Schedule Uncertainty and Risk
The terms risk and uncertainty are often used interchangeably, but they have distinct definitions in program risk analysis. Uncertainty refers to a situation in which little to no information is known about the outcome. A risk is an uncertain event that could affect the program positively or negatively. Stated another way, risk and its outcomes can be quantified in some definite way, while uncertainty cannot be defined because of ambiguity. In a situation that includes unfavorable and favorable events, the probability is that an unfavorable event will occur (a threat or harm) or that a favorable event will occur (an opportunity or improvement). Uncertainty and risk events may contain elements of both opportunity and threat.30
Schedule activity durations should account for both risk and uncertainty. Risk and uncertainty in scheduling refer to the fact that because activity durations are forecasts, there is always a chance that actual activity durations—and therefore scheduled start dates and finish dates—will differ from the plan. There will always be some aspect of the unknowable, and there will never be enough data available in most situations to develop a known frequency distribution of possible durations.
Risk events that can be listed and defined should be included in a program’s risk register in the form of threats and opportunities. Uncertainty arises because of the inherent variability in the actions of individuals and organizations working toward a plan. Uncertainty may also include estimating error and even systematic bias, such as when estimates are consistently optimistic. These events are often called “unknown unknowns.” As the program progresses, some uncertainties may be revealed or elaborated on and defined in the risk register as a threat or an opportunity. Prudent organizations recognize that uncertainties and risks can become better defined as the program advances and conduct periodic reevaluations of the risk register.
As we describe in the following sections, threats and opportunities, as well as general uncertainty, can be incorporated and quantified to some degree using schedule risk analysis.31
Definitions of risk and uncertainty are interrelated and vary across organizations, government agencies, and even fields of study. For example, some organizations consider risk as only the unfavorable outcome of an uncertain event.↩︎
These techniques are designed to capture general uncertainties about the future, not unforeseen catastrophic events such as major earthquakes and large labor strikes.↩︎