The strategic management of uncertainty

As the economic environment becomes increasingly uncertain, the ways firms minimize the risks of, and capitalize on the opportunities presented by that uncertainty become correspondingly important. This paper develops a strategic approach to the management of uncertainty which firms can use to achieve a desirable balance of risk and return. It identifies four generic approaches to uncertainty which differ in the pattern and timing of their resource commitments, and which firms can choose from to offset the exogenous uncertainty they face. The paper then suggests the conditions under which each approach might be appropriate, and describes the important managerial issues surrounding the different approaches. It thereby provides a way to integrate the treatment of uncertainty into strategy making at all levels of the organisation.