Risk and uncertainty

In this lesson

1. 0:00 Risk and uncertainty in project appraisal
2. 0:36 NPV estimates and future unknowns
3. 1:12 Key differences between risk and uncertainty
4. 1:37 Risk characteristics and probability assignment
5. 2:07 Uncertainty factors and project duration

About this lesson

Risk is quantifiable — it's based on prior experience and allows you to assign probabilities to potential outcomes — while uncertainty cannot be quantified because there's little historical data to draw from. Understanding this difference matters because it directly affects how you incorporate these factors into NPV calculations and how you assess the reliability of your financial forecasts. You'll explore why organisations must account for both risk and uncertainty when making decisions, even with detailed planning in place. The video covers how risk increases with outcome variability and how uncertainty grows as project timelines extend. By distinguishing between what can be measured and what cannot, you'll be better equipped to evaluate investment proposals critically and communicate the limitations of your analysis — essential skills for Performance Management and Strategic Business Leader case studies.

Duration: 3m