While analyzing project stability, it is important to come up with impact of a risk event quantitatively and determine which risk causes more damage (or benefit) to the project. Sensitivity charts are used to visualize impacts (best and worst outcome values) of different uncertain variables over their individual ranges. The sensitive variable is modeled as uncertain value while all other variables are held at baseline values (stable). Tornado diagram is a variance of the sensitivity charts where the variable with highest impact kept at the top of the chart followed by other variables in descending impact order which represents a Tornado.
Tornado diagram is applicable to wide range of project domains – Financial, Constructions, Software, Sales, Services, etc. Tornado diagram can be used for analyzing sensitivity in other project constraint (cost, time, quality and risk) objectives also.
Tornado Diagram’s Benefits & Characteristics in a nutshell:
- The longer the bar the greater the sensitivity of the project objective to the factor
- The factor that have the greatest impact is located at the top
- The bar ends indicate the low and high value of the factor
- Assist the project manager in focusing on the most critical variable of the project
- Sort and prioritize the variable according to their impact on the project objective
- Realize how much the value of the project is impacted by the uncertainties of the project
- Decide where you need to invest any additional efforts
1. Constructing Tornado Diagram using spreadsheet – http://www.oup.com/us/pdf/engineeringecon/scan.pdf