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Sensitivity Analysis

With respect to reserve studies, a sensitivity analysis is the process of testing of the impact of different scenarios by running alternative funding models.

so that the owners can make an informed decision based on their tolerance for risk.

Different inputs to the models (such as inflation rates and funding levels) result in different outputs.

A sensitivity analysis forces a controlled cascading effect on the variables.


Purpose of Sensitivity Analysis

The analysis helps the owner group find a funding level that is considered most appropriate based on their:



Classes of Sensitivity Analysis
Sensitivity analysis asks the following two questions:


A. Linear Funding Models
This method asks the question: “If the owners fund at level x, what  will be the resultant FCI each year?

B.  Lumpy Funding Models

This method of funding asks the question: "What should our funding be each year to ensure that the FCI remains at a certain level."



Types of Funding Models
Listed below are the four primary types 
of funding models that provide a sensitivity analysis of the impact of different funding levels for the reserve components in a building. The models are typically presented as part of the financial analysis in a reserve study.
Workflow to illustrate how lumpy funding models form part of a sensitivity analysis.
Fig. Workflow to illustrate how lumpy funding models form part of a sensitivity analysis
.

Sensitivity analysis testing the Projected FCI levels on two linear funding models.
Fig. Sensitivity analysis testing the Projected FCI levels on two linear funding models.


comparison of two funding models.
Fig. comparison of two funding models to test the sensitivity of different funding levels.

See also:

1
Fig. Sensitivity analysis comparing three alternative funding scenarios.

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