Describe the concept of certainty, risk and uncertainty

Certainty is when there is no doubt of the outcome of an event. But uncertainty is when there is doubt in the achievement of the desired outcome and the potential deviation in the outcome is called risk.

Uncertainty is a perceptual phenomenon that exists in different degrees to different people. It can be represented on a straight line called continuum. This continuum can be divided into different levels of uncertainty.

At level zero, the exposure to uncertainty is zero and at the right extremity the exposure to uncertainty is 100%. Therefore in this context risk is defined as exposure to uncertainty.

Level 0 (certainty) - There is no uncertainty at this level. The outcome of an event is known in certain. Events that come under the law of nature such as laws of physics and chemistry fall in this category.

Level 1 (objective probability) - Lowest level of uncertainty, events
occurring in this level are categorised by the likelihood of their occurrence. For example tossing of a coin, has an established fact that there are two outcomes either heads or tails, each with a probability 0.5.

Level 2 (subjective probability) - In this level, the degree of uncertainty increases. The outcomes of the events in this level are known but assigning probabilistic values to these outcomes is difficult. Probability is assigned with respect to a person, scenario or circumstances. Therefore it is referred to as subjective probability.

Level 3 (complete uncertainty) - The degree of uncertainty is the highest here. The outcomes of the events in this level are difficult to predict and hence the probability of occurrence is not known.