Risk can be described as any outcome that cannot be predicted with certainty. The appropriate use of inferential statistics, however, can assist the project team to make an informed judgement of the likelihood of a given risk occurring and the consequence(s) of that occurrence. However, statistical output can often be misleading and should not be regarded as an absolute solution in the quantification of the risks - the objective is to augment the judgment, experience and creative processes of the project team managing the risk analysis function, not to displace them.
In the context of the PSC, an estimate can be made of the financial impact of risk by simulating the likely behaviour of the risk over time. Simulation can be described as a mathematical model that explains the relationship between various input variables (or independent variables) and one or more output (dependent) variables, where the value of one or more of the independent variables is uncertain.