Tables Features Requirements Introduction Risk Analysis, or Decision Analysis, is the analysis of uncertainty applied to decision-making.
Many companies build business models to estimate future profitability and guide decision-making.
These models often base profitability calculations on a single set of assumptions about the future, which understates, even ignores, future uncertainty. By varying your assumptions through a range of possibilities, you can generate significant insight about the risk and reward of future profitability, and focus your management on key issues that count. Typically, out of the 10-200 assumptions most models contain only a few are critical contributors to risk. Scenario Analysis focuses on those critical assumptions, looking at all possibilities, to create a statistical distribution describing the range of possible profitability situations, both good and bad.