SENSITIVITY ANALYSIS
D X Gnanaraj AFA/W/PER
1.
simplest
of handling risks
2.
magnitude
in the ROR by small change in the components of which are uncertain
3.
selct
variable –whose estimated values may contain significant errors or elements of
uncertainty
4.
key
variables are – cost, price, project life, market share etc
Advantage:
1.
identify
crucial variables that makes greatest impact in the NPV of the project
2.
graphical
presentation – better visual appeal
3.
by
confining SA to adverse changes in the variable that can be reasonably expected
to occur one can obtain range of NPV that can be reasonably anticipated
4.
knowledge
is helpful for making decisions
Railways
Risk Factors:
1.
land -
delay in acquisition – litigation
2.
earth
work availability of sand
3.
soil
condition – geographical factors –weak/loose Eg TEN-NGC line due to weak soil
4.
alignment
due to local or popular demand Eg KRCL in Madgaon line in Goa State
5.
availability
of sleepers – wooden/ Pre Stressed Concrete Sleepers – snags in production- ban
on wooden sleepers as environmental policy of the Govt
6.
availability
of rails – change in the production pattern of the steel mills – delay in
production- change in the Govt policy
7.
estimated
earnings – net production of commodities short fall in projected and traffic
due to climatic and natural causes – import and export potential
8.
delay in
rolling stock in ordered quantity Eg Hassan – Mangalore line for transport of
ore to Port of Mangalore
9.
cost and
time over runs – likely delay due to paucity of funds/allotment
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