sensitivity-tornadolisted

# Sensitivity Tornado ## When to use Use this skill when a model has been built and the team needs to identify which assumptions actually drive the output, before investing further analytical effort. Trigger it when a project manager asks "what are the key risks to the model?", when a model review requires a sensitivity summary, or when an investment committee asks "what is the most important assumption?" It is most valuable at the end of a modeling exercise, as a final diagnostic before a model is presented or signed off. ## What it does Produces a complete tornado chart analysis: identifies all input variables to test, defines the swing range for each, computes the output impact for each swing (both upside and downside), ranks variables by absolute impact, and specifies the horizontal bar chart data structure in Excel that creates a tornado diagram. Ranks assumptions by their contribution to output uncertainty. ## Method 1. **Identify the key output to be sensitized.** The tornado analysis focuses on one output at a time. Define which output is most decision-relevant: EBITDA, IRR, equity value, NPV, 5-year revenue, or another key metric. If multiple outputs are relevant, build one tornado per output. 2. **List all candidate input variables.** Compile every material assumption in the model that is (a) uncertain and (b) could have a meaningful impact on the output. A starting list for a financial model: revenue growth rate, gross margin, EBITDA margin, customer acquisiti