Event Risk Vs Variability Risk Vs Ambiguity Risk Vs Emergent Risk

What is RISK in Project Management?

Risk is any unexpected event that can affect your project — for better or for worse. Risk can affect anything: people, processes, technology, and resources or we can shape it as “a risk is anything that could potentially impact your project’s timeline, performance or budget.”

Or

Risk is the possibility of loss or injury. Project risk is an uncertain event or condition that, if it occurs, has an effect on at least one project objective.

Or

A risk is an event or occurrence that may negatively impact the project. Risks are potentialities, and in a project management context, if they become realities, they then become classified as “issues” that must be addressed. For Example, you want to go for a photo-shoot and one of the risk that you can predict is that it may rain and that will impact your equipment. So risk management, then, is the process of identifying, categorizing, prioritizing and planning for risks before they become issues. So one of the mitigation option that you may consider taking a rainproof tent along with you so that your equipment will safe.

It is possible to define four types of uncertainty:

1. Event risk
2. Variability risk
3. Ambiguity risk
4. Emergent risk

Event Risk: (stochastic uncertainty)

Event risk something that has not yet happened & it may not happen at all, but if it does happen then it has an impact on one or more objectives. As a taken example, when you go for a photo-shoot, it may rain or may not. But if it rains you are prepared. This is known as Event Risk. The Event Risk is also categorized as future possible events which are sometimes called “stochastic uncertainty”, 

Most risks identified in the typical project risk register are event risks. Examples of event-based threats and opportunities include: 

• A key supplier may go out of business during the project
• The client might change the requirement after the design is complete
• New regulatory constraints might be imposed
• We may lose a key resource at a critical time in the project
• The client may allow incremental deliveries

 

Stochastic branches to model threat and opportunity event risks (from Hillson, 2003)

Image Taken From (https://www.pmi.org/learning/library/manage-risks-didnt-know-were-taking-9275)

Variability Risk: (Aleatoric uncertainty)

Variability risk: There is a set number of possible outcomes but we don’t know which one will actually occur. 

Or 

Variability means - Inconsistent (So Variability risk means key characteristics of the planned event to be uncertain- The Planned event here is "productivity", it will be there but will it be above target or below target or just the target).

Or 

This is a risk that comes from variables in your environment that always exist, but over which you have no control. For example, weather can have a significant impact on the schedule of a construction project. While you might target a time of year when the weather's more cooperative, the weather will always vary.

The name is taken from the Latin word alea, which is a game of chance with dice where there are a set number of possible outcomes but we don’t know which one will actually occur. A common example from the project arena is the situation where we plan to run a 15-day trial, but the actual duration could, in fact, be anywhere between 10–25 days. The probability of running the trial is 100%, but its duration is uncertain. Other variable parameters include cost, resource requirement, productivity, defect rate, performance, etc.

Example variability risks include:

• Productivity may be above or below the target
• The number of errors found during testing may be higher or lower than expected
• Unseasonal weather conditions may occur during the construction phase
• Exchange rates could vary beyond the range used to build our quotation

The best way to analyze variability risks is in a quantitative risk analysis model using Monte Carlo simulation (Vose, 2008; Hulett, 2011).

Using distributions to model variability risk

Image Taken From (https://www.pmi.org/learning/library/manage-risks-didnt-know-were-taking-9275)

Ambiguity Risk: (Non-Event Risks)

Ambiguity risks deal with unknown/vague factors about what will happen in the future. It with the probability or possibilities that are unknown. Those areas of the project which lack knowledge and understanding are more prone to ambiguity risks. These are also known as “epistemic uncertainty,” from the Greek word episteme meaning knowledge since they describe uncertainties arising from lack of knowledge or understanding. 

Areas of the project where imperfect knowledge might affect our ability to achieve project objectives include:

• Elements of the requirement or technical solution
• Use of new technology
• Market conditions
• Competitor capability or intentions
• Future developments in regulatory frameworks
• Inherent systemic complexity in the project

Ambiguity risks are addressed through exploration and experimentation, seeking first to define the scope and boundaries of those areas where we have a deficit of knowledge or understanding. The aim is to transform ambiguity risks into “known-unknowns.” Benchmarking and external inputs can be used to fill the gaps of knowledge deficit in order to manage ambiguity risks. Other ways of managing ambiguity risks involve simulation, prototyping etc. It is important with these approaches to ensure clear acceptance criteria for our project deliverables so that each incremental step is directed towards achieving the overall project goals.

Emergent risk: (ontological uncertainty)

We have risks that emerge from our blind-spots i.e. well outside of our prediction. Also known as unknowable-unknowns. These risks are just outside of our current mindset or cognizance.

Another popular term for emergent risks is “unknown unknowns,” which are things that we do not know but where we are unaware of our ignorance. 

Traditional risk management cannot manage emergent risks since it only targets uncertainties that can be seen in advance and which we can prepare for or address proactively. At the strategic level, business continuity addresses “unknowable unknowns” by identifying areas of vulnerability then building in sufficient organizational resilience to cope with the impact of the unexpected, wherever it comes from.

While determining risk (s) in project management, consider these five key points:

• Risk event: What might happen to affect your project?
• Risk timeframe: Prediction of “when” is it likely to happen?
• Probability: What’s are the possibilities of it happening?
• Impact: What’s the expected outcome?
• Factors: What events might forewarn or trigger the risk event?

References: 

https://www.pmi.org/learning/library/manage-risks-didnt-know-were-taking-9275

Thank You For Reading!