Sensitivity Analysis Case Interview: What to Stress-Test and Why

Sensitivity analysis case interviews test whether you can pressure-test assumptions and explain which variables truly drive outcomes under uncertainty. In a sensitivity analysis case interview, candidates are expected to move beyond base-case math and demonstrate judgment by identifying what to stress-test, how results change, and why those changes matter for decisions. Many candidates struggle because they test everything instead of focusing on assumptions that materially affect the answer.

TL;DR - What You Need to Know

A sensitivity analysis case interview evaluates how well candidates identify key assumptions, stress-test value drivers, and judge decision robustness when outcomes change under uncertainty.

• Sensitivity analysis tests how changes in critical assumptions affect outcomes rather than relying on a single base case forecast.
• Consultants focus on demand, pricing, cost structure, and timing because these variables typically drive the largest outcome swings.
• Strong answers isolate value drivers before testing ranges to avoid unfocused or low-impact analysis.
• Sensitivity analysis differs from stress testing because it varies individual inputs while stress testing evaluates adverse combined scenarios.
• Interviewers assess judgment, prioritization, and decision clarity rather than mathematical complexity.

What Is a Sensitivity Analysis Case Interview

A sensitivity analysis case interview tests how your recommendation changes when key assumptions move away from the base case. In a sensitivity analysis case interview, interviewers evaluate whether you can isolate the few variables that truly drive outcomes, test realistic ranges, and explain decision risk under uncertainty rather than relying on a single forecast.

In consulting interviews, sensitivity analysis often appears after you establish a base case. Once initial results are calculated, the interviewer asks what happens if assumptions are wrong or if conditions change.

Sensitivity analysis in consulting interviews is designed to assess judgment, not technical modeling skill. You are expected to reason clearly about uncertainty using simple, structured logic.

Interviewers use this case type to evaluate whether you can:

• Identify key assumptions that materially affect results
• Stress test those assumptions using realistic upside and downside ranges
• Interpret outcome volatility and its impact on the final decision

Case interview sensitivity analysis often appears within profitability, pricing, market entry, investment, or capacity decisions. The objective is not to test every variable but to focus on the few impact drivers that influence decision robustness.

For example, if profitability depends primarily on demand and price, testing small changes in minor fixed costs adds little insight. A strong answer instead evaluates demand sensitivity, pricing flexibility, and variable cost exposure relative to base case assumptions.

Why Consultants Use Sensitivity Analysis to Stress-Test Decisions

Consultants use sensitivity analysis to stress-test decisions by evaluating how fragile or robust a recommendation is when assumptions change. Sensitivity analysis in consulting interviews helps determine whether a strategy still holds under downside scenarios rather than only in an ideal base case.

Most business decisions rely on assumptions that are uncertain at the time of analysis. Sensitivity analysis helps clarify which risks materially affect outcomes and which do not.

In case interviews, sensitivity analysis is often used to:

• Reveal which assumptions drive most of the outcome
• Expose downside risk that could invalidate a recommendation
• Support decision confidence by showing robustness across scenarios

Interviewers care less about the exact numbers and more about your reasoning. They want to see whether you recognize uncertainty and respond to it logically.

For example, if an investment appears attractive only when demand grows aggressively, sensitivity analysis should test lower growth scenarios immediately. If modest downside turns returns negative, the decision may require mitigation or reconsideration.

This stress testing assumptions case interview logic mirrors real consulting work, where leadership teams rarely rely on a single forecast.

Key Assumptions to Stress-Test in a Sensitivity Analysis Case Interview

In a sensitivity analysis case interview, you should stress-test assumptions that have the largest impact on results, not every input in the model. The goal is to identify which assumptions materially change outcomes and decision direction.

The most common assumptions to stress-test include:

• Demand or volume growth
• Pricing levels or price elasticity
• Variable cost per unit
• Fixed cost leverage at different scale levels
• Timing assumptions such as ramp-up or adoption speed

These assumptions typically drive contribution margin, break-even points, and overall profitability. Small changes in these variables often create large swings in outcomes.

Key assumptions case interview analysis should always start with value drivers. If changing an assumption barely moves profit or returns, it is not worth stress testing in depth.

For example, in a pricing case, price and volume assumptions usually dominate results. Testing minor marketing costs rarely changes the conclusion and signals weak prioritization.

Strong candidates explicitly explain why they choose certain assumptions to test, which demonstrates structured thinking and business judgment rather than mechanical analysis.

How to Identify the True Value Drivers Before Running Sensitivity Tests

Before running sensitivity tests, you must identify the true value drivers that explain most outcome volatility. This step prevents over-analysis and demonstrates expert prioritization.

Value drivers are variables that disproportionately affect results relative to other inputs. They are usually tied to revenue generation, cost structure, or utilization.

To isolate value drivers, you should:

• Start from the profit or return equation
• Identify which variables multiply or scale results
• Assess which inputs are both uncertain and impactful

This approach reflects how consultants think about impact drivers and decision robustness.

For example, in a capacity expansion case, utilization rate and demand forecasts often matter far more than small differences in fixed overhead. Stress testing utilization reveals downside risk quickly.

Interviewers look for clarity here. Testing everything signals a lack of judgment. Testing only what matters signals maturity and experience.

Sensitivity Analysis vs Stress Testing in Case Interviews

Sensitivity analysis and stress testing are related but distinct concepts in case interviews. Sensitivity analysis evaluates how outcomes change when one assumption moves, while stress testing examines adverse combinations of assumptions.

Sensitivity analysis typically changes one variable at a time within realistic ranges. Stress testing evaluates downside scenarios where multiple assumptions move together.

In case interviews, sensitivity analysis helps diagnose drivers, while stress testing helps assess risk exposure.

For example:

• Sensitivity analysis might test price plus or minus 5 percent
• Stress testing might assume lower demand, higher costs, and delayed rollout simultaneously

Interviewers expect you to use both concepts appropriately. Sensitivity analysis explains why results move. Stress testing shows whether a decision survives adverse conditions.

Confusing the two can weaken your recommendation.

How to Structure Sensitivity Analysis in Case Interviews Step by Step

A clear structure is essential when running sensitivity analysis in case interviews. Interviewers value disciplined thinking more than speed or complexity.

A strong case interview sensitivity analysis follows these steps:

• Confirm the base case result and decision
• State the decision threshold such as break-even or minimum return
• Identify the key value drivers
• Select one to three critical assumptions to test
• Define realistic upside and downside ranges
• Compare outcomes to the decision threshold

This structure keeps the analysis focused and interpretable.

When presenting results, always tie findings back to the decision. Avoid listing numbers without insight.

For example, instead of saying profit drops by 20 percent, explain whether the project remains profitable or whether the recommendation changes.

This approach demonstrates control, clarity, and decision orientation.

What Interviewers Look for When You Run Sensitivity Analysis

Interviewers evaluate sensitivity analysis based on judgment rather than calculation accuracy alone. In a sensitivity analysis case interview, they assess how you think under uncertainty and how you communicate risk.

Key evaluation criteria include:

• Selecting appropriate assumptions to test
• Explaining clearly why those assumptions matter
• Interpreting upside and downside outcomes logically
• Adjusting or defending the recommendation confidently

Interviewers also look for decision awareness. Strong candidates explain whether results change the recommendation, require mitigation, or reinforce confidence.

For example, showing that a decision holds even under conservative assumptions strengthens credibility. Showing that it fails under mild downside requires a thoughtful response, not defensiveness.

Ultimately, sensitivity analysis reveals whether you can move beyond numbers and think like a consultant making real-world decisions under uncertainty.

Frequently Asked Questions

Q: What should you stress test in a sensitivity analysis case interview?
A: In a sensitivity analysis case interview, you should stress test demand, pricing, variable costs, and timing assumptions that materially influence outcomes rather than low-impact inputs.

Q: How do you do sensitivity analysis in case interviews step by step?
A: To do sensitivity analysis in case interviews, explain how you would test key assumptions conceptually, describe expected outcome changes, and interpret whether the recommendation still holds under uncertainty.

Q: What is the main objective of sensitivity analysis in consulting interviews?
A: The main objective of sensitivity analysis in consulting interviews is to assess whether a recommendation remains valid when key assumptions change, revealing judgment and risk awareness.

Q: What is the difference between stress testing and sensitivity analysis?
A: The difference between stress testing and sensitivity analysis is that sensitivity analysis varies one assumption at a time, while stress testing evaluates combined adverse scenarios.

Q: What is the key focus of sensitivity analysis in decision making?
A: The key focus of sensitivity analysis in decision making is identifying impact drivers that change outcomes and clarifying whether risk supports or undermines the final decision.