What if analysis importance

What-if analysis takes this a step further and attempts to perform analytics based on changing certain inputs in a financial model to attempt to predict outcomes under very specific circumstances. The technique is often deployed in conjunction with scenario planning, which is the process of analyzing potential scenarios and how they might impact future outcomes.

As the name implies, what-if analysis is used in financial modeling to assess possible outcomes due to certain events that might be favorable or unfavorable to a business. This is most commonly performed in conjunction with various scenarios.

Scenarios are first created based on possible business impacts. For example, a steep decline in demand, a supply chain disruption, or the outcome of a pending litigation matter. At its core, what-if analysis is used to create and compare different financial plans and develop alternatives that can be used when a given condition changes. Whatever the various scenarios might be, what-if analysis attempts to quantify the impact of the various scenarios. Among the various benefits of performing what-if analysis, there are some very practical applications.

First, the outcomes help to develop different budgets based on changes in revenue as a result of some external force. Addressing Mental Illness and Workplace Safety. Risk Takers Wanted. Follow Connect with us.

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It is also known as sensitivity analysis. Safeopedia Explains What-If Analysis What-if analysis is the study of how the uncertainty in the output of a model or system numerical or otherwise can be linked to different sources of uncertainty in its inputs. Synonyms sensitivity analysis. Share this Term. Let's Make Workplaces Safer! Do you recognize the practical explanation or do you have more suggestions? What are your success factors for good decision making? How to cite this article: Mulder, P.

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