Sensitivity Analysis

Sensitivity analysis is a quantitative method of analyzing the potential impact of risk events on the project and determining which risk event (or events) has the greatest potential for impact by examining all the uncertain elements at their baseline values. One of the ways sensitivity analysis data is displayed is a tornado diagram. Figure 6.5 shows a sample tornado diagram.

FIGuRE 6.5 Tornado diagram

Project management risk | |

Organizational risk | |

-12,000 -6,000 0 6,000 12,000 Project budget

You can see by the arrangement of horizontal bars (each representing a sensitivity variable) how the diagram gets its name. The idea is that each sensitivity bar displays the low and high value possible for the element the bar represents. It's beyond the scope of this book to explain how these values are determined. The questions you might encounter on the exam are focused on the context of this type of analysis. The variables with the greatest effect on the project appear at the top of the graph and decrease in impact as you progress down through the graph. This gives you a quick overview of how much the project can be affected by uncertainty in the various elements. It also allows you to see at a glance which risks might have the biggest impacts on the project and will require carefully crafted, detailed response plans. You can use tornado diagrams to determine sensitivity in cost, time, and quality objectives or for risks you've identified during this process. Sensitivity analysis can also be used to determine stakeholder risk tolerance levels.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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