For the grits:
Bring the milk, water, and salt to a boil in a 4-quart saucepan set over medium-high heat.
While continuously whisking, gradually add the grits. Turn the heat to low and cover. Cook until thick and creamy, 15 to 20 minutes, removing the lid and whisking every 3 to 4 minutes to prevent the grits from sticking or forming lumps.
Remove from the heat, add the pepper and butter, and whisk to combine. Once the butter is melted, gradually stir in the cheese. Cover and set aside until the shrimp is ready.
For the shrimp:
Place a 10-inch saute pan over medium heat for 2 minutes. Add the shrimp to the pan and toss once or twice. Remove the pan from the heat. Gently pour the whiskey into the pan, carefully ignite with a long match or stick lighter, and return to the heat. Toss continuously until the flame extinguishes, 1 to 2 minutes. Saute until the shrimp are cooked through, 1 to 2 minutes more. Season with hot sauce and salt and pepper, if desired. Serve over warm grits.