Introduction • All impacts in money terms • No impacts in monetary terms • Some impacts in money terms • Risk & uncertainty

Risk and uncertainty

However the assessment is undertaken and a preferred option selected, there will always be some risk that the correct option has not been selected, that there will be residual impacts and that uncertainty may not have been fully addressed.

The first risk (that the wrong option was chosen) is dependent on the amount of data that was available, how (and if) stakeholders have been involved in the decision, and whether changes occur that were not expected. There may also have been some appraiser bias in terms of how the options were assessed. This is common where one option is preferred at the outset and an appraiser (often unintentionally) records that option as having greater benefits or fewer impacts. In most cases, it will not be known that the wrong option has been selected unless monitoring is undertaken which allows the predicted impacts to be compared with the actual impacts.

The second risk relates to residual impacts that occur because there is not one option that always outperformed the others (i.e. is risk free). In such cases, it is important that residual risks are reported and mitigation measures proposed, as far as possible.

Uncertainty can affect the selection of the preferred option, particularly where impacts have been estimated in money terms. It is important, therefore, that sensitivity analysis is undertaken to determine the robustness of the decision. If the preferred option remains the same even when large changes are made to the assumptions and, hence, to the estimated benefits, it can usually be assumed that the preferred option is robust. It is more difficult to take account of uncertainty when using qualitative and/or quantitative descriptions of impacts. In this case it is important that uncertainties in the base data or in the predicted impacts are recorded. In this way, a decision maker will be fully informed with respect to uncertainty and can take it into account when selecting the preferred option.