horse in a horse race.
Risk and Uncertainty are concepts that talk about expectations in future, but whereas you can minimize risk by taking health policies to face an uncertain future, you cannot remove uncertainty from life altogether.
When airplanes were introduced, many people were afraid of flying saying it was very risky, and indeed they were right. But with technological advances, the risk factor has been greatly minimized, though there is still uncertainty which is beyond human control.
When you are uncertain, you are not sure of what is going to happen next. When you take precautions against a disease, you are reducing the risk of catching it. Thus it becomes clear that risk is when you know that hazard is there, but its occurrence has a very low probability, but uncertainty is when you know nothing about the outcome.