• Business
  • Finance
  • Banking
  • Education
  • General
  • Law
  • Science
  • IT
  • English

Key Differences

Know the Differences & Comparisons

Difference Between Risk and Uncertainty

risk vs uncertainityIn our day to day life, there are many circumstances, where we have to take risks, which involves exposure to lose or danger. Risk can be understood as the potential of loss. It is not exactly same as uncertainty, which implies the absence of certainty of the outcome in a particular situation. There are instances, wherein uncertainty is inherent, with respect to the forthcoming events, i.e. there is no idea, of what can happen next.

So, in short, risk describes a situation, in which there is a chance of loss or danger. Conversely, uncertainty refers to a condition where you are not sure about the future outcomes.

We use the terms risk and uncertainty in a single breath, but have you ever wondered about their difference. Well, this article might help you in understanding the difference between risk and uncertainty, take a read.

Content: Risk Vs Uncertainty

  1. Comparison Chart
  2. Definition
  3. Key Differences
  4. Conclusion

Comparison Chart

Basis for ComparisonRiskUncertainty
MeaningThe probability of winning or losing something worthy is known as risk.Uncertainty implies a situation where the future events are not known.
AscertainmentIt can be measuredIt cannot be measured.
OutcomeChances of outcomes are known.The outcome is unknown.
ControlControllableUncontrollable
MinimizationYesNo
ProbabilitiesAssignedNot assigned

Definition of Risk

In the ordinary sense, the risk is the outcome of an action taken or not taken, in a particular situation which may result in loss or gain. It is termed as a chance or loss or exposure to danger, arising out of internal or external factors, that can be minimised through preventive measures.

In the financial glossary, the meaning of risk is not much different. It implies the uncertainty regarding the expected returns on the investments made i.e. the probability of actual returns may not be equal to the expected returns. Such a risk may include the probability of losing the part or whole investment. Although the higher the risk, the higher is the expectation of returns, because investors are paid off for the additional risk they take on their investments. The major elements of risk are defined as below:

  • Systematic Risk: Interest Risk, Inflation Risk, Market Risk, etc.
  • Unsystematic Risk: Business Risk and Financial Risk.

Definition of Uncertainty

By the term uncertainty, we mean the absence of certainty or something which is not known. It refers to a situation where there are multiple alternatives resulting in a specific outcome, but the probability of the outcome is not certain. This is because of insufficient information or knowledge about the present condition. Hence, it is hard to define or predict the future outcome or events.

Uncertainty cannot be measured in quantitative terms through past models. Therefore, probabilities cannot be applied to the potential outcomes, because the probabilities are unknown.

Key Differences Between Risk and Uncertainty

The difference between risk and uncertainty can be drawn clearly on the following grounds:

  1. The risk is defined as the situation of winning or losing something worthy. Uncertainty is a condition where there is no knowledge about the future events.
  2. Risk can be measured and quantified, through theoretical models. Conversely, it is not possible to measure uncertainty in quantitative terms, as the future events are unpredictable.
  3. The potential outcomes are known in risk, whereas in the case of uncertainty, the outcomes are unknown.
  4. Risk can be controlled if proper measures are taken to control it. On the other hand, uncertainty is beyond the control of the person or enterprise, as the future is uncertain.
  5. Minimization of risk can be done, by taking necessary precautions. As opposed to the uncertainty that cannot be minimised.
  6. In risk, probabilities are assigned to a set of circumstances which is not possible in case of uncertainty.

Conclusion

There is an old saying, “No risk, No gain”, so if any enterprise wants to survive in the long run, it has to take calculated risks where the probability of loss is comparatively less, and the chances of gains are higher. Uncertainty is inherent in every business which cannot be avoided, and the business person has no idea about what will happen next, i.e. the outcome is unknown.

You Might Also Like:

hazard vs riskDifference Between Risk and Hazard Business Risk vs Financial RiskDifference Between Business Risk and Financial Risk riskDifference Between Systematic and Unsystematic Risk binomial vs poisson distributionDifference Between Binomial and Poisson Distribution mutually exclusive vs independent eventDifference Between Mutually Exclusive and Independent Events reinforcement vs punishmentDifference Between Reinforcement and Punishment

Comments

  1. Leonard Mare Chegutu Zimbabwe says

    September 8, 2017 at 4:08 pm

    This is useful stuff

    Reply
    • Samaila shehu kalgo says

      September 12, 2022 at 12:14 am

      Very nice and understandable

      Reply
  2. folasewa says

    November 24, 2017 at 7:42 am

    Well written..very precise information

    Reply
  3. Emmanuel Horia says

    August 22, 2018 at 12:33 pm

    Nice one am glad of these

    Reply
  4. Babar abbasi says

    March 8, 2019 at 11:22 am

    Very useful and Very easy to understand

    Reply
  5. faizan gilgiti says

    April 21, 2019 at 11:41 pm

    good explaination

    Reply
  6. Nangyalai says

    July 18, 2019 at 1:29 pm

    Precise & informative

    Reply
    • Surbhi S says

      July 18, 2019 at 3:22 pm

      Thanks for the appreciation and sharing your views with us, it really means a lot. Keep visiting and reading. 🙂

      Reply
  7. Williams Opoku-Agyemang says

    July 9, 2020 at 1:11 pm

    very precise and brief

    Reply
  8. Prof. (Retd.) Bipul Kumar Bhdra, PhD (McMaster) says

    July 23, 2020 at 12:56 pm

    Many thanks for the valuable summary of the differences between two concepts of risk and uncertainty.

    Reply
  9. Afra says

    September 6, 2021 at 4:25 pm

    Thank you so much for this….It helped me a lot

    Reply
    • sreelakshmi says

      November 23, 2021 at 2:30 pm

      thanks for the comparison… I needed it!!

      Reply
  10. Priya says

    February 27, 2024 at 10:00 am

    A very good explanation
    thank you!!

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Top 5 Differences

  • Difference Between PERT and CPM
  • Difference Between Micro and Macro Economics
  • Difference Between Developed Countries and Developing Countries
  • Difference Between Management and Administration
  • Difference Between Qualitative and Quantitative Research



New Additions

  • Difference Between Deforestation, Reforestation and Afforestation
  • Difference Between Race and Ethnicity
  • Difference Between Customer Service and Customer Experience
  • Difference Between Human Capital and Human Development
  • Difference Between Systems Approach and Contingency Approach
  • Difference Between Industrial Relations and Employee Relations
  • Difference Between Introduction and Executive Summary
  • Difference Between Programmed and Non-programmed Decisions
  • Difference Between Depreciation and Devaluation of Currency
  • Difference Between Consumer Market and Business Market

Categories

  • Banking
  • Business
  • Education
  • English
  • Finance
  • General
  • IT
  • Law
  • Science
fb-follow youtube follow

Copyright © 2025 · Key Differences · Contact Us · About Us · Privacy