Sensitivity Analysis

Sensitivity analysis allows the impact of different possible outcomes to be evaluated easily. It is sometimes described as ‘what if?’ analysis, because it answers the question ‘what if such and such were to happen?’

Typical outcomes which can be evaluated are:

  • What if development work costs 5% more than forecast?
  • What if the sales launch is delayed by six months?
  • What if sales in the first year are 10% below forecast?
  • What if sales prices are 1% higher or lower than forecast?

Various possibilities can be evaluated to find out which factors will have the greatest impact upon the return to be achieved. This allows management attention to be focused on the most sensitive aspects of the project in an informed way.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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