Introduction

In this lesson

1. 0:00 Lesson overview: Risk and uncertainty topics
2. 0:52 Risk versus uncertainty: Key definitions
3. 2:22 Understanding attitudes to risk

About this lesson

You'll discover the key distinction between risk (where probabilities can be assigned) and uncertainty (where they cannot), explore how different decision makers approach risk based on their attitudes, and gain a foundation for the five core areas covered in this module: sensitivity analysis, probability and expected values, decision rules like maximin and maximax, minimax regret, and decision trees with worked examples. Understanding risk and uncertainty is critical because management must make investment and strategic decisions without knowing exact future outcomes. This lesson breaks down how to quantify and incorporate these factors into your calculations, and introduces you to three decision-making profiles: risk seekers who pursue the best outcome regardless of probability, risk-neutral decision makers who focus on expected values, and risk-averse decision makers who prepare for worst-case scenarios. By the end of this module, you'll be able to apply these concepts and analytical tools to real exam scenarios and business problems.

Duration: 4m