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:
Characteristics:
- 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
Benefits
- 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
References:
1. Constructing Tornado Diagram using spreadsheet – http://www.oup.com/us/pdf/engineeringecon/scan.pdf
Project Management & Leadership Champions 
but why is the centre not on 0?
Hi Richard, I tried to show all of them having benefits higher than damages – that why the center is not on 0.
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good start
So the breadth represents the uncertainty from a negative to a positive value?
The portion on the left represents a negative cost impact if the event occurs and the portion on the right represents the positive value of the risk?
Hi Gary,
Breadth (X-axis) can be any project objective output like Cost, Schedule, which depicts the impact. Variable inputs, on which the sensitivity needs to be measured, are stacked in increasing order of magnitude (in Y-axis).
In case of risk – moving it from probability of 0.1 to 0.9, the impact is calculated on different project objective (here it is cost). Based on that it has positive or negative impact on cost. Stacking all risks in increasing order of magnitude produces Tornado diagram. The longer the bar the greater the sensitivity of the project objective to the factor. This assists the project manager in focusing on the most critical variable(risk) of the project