Sensitivity analysis is a method used in project management and making decisions to figure out how changes in certain factors affect how a project or decision turns out. It helps to figure out which factors have the most effect on the project or decision, and it lets project managers make choices based on a variety of possible results and scenarios.
In sensitivity analysis, project managers change the values of one or more factors in a project model or decision-making process and look at how the changes affect the project results. For example, a project manager might change a project’s prices, income, or discount rate in a financial model to see how these changes affect the project’s net present value (NPV) or internal rate of return (IRR). (IRR).
Sensitivity analysis can help project managers figure out which assumptions and factors are the most important and have the biggest effect on how the project turns out. It can also help project managers figure out the risks and unknowns of a project and figure out how well it can handle changes in different situations.
When a project has a lot of doubt, complexity, or danger, it is especially helpful to use a sensitivity analysis. By doing a sensitivity analysis, project managers can find the most important factors that could have the biggest effect on how the project turns out and take steps to reduce the risks and uncertainties that come with them.
