Sensitivity Analysis and Scenario Planning (Text Based Course) 1.5 CPE

This course gives you insights into how sensitivity analysis and scenario planning can improve your company's decisions. You'll also discover tools to obtain and communicate the insights from this analysis.

Sensitivity analysis is the process of varying inputs to a model to assess their impact on the outcomes (i.e., outputs) of the model. This allows you to identify the model inputs that have the biggest impact on the outputs (e.g., profit). This improves decision efficiency and effectiveness. You also get a clear picture of the company's full range of potential outcomes.

Scenario planning explores projections in which multiple assumptions have been changed from the base case or current conditions. Scenario planning allows outcomes to reflect the correlation of multiple assumptions, which may cause their impact to increase exponentially versus a change by any one of the assumptions. Scenarios can explore opportunities for which the company wants to prepare or risks for which the company should take mitigation steps.

You'll learn tools like bookending and tornado diagrams to develop and communicate sensitivity analysis. Many people anticipate a much too narrow range of potential outcomes. This leaves them blind to many good and bad potential outcomes. You'll discover techniques to improve the accuracy of estimates of the most likely outcome and the range of potential outcomes.

Course Key Concepts: Scenario planning, Sensitivity analysis, Sensitivity testing, Stress testing, Bookending, Bracketing, Tornado diagrams, Break-even analysis.

Note: This course is also available in Video-Based format:
Sensitivity Analysis and Scenario Planning

Prerequisites

No advanced preparation or prerequisites are required for this course.

Learning Objective

• Recognize and recall how to perform sensitivity analysis.
• Discover and describe scenario planning.
• Identify ways to improve estimates.

Last updated/reviewed: March 13, 2025