CIMA P1 Syllabus D. Dealing With Risk And Uncertainty - Sensitivity - Notes
Sensitivity Analysis
This calculates the maximum percentage change in a variable before a decision would change
The lower % variables that are therefore the most important for the decision under review.
Advantages of Sensitivity Analysis
Easy to understand
Highlights key variables
Disadvantages of Sensitivity Analysis
Looks at variable only one at a time
It does not assess the probability of any change occurring
Does not offer a clear decision rule; management judgement is still required
Previous
Decision Trees
Syllabus D. Dealing With Risk And Uncertainty
D1b. Decision Models
Next up
Stress Testing
Syllabus D. Dealing With Risk And Uncertainty
D1b. Decision Models