What is the purpose of sensitivity analysis?

The purpose of sensitivity analysis is to assess how changing values of an independent variable affect a dependent variable. This technique allows analysts and decision-makers to understand the relationship between different variables within a model, highlighting which variables have the most significant impact on the outcomes of interest. By systematically varying the inputs, sensitivity analysis reveals the degree to which results are sensitive to changes in these inputs, helping to identify risks and the robustness of the model.

This is particularly useful in scenarios where decision-making may be influenced by uncertainties in inputs, as it can guide stakeholders in focusing their efforts on managing and understanding key variables that drive changes in target outcomes. It plays an essential role in various fields, including finance, engineering, and project management, enabling more informed strategic planning.