QUESTION 2.

2
What is the difference between risk and uncertainty? How can you identify and differentiate between
them in the following case?
a) ABC Grocery and Supermarket Outlets plans to automate its warehouse by installing a computercontrolled order-packing system and a conveyor system for moving goods from storage to the
warehouse shipping area.
SOLUTION
RISK: Risk is a measure of Possibility of Loss of life or injury and occurrence of dangerous element due
to natural or human activities. Risk or potential loss is associated with exposure of the recipients to hazard
and its consequences such as adverse health effects, loss of property, reconstruction costs, loss of
economic activity, environmental/natural damage or losses, etc. When we observe risk we observe
uncertainty about the possible outcome. Even if we are uncertain about the exact outcome, we can often
think of a range of possibilities that might occur. Risk arises from some of the uncertain outcomes being
less favourable than others. In general, this probability can be assessed for a risky event using qualitative
or quantitative methods. Risk can be identified using probability distribution function of the potential
outcome.
Risk analysis should be performed using system framework that need to account for:
- Uncertainties in modelling (system architecture)
- Behavior (physical laws)
- Prediction models
- Interaction among a systems components
- Impacts on the system and its surrounding environment
UNCERTAINTY: Uncertainty is something or an event that is uncertain, meaning that it is indefinite, not
reliable, unknown beyond doubt and not constant. In general, it is difficult to estimate a probability value
of occurrence of uncertain events. Uncertain means feeling doubt about things we carry out which make
us unconfident in predicting or describe something. Uncertain things tends to change frequently, which
has no historical data or previous history record make by decision maker on some situation. Uncertainty
is a situation that potential outcome cannot be described and identified using probability distribution.