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Managing Scenarios

Chapters 11 and 12 explained how to construct a base business case. During the initial case development, the tendency is to be neither optimistic nor pessimistic about the initial inputs: these estimates are starting points, and they are usually just best guesses. After constructing the basic business case, it's useful to continue with a sensitivity analysis—an examination of each input variable, and the assignment of base case, worst case, and best case values to each.

Scenario management is the process of examining individual variables, and assigning ranges of values to them. Each combination of values results in a different view, or scenario. You can then focus on each scenario, and assess the sensitivity of the most likely outcome (the base case) to changes in the assumptions that underlie the business opportunity. Again, this helps you keep your eye on the variables that matter.


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