Risk & Uncertainty basics

NotesVideoQuizPaper examCBE

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

NotesVideoQuizPaper examCBE