Question

limitations of what-if anaylsis.

Answer 1

Definition of What if analysis

Unable to accurately identify the impact of alternate possible scenarios in taking bussiness decisions as well as day to day operations. A what if Analysis determines what can go wrong in a particular scenario then analyze the likelihood and consequences that thing will go wrong.

Examples-

1. HR Manager will use What if analysis to reduce headcount to 10% and then would this lower human capital cost to desired level.

2. If Sales Department wants to meet their FIscal revenue then they will use what if analysis to know about how much % does marketing need to increase their number of lead over next year.

There are various limitations of What If Analysis:-

1. Since What if Analysis requires evaluation and assessment of Risk so due to Potential Human Error, outcome will not be as accurate as planned.

2. The source of Information i.e. Market is volatile and no one can predict market so analysis can go wrong.

3. What if Analysis relies only on the Intutions of the members of the team which is not appropriate.

4. What if analysis is useful only whwn the right Questions were asked.

5. What If analysis is more subjective than other methods of Analysis.

6. What if Analysis contains greater potential of biasness by Reviewer.

7. What if Analysis gives more difficulty to understand results into convincing arguments for change.

8. Since no specialized tools required to conduct What if Analysis so reliablity is also under question sometimes.

9. Most What if Analysis gives only Qualitative results as they don't give any qualitative results of risk related characteristics.

10. As there is no formal structure of What if analysis, it is difficult to Audit for thoroughness.

11. As it is a loose structure so it is likely to miss some potential problems.