Switch to managing uncertainty, not risk

Most projects have an element of uncertainty to them. By virtue of their unique nature, projects are mired in uncertainty.

Economists view uncertainty as one of the major conditions for entrepreneurial behaviours in an economy; without uncertainties, entrepreneurial profits would be impossible. If projects are unique, as the general body of literature suggests, then uncertainties (unknown-unknowns) are inevitable, no matter how much information is gathered before a project is initiated. Consequently, following the arguments of the economists, uncertainties are the pre-condition for the existence of opportunities. Therefore, uncertainties are not necessarily limited to negative consequences; there are positive implications as well.

In many cases, you can use well-established risk management practices to deal with this. However, for cutting-edge projects, or for ones that must adapt to constantly changing conditions, you may not be able to foresee all risks risks (known-unknowns) when you start out. In these situations, you need to manage uncertainty instead of trying to manage risk.

References

• CLEDEN, David, (2009). Managing Project Uncertainty. (Advances in Project Management). Gower Publishing.

• DE MEYER, Arnoud; LOCH, Christoph H.; and PICH, Michael T. (2002). Managing project uncertainty: From variation to chaos. MIT Sloan Management Review. 43, (2), pp.60-67.