ERM Glossary: Uncertainty

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In risk management it is often important to differentiate between ‘risk’ and ‘uncertainty’. In this context, ‘risk’ is usually taken to mean some measurable assessment of the spread of possible future outcomes, with ‘uncertainty’ then taken to mean lack of knowledge, even (or particularly) concerning the size of this spread.


In economics, this type of ‘uncertainty’ is typically known as Knightian uncertainty.


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