How does scenario analysis differ from sensitivity analysis?

How does scenario analysis differ from sensitivity analysis?

• A. Scenario analysis evaluates multiple input combinations and outcomes; sensitivity looks at one input at a time.
• B. Scenario analysis analyzes one input at a time; sensitivity uses multiple inputs.
• C. Scenario analysis uses probabilistic distributions; sensitivity uses fixed values.
• D. Scenario analysis ignores risk; sensitivity accounts for risk.

Answer: (A)

Understanding how changing inputs affects outcomes requires two common approaches. When you want to see how a plan performs under different conditions, you set up several input combinations at once and look at the resulting outcomes. That is scenario analysis. It lets you explore how multiple drivers moving together—such as optimistic, base, and pessimistic conditions or other realistic mixes—shape the results. Sensitivity analysis, by contrast, measures how much the outcome would change if you tweak a single input while holding all other inputs constant. It isolates the effect of that one variable, helping you rank which inputs have the biggest impact on the result. So the distinction is about how many inputs you vary at once: scenario analysis assesses multiple inputs together to reveal a range of possible outcomes, while sensitivity analysis varies one input at a time to gauge its influence.