Environmental uncertainty is the degree to which an organization lacks factual or competent information concerning the internal and external operating environment for the organization. Simply, it is the unknown in the organization and in the field of business relevant to company operation.
External environmental factors for an organization form the structure for how businesses operate in their market. Factors include customer demand, product availability, resource availability, political influence and competition. Some environmental factors are ubiquitous while others are more unique to a specialized environment. For example, construction companies often deal with the Environmental Protection Agency (EPA) when building or proposing new sites. An internet based company will not have the same concern, but will deal with other regulatory agencies. However, both must be concerned with resource management and competition.
Organizations can address environmental uncertainty in a variety of ways. Simplifying their operation is one method. The more complicated an organizational method is, the higher degree of environmental uncertainty because there are more external and internal factors to manage. Organizations can also manage their growth to control costs and diversify risk. There is no single best way to address environmental uncertainty. The best defense is information which is not always available (or poorly analyzed) or simply cannot be known.