Both Aleatory and Epistemic Uncertainty Create Risk


Nice work Glen! I have asked the question before but “at what point does the decision NOT to obtain accessible knowledge about ‘reducible exposures’ [epistemic uncertainty] – such as excessive complexity – become a Corporate Governance issue?”

Epistemic risk is modeled by defining the probability that the risk will occur, the time frame in which that probability is active, and the probability of an impact or consequence from the risk when it does occur…

…For these types of risks we can have an explicit or an implicit risk handling plan. I use the word handling with special purpose. We handle risks in a variety of ways. Mitigation is one of those ways. But the risk handling work is actual work. It is in the schedule. We are doing work to mitigate the risk. We are buying down the risk, or we are retiring the risk. In all cases, we are spending money, and consuming time to reduce the probability that the risk will occur. Or we could be spending money and consuming time to reduce the impact of the risk when it does occur. In both cases we are taking action to address the risk.

via Herding Cats: Both Aleatory and Epistemic Uncertainty Create Risk.

One Response to Both Aleatory and Epistemic Uncertainty Create Risk

  1. galleman says:

    That’s a good question. I’ve tried to tell people that without knowing the “value at risk,” it’s hard to start the conversation. Maybe that’s how to get the BoD to start paying attention. “What do we have to lose?” Monetize that, and then start down the path of the “handling strategy.” It works in Manned Space Flight – The probability of the Loss of MIssion, Loss of Crew, Loss of any “capabilities” on the mission. Same of nuclear power.

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