Uncertainty creates Risk, Decisions in Presence of Uncertainty Requires Estimating
Glen Alleman MSSM
Veteran, Applying Systems Engineering Principles, Processes & Practices to Increase the Probability of Program Success for Complex Systems in Aerospace & Defense, Enterprise IT, and Process and Safety Industries
According to ISO 31000, ISO 17666:2016 and ISO 11231:2010 a risk is the effect of uncertainty?on objectives and an effect is a positive or negative deviation from what is expected.
This definition?recognizes that all of us operate in an uncertain world. Whenever we try to achieve?an objective, there's always the chance that things will go differently than planned. Every step has an element of risk that needs to be managed, and every outcome is uncertain. We sometimes get the expected results whenever we try to achieve an objective. So, sometimes, we get positive results; sometimes, we get damaging results; and occasionally,?we get both. Because of this, we need to reduce uncertainty as much as possible.
Uncertainty (or lack of certainty) is a state or condition involving a deficiency of information that leads to inadequate or incomplete knowledge or understanding. In the context of risk management, uncertainty?exists whenever the knowledge or experience of an event, consequence, or likelihood is inadequate or incomplete.
When asked to make a decision or a choice in the presence of uncertainty, an estimate is needed, since the information needed to make an?informed decision is not directly available or is probabilistic, or stochastically defined (non-deterministic).?
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Let's define what an Estimate is ...
An estimate is not a guess, it is a value based on sampled data which has been adjusted using statistical?estimation procedures. While both involve analysis of data, the key difference between a forecast?and a projection is the nature of the assertion with the assumptions occurring?- from?Statistical Langauge - Estimate and Projection, www.abs.gov.au
In the strict sense, an estimate is a particular value an estimator yields in a given set of circumstances.
The expression is widely used to denote the method by which such particular values are calculated.?It seems preferable to use the word?estimator for the rule of procedure, an?estimate for the value to which it leads in particular?cases—from?The International Statistical?Institute, The Oxford Dictionary of Statistical Terms.
So What's the Point?
When uncertainty?exists on projects, risk also exists. Making a decision in the presence of uncertainty requires estimating the outcome of that decision on the current and future level of risk. No matter how often it is stated, how often it is denied, or how often?unsubstantiated alternatives are provided ...
Yes, there is more risk when working with incompetent people, especially incompetent managers. They have a lot that they don't know that they don't know. When doing recovery projects, I usually start off by testing team members for competencies. Usually about 10% of the individual contributors are incompetent and about 25% of the managers are incompetent. By the way, thank you for raising the level of competency in many people, and, therefore, reducing risks.