There is a lot on misunderstanding in interpretation of risk and uncertainty. To understand the difference between these two terms begin by exploring what is meant by “risk”. In general, risk is the chance of injury, damage, or loss (Webster’s New World Dictionary).

Risk: We don’t know what will happen in future, but we do know the distribution of future outcomes.
Uncertainty: We don’t know what will happen in future, and we don’t know what the possible outcome distribution is.

In other words, the future is always unknown — but that does not make it “uncertain.”
Although the definitions we have just provided are very simple, they can explain a lot when going into details.

“Damage or loss” in the definition of risk means that a spectator does realize that observable process or event may lead to negative effect. Note that it is not necessary to measure the size of this effect to realize the fact that it may occur. “Chance” means that the spectator possesses certain information, which allows describing the cause-effect relationship in any formal way. Still, this does not mean that he is able to predict future. The spectator can only define all possible outcomes of the process. Future is unknown, but certain. The latter is a key word in the definition of risk.

There is also a more formal way to define the terms of risk and uncertainty.

Assume that any process can be described by set of outcomes . In case you have no information about this process, is the same as universal set of all possible outcomes: .
Assume now that you have any information or data , which allows you guessing about the subset of future outcomes. Thus, conditional set of future outcomes is a subset of universal set, conditioned on :   . Future is still unknown; however, you may guess about possible outcomes for different processes i and j:

,

  .

This is how definitions of risk and uncertainty can be formalized.

Institutions can reduce uncertainty by researching their processes. For example, a bank can reduce its credit uncertainty by getting to know its borrowers. A brokerage firm can reduce market uncertainty by obtaining more knowledge about the markets it operates in.
As for the risk, there are two types of action which can be applied to decrease its negative effect: risk can be managed or reduced.