Uncertainty - The inability to calculate the costs and benefits of a decision precisely

External Uncertainty:

• Economic- The uncertainty of whether the economy will continue to be in a boom or whether it could fall into a recession.
• Political- If there is an election coming up the uncertainty would be how the possibile new government's attitude to business is, and whether they differ from the current one.
• Competitive- What are competitors currently planning and how will they react to a business's decisions.

Internal Uncertainty:

• Human resource uncertainty- Will the employees be for or against a decision the business has made.
• Stakeholder- How will stakeholders react to a business decision and will relations be worse.
• Technological- will existing technology be made redundant by new ones which could happen at any time.

Risk - The chance or possibility of an adverse occurrence

Reward - The possible return that a particular activity may make

Quantifiable Risk - The likelihood of a predictable risk occurring. It is possible to put a value on this sort of risk.

Unquantifiable Risk - the risk of an event that is unexpected. Sometimes referred to as the ‘ the unknown unknowns’. It is not possible to put a value on this sort of risk.

In general the relationship between risk and reward is, the larger risk you take the larger reward you will make. However this is not always valid.

Management of risk:

Economic risk:

• Analysis of a wide variety of economic indicators
• Use of Time series Analysis to forecast trends

Political risk:

• Managers being aware of the political situation and how outcomes will affect their business

Competitive risk:

• Building a strategy based on regular and thorough SWOT analysis
• Ongoing market research
• Use of tools such as the Boston Matrix

Human Resources:

• Clear understanding how actions affect departments
• Fostering a ‘Change Culture’
• Offering appropriate incentives for those adopting new roles where restructuring is necessary

Stakeholder:

• Consultation with any stakeholders likely to be affected by the decision well in advance