Scenario Analysis

What is scenario analysis?

Using HEA baseline data, an analysis of household coping strategies, and monitoring information on a current year shock (such as a drought), it is possible to project the likely effects of this shock on households’ livelihoods. This can then be compared against two thresholds used in HEA:

-the survival threshold: the total income (both food and cash) required to ensure basic survival;

-the livelihoods protection threshold: the total income (both food and cash) required to (1) ensure basic survival; (2) maintain access to basic services – for example, health and education; (3) sustain livelihoods in the medium to longer term – for example, purchase of seeds or veterinary drugs; and 
(4) achieve a minimum locally acceptable standard of living – for example, purchase of basic clothing or coffee/tea.

This process is known as scenario or outcome analysis.

What can scenario analysis do?

Scenario analysis can be used to calculate how many households require assistance, how much, and for how long both in food and cash terms. It is also used in several other applications of HEA, such as program design and graduation modelling.

Scenario analysis tools

FEG has developed three main tools to carry out scenario analyses and can provide support in all them and all types of scenario analysis:

-the single zone analysis spreadsheet: the quickest and simplest tool to set up, most often used in rapid HEAs to run scenarios for a single livelihood zone;

-the livelihoods integrated analysis spreadsheet (LIAS): a tool that allows scenarios to be run for larger geographical areas and up to twelve livelihood zones, and incorporates seasonal analysis to show the seasonal nature of any deficit;

-the dashboard: the simplest tool to use, it allows the user to carry out scenario analysis for multiple zones. It can also be used to model the impact of a range of programs on household livelihoods and is therefore helpful in program planning.

Example of scenario analysis

The graphic below from the HEA Guide for Program Planners and Policy-makers is a simple example of how scenario analysis works. Please see also the Practitioners’ Guide to HEA, or our presentation on HEA and resilience for a narrated explanation