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To answer this question, I’ll begin with a few basic statements. Risk is tangible; uncertainty is not. One can define risk, but one can barely delineate the outer layers of uncertainty. Risk can be rendered concrete; uncertainty cannot.

We can identify risk like we do a distant train coming towards us or to a dog barking at us nearby. Of course, the train may change its course before it reaches us; it may slow down or stop altogether. The dog, for its part, may bark without doing anything beyond that. Risk, after all, is not the train which has killed us or the dog that has attacked us. Neither constitutes risk. Rather, the danger perceived to be looming — whether close by or far away — represents risk. The realized danger, so to speak, is no longer a risk.

Uncertainty on the other hand has too many unknown variables. To turn to the examples aforementioned, uncertainty would be akin to us not knowing if the train has already left the station; and if it has, whether it would be using tracks leading our way. Uncertainty would be like knowing there is a dog somewhere in the neighborhood without us having a clue as to whether it would be heading towards us. It might not bark at us at all.

In the same vein, and following a similar logic, one should be careful to distinguish between risk and uncertainty when it comes to international conflicts. To go back in history, the French Revolution of 1789 represented an uncertain event to the other European powers; its outward expansion constituted a risk for them. The rise of the Nazi Party in Germany in 1933 was perceived by the democracies as more of an uncertain event than a risky development. The German conquest of Czechoslovakia in March 1939, however, convinced almost all decision-makers in democratic countries that Germany constituted a risk to the international system.

Of course the difference between a risk and uncertainty may be a matter of perception.

Subsequent to Napoleon’s defeat, a conceptual difference of opinion divided the British from the continental powers. Whereas the latter viewed any political revolution anywhere as a risk, the British thought the risk was only in the outward expansion of such a revolution. Thus the British saw uncertainty where the continental powers saw risk.

At the time the Nazis assumed power, Britain’s ambassador to Germany, Sir Horace Rumbold, warned his government about the Nazi Party and the threat it presented. He even alerted the Foreign Office in London prior to 1933 of the danger that a Nazi-led government would represent to Germany and European stability. Here, he perceived risk where many others saw uncertainty.

Why is this relevant now? Let’s look at Iran. For years, Iran’s nuclear programme has been regarded by most democratic countries as uncertain and seen by Israel, and later the United States, as a risk.

Today, most democratic countries tend to agree conceptually that Iran’s nuclear programme constitutes a risk, although there is a difference of opinion with regard to the time left and the means to be employed to counter it.

To be sure, uncertainty may be regarded as potentially affording opportunities, such as the so called-Arab Spring was/is perceived by many decision-makers and opinion shapers in the democratic countries.

All of this is a matter of perspective. The distinction between risk and uncertainty can be defined objectively, but, when it comes to the shaping of foreign policy, it is often a matter of perception about whether an event or a process is seen as risky or uncertain. Uncertainty and risk provide different thresholds.

Dr. Yoav J. Tenembaum lectures at the Diplomacy Programme (Political Science Department) at Tel Aviv University. He holds a doctorate in Modern History from Oxford University and a master’s degree in International Relations from Cambridge University.

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2 Comments

  1. July 1, 2013 at 4:52 pm — Reply

    Really helpful for the students of finance.

    Thanks.

    • Yoav J. Tenembaum
      July 2, 2013 at 1:03 pm — Reply

      Thank you.

      Yoav

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