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

  1. Easy to understand

  2. Highlights key variables

Disadvantages of Sensitivity Analysis

  1. Looks at variable only one at a time

  2. It does not assess the probability of any change occurring

  3. Does not offer a clear decision rule; management judgement is still required

Notes