Business Analytics · Intermediate level

Intermediate level · Module 4: Scenario Planning and Sensitivity · Lesson 3 of 3

Sensitivity and Communicating Uncertainty

Find which assumptions move results most and present uncertainty honestly.

In this lesson you will

  • Run a one-at-a-time sensitivity analysis
  • Present ranges and key assumptions to decision-makers

Key concepts

sensitivity analysiskey assumptionstornado rankingranges

The lesson

Sensitivity analysis changes one assumption at a time and records the effect on profit. Ranking the effects shows which assumptions matter most.

In the branch model, a margin of 25% instead of 30% cuts base profit from 120,000 to 70,000 SSP — so margin deserves close monitoring.

Present results as ranges, name the key assumptions and propose leading indicators to watch after the decision.

Step by step

  1. Change each assumption by a realistic amount.
  2. Record the effect on profit.
  3. Rank assumptions by effect.
  4. Write the uncertainty section of the briefing.

Practice activity

Complete the sensitivity analysis and briefing for the branch decision.

Expected result: A ranked list of key assumptions and a briefing with ranges.

Check your understanding

  1. What does sensitivity analysis show?

    Show answer

    Which assumptions have the biggest effect on results.

  2. How should uncertain results be presented?

    Show answer

    As ranges with key assumptions and indicators to watch.

Taught live by an instructor — online or in person. Free course lessons are for self-study and do not lead to a certificate — see registration options.