# 10 DIFFERENCES BETWEEN RISK AND UNCERTAINTY

Risk can also refer to a discrete event with a probability of occurrence.

However, in finance, risk can be defined as the probability that the actual return of an investment may deviate from its expected return.

Uncertainty arises when there is no certainty of occurrence.

Uncertainty refers to the fact that something isn't certain to happen. It's the lack of certainty about the occurrence of a specific event.

It is the inability to predict future occurrences or consequences

Prof. Knight has said that Uncertainty is an unknown risk, while the risk is a measurable uncertainty

## Differences Between Risk And Uncertainty

1. Risk is quantified in that it can be measured in quantitative terms.

Uncertainty, on the other hand, is not quantifiable as it can not be measured in quantitative terms.

2. In risk, the potential outcome is known, but in uncertainty, the potential outcome is unknown.

3. Risk can be managed with proper technique. This is not the case with uncertainty, which is out of anyone's control.

4. While certain risks can be insured, uncertainty cannot be insured in any form.

5. Risk is objective in the sense that it is based on facts. Uncertainty, on the other hand, is a subjective concept because it is linked to emotions and opinions.

6. Risk can be assigned probability, but uncertainty cannot be assigned probability.

7. Risk can be minimized by taking the appropriate precautions.

In contrast, uncertainty cannot be minimized because the possibility of occurrence cannot be measured and planned for.

8. Certain risks are transferable whereas uncertainties are generally not transferable.

9. Tossing a dice is an example of risk because you already know there's a chance you won't get the number you want.

The operation of the economy is an example of uncertainty because you never know what to expect from it next.

10. Efforts can be made to convert the risk into certainty to some extent. Contrary to popular belief, no amount of effort can turn uncertainty into certainty.

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