Structuring
Sensitivity analysis
Changing one assumption at a time to see which matters most.
Facts checked against sources onWhat does Sensitivity analysis mean?
Sensitivity analysis means changing one input, such as price or market share, while holding the others fixed, and watching how much the answer moves. The inputs that move the answer most are the ones to test hardest. In a case, a line such as "if share is 2% instead of 4%, payback roughly doubles (if cash flow scales with share)" shows good judgment.
Where does it come up in case interview prep?
- Landed cost, worked end to endLesson in Sourcing, trade and supply risk
- Nearshoring, friend-shoring and "China plus one"Lesson in Sourcing, trade and supply risk
- Supplier concentration and resilienceLesson in Sourcing, trade and supply risk
- Using this in a caseLesson in Sourcing, trade and supply risk
- Valuation in practice: multiples, a simple DCF, NPV, IRR and paybackLesson in Reading a business through its numbers: the three statements, cash and value
- Risk in plain numbers: probability times impact, the risk register, expected valueLesson in Making operations better, and planning for what can go wrong
- Scenario planning: base, upside, downside, and deciding when you cannot knowLesson in Making operations better, and planning for what can go wrong
- Planning the work and building a simple modelLesson in Saying so what: synthesis and communication at work
Related terms
- HypothesisYour best early guess at the answer, which you then test.
- Net present value (NPV)Today's value of all future cash flows, minus the upfront investment.
- MECEBuckets that do not overlap and together cover everything.
- Issue treeA branching diagram that breaks a problem into smaller parts.
- Driver treeAn issue tree built from the numbers that drive an outcome.
- Pareto principle (80/20)A small share of causes often drives a large share of results.
Learn it in context
See Sensitivity analysis at work in a lesson from Sourcing, trade and supply risk, with checks as you go.
Spotted something wrong or out of date? Report a mistake. We check every report and correct the page.