Supervised By: Dr.

Sensitivity Ashraf Labib

Analysis Seminar in Strategic

Management
 Our Team

Name ID
Mona Kamal Teamaa 19121829

Hany Abdel-Moneim Abdel-Rahman 20121144

Heba Hemdan 20122339

Aya Gamal Mohamed 20121345

Mayada Moataz Mostafa 20122047

Mostafa Fathy 20121874

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What is Sensitivity Analysis?

The technique that analysis the risk of the strategic alternatives that may affect the strategic
objectives under a given set of assumptions is defined as sensitive analysis. Its usage will
depend on one or more input variables within the specific boundaries, such as the effect that
changes in interest rates will have on a bond’s price.

Sensitivity analysis is also called what - if analysis?, Sensitivity analysis is a way to predict the
outcome of a decision if a situation turns out to be a different compared to the key
predictions.

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 • Uncertainty in various parameters used in
simulation models feedback Loops , probability
distributions
• Values of these parameters can not be estimated
Why Precisely due to data availability or time
constraints

sensitivity • Less reliable model : tested for their sensitivity to

the changes in model components
analysis • Components to which simulation results are
sensitive, need more attention than other parts
of the model
• Parameters sensitivity of the model can be
compared with information from real system

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How Sensitivity Analysis works

It can be used to ascertain how interest rates affect bond prices and in making predictions about the
share price of publicly traded companies.

The technique allows to establish which variables are more critical than others in affecting a
decision. so, it offers investors insight into how different variables can impact upon their potential
investment returns. we will look at how the variables move, as well as how the target is affected by
the input variable.

Sensitivity analysis allows for forecasting using historical data, paving the way for important
decisions to be made about businesses, the economy and making investments.

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Types of sensitivity analysis

Partial sensitivity Best-case and

analysis worst-case
scenarios

In partial sensitivity Best- and worst- case

analysis, you select one This type of sensitivity
scenario established the
variable, change its value analysis show how a broad
upper( best- case) and
while holding the values range of a problem or
lower(worst-case)
of other variables policy's possible outcomes
boundaries of a cost-
constant affect the bottom line.
benefits study's result

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 • Simplicity
• Directing management efforts
Advantages • Ease of being automated
• As a quality check

Disadvantage • It doesn't provide clear-cut results

s • Not a solution in standalone form

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There are • Local sensitivity analysis is a one-at-a-time (OAT)
technique that analyzes the impact of one
mainly two parameter on the cost function at a time, keeping
the other parameters fixed.
approaches
to analyzing • Global sensitivity analysis is the second approach to
sensitivity analysis, often implemented using Monte
sensitivity: Carlo techniques. This approach uses a global set of
samples to explore the design space.

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 Steps in Sensitivity Analysis

1. Defining the base case output: The first step is to define

the corresponding base case output for the base case
input value for which the sensitivity is to be measured.
2. Determining the new output value: During this step, we
determine the value of the output for a new value of the
input, given that the values of all other inputs are
constant.
3. Calculating the change: We then compute the
percentage changes in the output as well as the input.
4. Calculating sensitivity: This final step calculates
sensitivity by dividing the percentage change in output
by the percentage change in input.
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 1. Developing Recommendations for the Decision-makers
2. Feasibility testing of an optimal solution
3. Identifying the sensitive variables

Uses of
4. Identifying critical values and break-even point where the optimal
strategy changes
5. Assessing the degree of risk involved in strategy or scenario

Sensitivity 6. Communication
7. Allows the decision-makers to make assumptions

Analysis 8. Making recommendations

9. Quantifying the parameters
10. Developing a hypothesis for testing different scenarios
11. Estimating the requirements of the input and output variables
12. Understanding the relationship between input variables and the
outcome

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Examples of sensitivity analysis Interest
Rate

In budgeting process there are always variables that Inflation

are uncertain such as Rates

Sensitivity analysis answers the question

Future
“If these variables deviate from expectations ,what Tax
will the affect be ( on the business model , system or
whatever is being analyzed )
and which variables are causing the largest
Head-
deviations?” count

Operating
expenses

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Forms of Outcomes in Sensitivity Analysis:

• Pessimistic
• Expected or the Original
• Optimistic

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Example:

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Example:

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Thank you

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