Risk analysis-Sensitivity

Analysis
Presented By : Manoj Datkhile.

Submitted To:
What is Risk?
The chance that an investment's actual return will
be different than expected. Risk includes the possibility of
losing some or all of the original investment.
Risk can be a currency risk, inflation, economic, liquidity risk,
market risk, opportunity risk, income risk, investment risk.
Risk analysis is the process of defining and analyzing the
dangers to individuals, businesses and government agencies
posed by potential natural and human-caused adverse events.
Types of Risk Analysis
Quantitative risk analysis:
It is an attempt is made to numerically determine the
probabilities of various adverse events and the likely extent of
the losses if a particular event takes place.
Qualitative risk analysis:
which is used more often, does not involve numerical
probabilities or predictions of loss. Instead, the qualitative
method involves defining the various threats, determining the
extent of vulnerabilities and devising countermeasures should
an attack occur.
Steps in Risk Analysis
 Identify Threats:
Threats can be operational, technical, financial, natural,
political.
 Estimate Risk
 Manage Risk
 Review
Sensitivity Analysis
A technique used to determine how different values of an
independent variable will impact a particular dependent
variable under a given set of assumptions. This technique
is used within specific boundaries that will depend on one or
more input variables.
For Example: If the investment budget increases 20% due to
unknown factors, it will be its effect on NPV.
Uses of Sensitivity Analysis
Testing the robustness of an optimal solution.
Identifying sensitive or important variables.
Comparing the values of simple and complex decision
strategies.
Allowing decision makers to select assumptions.
Estimating relationships between input and output variables.
Developing hypotheses for testing.
Model Development.
THANK YOU