Everything you ever wanted to know about risk, uncertainty and ignorance
Together with Jan Kwakkel, we just published our chapter for the Handbook of Engineering Systems Design on better managing various types of uncertainty in large system design endeavors. This is a so-called “reference work”, the highest honour Springer bestows (at least if you ask me).
The purpose of the chapter is to provide a top-down introduction to “risk management”, including management of uncertainty (i.e. no probabilities) and ignorance (i.e. no knowledge what exactly could go wrong). In addition, we look at each of these areas from two perspectives: What do when people agree, and what to do when people do not agree (as this is an academic work, we have to make it sound fancy and call it “commensurate” and “incommensurate” values).
Focus of our discussion: Six types of practices for dealing with risk, uncertainty and ignorance (Oehmen & Kwakkel 2022)
Even if I say so myself, I can highly recommend the text as an introductory overview for both students and practitioners. We tend to focus on what we call “classic” risk management practices, and ignoring a wide range of practices that also exist - and that can often be more appropriate for the real-life situation we are facing.
Citation
Oehmen J., Kwakkel J. (2022) Risk, Uncertainty, and Ignorance in Engineering Systems Design. In: Maier A., Oehmen J., Vermaas P.E. (eds) Handbook of Engineering Systems Design. Springer, Cham. https://doi.org/10.1007/978-3-030-46054-9_10-1
Abstract
Uncertainty is the third major perspective in understanding and designing engineering systems, along with complexity and human behaviour. Risk, a corollary of uncertainty, is understood as the effect of uncertainty on objectives. When designing engineering systems, you cannot not manage risk – even ignoring risk equates to a decision to accept it. Engineering systems are characterised by long life cycles, changing operational environments, and evolving stakeholder values, leading to a wide range of uncertainties in their design and operation. Productively engaging with this uncertainty is critical for successfully operating and especially (re-)designing engineering systems.
This chapter provides an overview of managerial practices to address the three levels of increasing uncertainty in engineering systems design: from (1) managing risk, to (2) managing uncertainty, to (3) managing ignorance. We differentiate for each level of uncertainty between two levels of value diversity: (1) primarily commensurate values (i.e. agreement on core values by critical stakeholders) and (2) primarily incommensurate values (i.e. no agreement on core values). The managerial practices we discuss are “classic” risk management, public engagement, scenario planning, robust decision-making, resilience, and applying the precautionary principle. In addition, we briefly illuminate the actuality of management practices dealing with the different levels of uncertainty beyond explicit, formal processes, the understanding of managing uncertainty as both modelling and decision support practices and personal and organisational biases in the context of addressing uncertainty.