Risk Management, 5th Edition

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Risk Concepts

Although the terms risk and uncertainty are often used interchangeably, they are not the same. Risk is defined as the “cumulative effect of the probability of uncertain occurrences that may positively or negatively affect project objectives” (Ward 2008, 353). This is unlike uncertainty, which considers only the event and where the probability is completely unknown. The traditional view says that risk is a situation where an event may happen and the frequency of occurrence can be evaluated based on a probability distribution of past occurrences or environmental considerations. Although that observation has limited utility in project management, it does distinguish between risk and uncertainty. With risk, there is a sense of the ...