What is Project Sensitivity Analysis?

Project Sensitivity Analysis is a kind of simulation analysis in which key quantitative computations and assumptions that underlay a given project are reviewed and changed systematically to assess their effect on the final result of the project. It is employed commonly in evaluating the overall risk or identifying critical factors to predict alternative outcomes of the same course of project implementation. It’s also called what-if analysis.

 The analysis of project sensitivity entails making an attempt to determine what events cause uncertainty and risks to the project and how they impact on the project’s outcomes. During the analysis, alternative or "what-if" scenarios are generated and described to explain how risks may influence the project, what opportunities can be exploited, and what effort and resources will be required to cope with project risks in every forecasted scenario.

 When all scenarios and risks are analyzed, sensitivity chart (aka "tornado diagram") is to be created. Such a chart summarizes the total effect of various assumptions and computations on the project’s overall goal. The greatest value of sensitivity chart is that it shows the best scenario that causes the lowest negative effect to the project and its results. Thus, the project is less sensible to risks and uncertainty caused by the scenario.

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