A technique that examines how changes in key assumptions or variables affect the outcome of a financial model or business decision. It helps identify which factors have the greatest impact on results and how robust conclusions are to different conditions.
Combines 'sensitivity' from Latin 'sensus' (feeling, perception) and 'analysis' from Greek 'analyein' (to break up). The mathematical technique originated in operations research during WWII and was adopted by business analysts in the 1960s for financial modeling and strategic planning.
Sensitivity analysis reveals the 'pressure points' in your business model - the variables that can make or break your success! Smart executives focus most of their attention and control systems on the factors that sensitivity analysis shows have the biggest impact on outcomes, rather than trying to manage everything equally.
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