In risk analysis, several types of uncertainties are generally analyzed. However, what is the fundamental difference between risk analysis and sensitivity analysis to address uncertainties?a) Risk analysis shows correlation of an input's value of a project with the value of its output while sensitivity analysis provides a functional form of that relationshipb) The use of probabilities to quantify uncertainties in risk analysis and absence of it in sensitivity analysisc) The use of probabilities to quantify uncertainties in sensitivity analysis and absence of it in risk analysisd) While sensitivity analysis is associated with one-by-one change in inputs' values, risk analysis is associated with the change of all inputs as a sete) Sensitivity analysis is based on the concept of expected value while risk analysis is associated with the concept of variance

Question

In risk analysis, several types of uncertainties are generally analyzed. However, what is the fundamental difference between risk analysis and sensitivity analysis to address uncertainties?a) Risk analysis shows correlation of an input&#039;s value of a project with the value of its output while sensitivity analysis provides a functional form of that relationshipb) The use of probabilities to quantify uncertainties in risk analysis and absence of it in sensitivity analysisc) The use of probabilities to quantify uncertainties in sensitivity analysis and absence of it in risk analysisd) While sensitivity analysis is associated with one-by-one change in inputs&#039; values, risk analysis is associated with the change of all inputs as a sete) Sensitivity analysis is based on the concept of expected value while risk analysis is associated with the concept of variance

Nicolas Calhoun · Accepted Answer

The correct option is b) the use of probabilities to quantity uncertainties in risk analysis and absence of it in sensitivity analysis. Risk analysis is the method to estimate the probability distribution of some project outcome whereas sensitivity analysis is the first step to risk analysis which involves recalculating project outcomes for different values of major variables.