A Primer on the Management of Risk and Uncertainty

Most business decisions are made with incomplete information and in the face of an uncertain future. Indeed, with the exception of a reasonable expectation that the sun will come up tomorrow, few things in human affairs can be predicted with certainty. Managers have to deal with risks every day. For example, a company may have perfected a new technology but consumer acceptance of the innovation is unknown; a competitor may be tempted to engage in direct competition with a firm or may decide that the profits of a divided market are too slim and go on to seek other opportunities. Uncertainty encompasses both identifiable trends whose depth and timing can only be guessed at and unforeseen sudden events whose effect is immediate.