Risk and uncertainty

In this lesson

1. 0:00 Risk and uncertainty in performance management
2. 0:20 The difference between risk and uncertainty
3. 1:44 Why uncertainty and risk matter for business
4. 3:24 Understanding risk appetite and tolerance
5. 5:28 The four risk management approaches
6. 8:08 Transfer, accept, reduce, abandon framework
7. 10:21 Practical risk management in daily decisions

About this lesson

Risk is a quantifiable possibility with measurable probability (like a 6% chance of an item being out of stock), whereas uncertainty involves too little information to calculate odds (like visiting a new shop for the first time). Understanding this difference is essential for exam success and real-world decision-making. You'll explore why risk matters to organisations: it drives competitive advantage, shapes future strategy, and forces managers to think beyond day-to-day operations. The lesson covers risk appetite—whether an organisation is risk averse, risk neutral, or risk seeking—and how this determines which decisions get made. You'll see practical examples of how a risk-focused culture prevents costly mistakes, from credit-checking international customers to identifying control gaps in new projects. Finally, you'll master the four core risk management approaches: transfer (buying insurance for low-likelihood, high-impact events), accept (dealing with low-likelihood, low-impact risks as they arise), reduce (putting controls in place for high-likelihood, low-impact risks like shoplifting), and abandon (rejecting projects where both likelihood and impact are high). These strategies apply across Performance Management scenarios and help you make sound recommendations in case studies and exams.

Duration: 13m