P3 syllabus
Risk and Uncertainty - Notes 1 / 6
Risk
This is present when future events occur with measurable probability
Uncertainty
This is present when the likelihood of future events is incalculable
Risk & Uncertainty
Risk refers to the situation where probabilities can be assigned to a range of expected outcomes arising from an investment project and the likelihood of each outcome occurring can therefore be quantified
Uncertainty refers to the situation where probabilities cannot be assigned to expected outcomes. Investment project risk therefore increases with increasing variability of returns, while uncertainty increases with increasing project life