Sensitivity Analysis
Definition
A financial modeling technique that measures the change in a defined output variable resulting from a change in a single input assumption, holding all other assumptions constant. Sensitivity analysis identifies which assumptions have the greatest effect on the output and therefore which assumptions require the most rigorous validation. Sensitivity analysis is distinct from scenario analysis: scenario analysis changes multiple assumptions simultaneously in a coherent set; sensitivity analysis changes one assumption at a time.
Common Misapplication
The most common misapplication is performing sensitivity analysis only on revenue assumptions while omitting cost and margin assumptions. For companies where gross margin variability is high or where cost escalation is a credible risk, cost and margin sensitivity may have a greater effect on the output than revenue sensitivity.
FFI Standard Reference
This term is defined and applied in Book 2, Section 2.4: The Scenario Analysis Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Sensitivity Analysis. https://ffistandard.org/glossary/sensitivity-analysis/. 2026.