Data Management Investigate

Failure Of Financial Sector Risk Management As An Analog for The Engineering & Construction Industry

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Executive Summary

It was spring of 1827 and Robert Brown had just returned from collecting pollen in the Scottish countryside. A botanist, Brown placed some of the pollen in water under his microscope and observed the grains of pollen moving about completely randomly. That random motion, now called Brownian motion after its discoverer is a useful tool in studying truly random events. Many of today's risk models are founded on the principles of Brownian motion, at least as Robert Brown understood them in the spring of 1827. Financial models and their associated risk management tools, built on the randomness underlying Brownian motion, served the financial industries well, at least to the current financial crisis.

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