P       Q       R       S       T P Pay-back period: the period over which the total cash flow receipts from a project equal the original investment (without discounting). Present value: the value now of a future payment, after discounting it by a suitable discount rate to recognise that it is worth less than a payment of the same amount made now. Probability: the likelihood or degree of certainty of a particular occurrence taking place during a specified time period. Independent probabilities relate to events which do not depend on other events which have occurred previously. Dependent probabilities are the probabilities of occurrence once previous specified events have occurred. Probability distribution: a distribution which relates a range of particular outcomes to their likelihood. The most common probability distribution is the normal distribution which is shaped like the cross-section of a bell. Project: Any organised business activity where an investment is made. It most commonly refers to the work of creating and operating a physical asset, such as a bridge or a building. However, it need not involve the creation of a new physical asset at all, for example if a company launches a new product which has been manufactured by existing assets. The project extends over the whole investment life-cycle of activity, not just the initial phases while the investment is being made. Top Q Top R RAMP: Risk analysis and management for projects. RAMP close-down report: a report prepared by the risk process manager after the project has terminated. RAMP process plan: a plan prepared at the outset by the risk process manager, which establishes the risk strategy and baseline. The plan is updated as the work proceeds. Residual risks: those risks which are not avoided, eliminated or transferred in the risk mitigation strategy. Risk: risk is the likelihood of variation in the occurrence of an event, which may have either positive or negative consequences. Risk analyst: an individual whose primary task is the identification and evaluation of risks during the risk review. Risk assessment tables: tables that may be used to allocate ‘scores’ to risks, to help in prioritising them. Risk custodian: an individual who has responsibility for monitoring, controlling and minimising the project’s residual risks. Risk diary: a logbook maintained by the risk process manager which should, inter alia, contain a record of key events in the planning and execution of the RAMP process, any problems encountered and unforeseen risks which arose, the results of the risk reviews and ways in which future risk reviews or the RAMP process itself could be improved. Risk event: the occurrence of an event which has the potential to affect the viability of a project. Risk management: the process of managing risks identified in the risk review using the risk mitigation strategy and the risk response plan. Risk matrix: the presentation of information about risks in a matrix format , enabling each risk to be presented as the cell of a matrix whose rows are usually the stages in the investment life-cycle and whose columns are different causes of risk . A risk matrix is useful as a checklist of different types of risk which might arise over the life of a project but it must always be supplemented by other ways of discovering risks (see Appendix 3 for a specimen risk matrix). Risk mitigation strategy: an overall plan for mitigating the risks in the investment activity. Risk process manager: the manager who will plan, lead and co-ordinate the RAMP process. Risk register: a list of risks identified in the risk review process, including full descriptive detail and cross-references. Risk response plan: a plan (prepared towards the end of the risk review) for controlling the risks once implementation begins. Risk review: an overall assessment of the risks involved in a project, their magnitude and their optimal management. Risk reviews can in principle be held at any stage in the life of a project with each review building on the results of previous ones. Each risk review should be preceded by a risk review plan. Risk reviews should generate information for inclusion in the risk register, risk mitigation strategy and risk response plan. The results of a risk review should be set out in a risk review report. Top S Scenario: a hypothetical sequence of events in the future. Secondary risks: risks which arise from actions taken to mitigate other risks or from extensions to the original scope of the project. Secondary risks can sometimes be important and always need to be analysed in their own right. Sensitivity analysis: a technique used to discover how sensitive the results from economic and financial models are to changes in the input values of the variables used to calculate the results. A high degree of sensitivity is a warning to interpret the results of the model with care and circumspection, especially because many of the input variables will themselves have been estimated and therefore be subject to error. Use of econometric models must not obscure awareness of their limitations and possible pitfalls, especially when they are being used for forecasting. Significant: is to be interpreted as implying a risk the potential consequence of which could have a significant effect on one of the objectives, parameters or 'deliverables', even if it has only a small probability of occurrence. Stakeholders: those parties whose interests are affected by decisions about the operation of an asset which they do not necessarily own or enjoy property rights in. Stakeholder interests in a local factory would include (as well as the owner) the local community, workers, investors, bank, consumers etc. all of whom are liable to be affected by decisions made concerning the operation of the factory. Stochastic model: see Monte Carlo simulation. Strategic risk: any risk event which has serious or catastrophic consequences even though the probability of occurrence may be quite low. Top T Trend schedules: schedules which are used during the implementation of the project to record factors which could change the future risk profile of a project. Top