What Happens When Sensitivity Analysis is Neglected?
Neglecting sensitivity analysis can lead to several negative consequences, including:
Overconfidence in Projections: Without sensitivity analysis, entrepreneurs may become overly confident in their financial projections and underestimate the variability and uncertainty in their assumptions. Poor Risk Management: Entrepreneurs may fail to identify and mitigate key risks, leading to unexpected challenges and potential business failure. Inadequate Contingency Planning: Lack of sensitivity analysis can result in inadequate contingency plans, leaving businesses unprepared for adverse scenarios. Missed Opportunities: Entrepreneurs may overlook potential opportunities that could be identified through a thorough examination of different variables and scenarios.