02.06 |【06】| Why distinguish between risk and uncertainty ?

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⚠ Use of different approaches to deal with…

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ℹ As risk is quantifiable, in an attempt to improve the reliability of business forecasts, appropriate sophisticated modelling techniques are essential to deal with it, for instance, use of…

 

1️⃣ Sensitivity Analysis

2️⃣ Probabilities (ρ) and Expected Values (EV)

3️⃣ Standard Deviation (σ)

4️⃣ Monte Carlo Simulation

5️⃣ Value at Risk (VaR)

6️⃣ Pay-Off-Tables (POT)

 

ℹ As uncertainty is unquantifiable, when probabilities are unknown — not available, there are still feasible techniques to incorporate uncertainty into decision making process, for instance, use of…

 

1️⃣ The Maximax rule

2️⃣ The Maximin rule

3️⃣ The Minimax Regret rule