Explain the difference between risk and ambiguity.

According to Ellsberg (2001), risk is where there are clear goals in decision making and there is more than enough information about the business one wants to embark on. However, the future outcomes and endeavors are unknown and hence one will be taking a chance and gambling that the future will hold positive outcomes. Ambiguity on the other hand has no clear cut decision making goals and there is uncertainty about any information or outcome concerning the future. With no clear problem that needs to be solved, no information present and the future being uncertain, everything about an ambiguous situation is left purely to uncertainty and unavailability while in a risky situation it is left purely to chance.

How might decision making for a risky versus an ambiguous business situation differ?

Decision making for a risky situation has a far more chance of being controlled and the situation maneuvered in order to get positive outcomes than is the case with an ambiguous situation. In an ambiguous situation, everything is carried out blindly as there are no directives for anything and neither is even the real problem known. Decision making can therefore not work without establishment of the problem at hand, without goals to solve the problem or even certainty or uncertainty about the future. A risky business situation has either a positive or negative outcome with the hope of correction of these outcomes with alternatives. This is more than can be said in an ambiguous business situation as whichever way the outcome turns, there is no way to correct it and establish the best decision as everything is uncertain and will remain so until a problem has been established (Ellsberg, 67).