The Business Case Dictionary

Sensitivity Analysis

Sensitivity Analysis is a method used to evaluate how the results of a decision or action may change in response to variations in one or more factors. It is a business case tool used to identify the key drivers of a decision or outcome, and to understand how these drivers may affect the overall performance of a business or project.

To conduct a sensitivity analysis, you need to identify the key factors that may impact the decision or outcome, and then vary these factors to see how the results change. This can involve creating models or projections based on different assumptions about market conditions, economic trends, and other factors that could affect the outcome of the decision.

Sensitivity analysis is often used in conjunction with scenario analysis, as it allows you to more thoroughly evaluate the potential risks and opportunities associated with a decision. It is a useful tool for decision-makers, as it helps to identify the most important factors to consider when making a decision and allows for a more informed assessment of the potential outcomes. Sensitivity analysis can be used in a variety of business contexts, including strategic planning, risk management, and investment analysis.

Sensitivity analysis is one of the features of the Financial Analysis Templates.


Stress Testing


Stress testing is a technique used to assess the resilience of the business case’s outcome under adverse or extreme conditions.

It involves subjecting the project’s cash flows and NPV to severe but plausible scenarios to evaluate its ability to withstand unfavorable circumstances.

Stress testing helps identify vulnerabilities, assess risk mitigation strategies, and ensure that the business case remains robust even in adverse conditions.

By incorporating stress testing into the business case, you can identify and address potential weaknesses, make informed decisions, and increase the likelihood of achieving success in challenging environments.