Which risk analysis technique helps assess various potential outcomes of a project?

Scenario analysis is a risk analysis technique that evaluates different possible future events by considering alternative outcomes. This method allows decision-makers to explore how changes in various factors can affect the potential results of a project. By creating several plausible scenarios, such as best-case, worst-case, and most-likely scenarios, analysts can identify the range of possible outcomes, assess the associated risks, and make more informed decisions about project viability.

This technique is particularly valuable because it acknowledges uncertainty and allows for the examination of how sensitive project outcomes are to changes in underlying assumptions or external conditions. It helps organizations prepare for various situations, leading to more robust planning and risk management strategies, ultimately improving the decision-making process in project development.

In contrast, other methods like regression analysis focus more on exploring relationships between variables rather than assessing diverse potential outcomes. Market analysis examines industry conditions and competitor positions rather than specific project risks. Investment appraisal, while important for evaluating the overall financial worth of a project, does not specifically address the varying outcomes that scenario analysis explicitly targets.