COPING WITH UNCERTAINTY, AMBIGUITY AND RISK

COPING WITH UNCERTAINTY, AMBIGUITY AND RISK

Definitions:

• Uncertainty refers to the perception that is given by the impossibility of assigning a probability to an event (Hoskisson & Busenitz, 2002). • Risk corresponds to situations where the decision-maker can draw the distributions of the outcomes of a set of events, whereas uncertainty refers to situations where it is impossible to estimate objective probabilities to the outcomes of events or it is even impossible to predict whether these events will occur. (Knight, 1921). In economics, risk is defined as a measure of the probability that an investment will offer a different return than expected. Risk is therefore an estimation while uncertainty is a perception. • Tolerance of ambiguity: describes one’s ability to make decision with incomplete information. Making decision in the situation of high uncertainty (Moriano & Gorgievski, 2007, p. 88). Hint: Make decisions dealing with uncertainty, ambiguity and risk. Descriptors: • Make decisions when the result of that decision is uncertain, when the information available is partial or ambiguous, or when there is a risk of unintended outcomes. • Within the value-creating process, include structured ways of testing ideas and proto-types from the early stages, to reduce risks of failing. • Handle fast-moving situations promptly and flexibly. Thread FOUNDATION Discover – Explore Relying on support from others INTERMEDIATE Experiment-Dare Building independence ADVANCED Improve-Reinforce Taking responsibility EXPERT Expand-Transform Driving transformation, innovation and growth

Cope with uncertainty and ambiguity. Not afraid of making mistakes while trying new things.

Explore my own ways to achieve things. Be able to discuss the role that information plays in reducing uncertainty, ambiguity and risk.

I can actively look for, compare and contrast different sources of information that help me reduce ambiguity, uncertainty, and risks in making decisions. Find ways of making decisions when the information is incomplete.

Pull together different viewpoints to take informed decisions when the degree of uncertainty is high Make decisions evaluating the different elements in a situation that is uncertain and ambiguous.

Set up appropriate strategies for collecting and monitoring data, which help me take decisions based on sound evidence.

Calculate risk. Identify examples of risks in my surroundings.

Describe risks related to a simple value-creating activity in which I take part.

Manage risk Identify and describe current and potential risks and ways to manage them. tell the difference between acceptable

and unacceptable

risks.

Weigh up the risks and benefits of selfemployment with alternative career options, and make choices that reflect my preferences. Critically evaluate the risks associated with an idea that creates value, taking into

account a variety of

factors.

Critically evaluate the risks related to the formal set-up of a value-creating venture in the area in which I Demonstrate that I can make decisions by weighing up both the risks and the expected benefits of a valuecreating activity.

Apply the concept of

affordable losses to make decisions when creating value.

Compare valuecreating activities based on a risk assessment. Assess the risks my venture is exposed to as conditions change.

Evaluate high-risk long-term investments using a structured approach.

Outline a risk management plan for guiding my (or my team's) choices while developing my valueUse strategies to reduce the risks that may arise during the value-creating process.

Come up with strategies to reduce the risk of my valuecreating initiative becoming obsolete.

Test and experiment

Related to the concept of “Lean” as a way of minimising risks Understand the mechanisms of testing hypotheses and assumptions related to the new venture (e.g., regarding the need identified, the target value, the designed idea…). Identify key assumptions of the value-creating idea that need to be tested and refined along the value-creating process. Design repeated “experiments” or tests to gather relevant information that check and revise the assumptions in any aspect of the new venture (customers, needs, value provided..). Use effective strategies to evaluate results of experiments, accept or reject hypotheses, and if necessary, test and make a new hypothesis.

work. creating activity.