RISK MANAGEMENT IN UNDERGRADUATE ENGINEERING ECONOMICS EDUCATION

ABSTRACT

Engineering economics courses and textbooks have typically acknowledged the existence of the role of risk in economic decision making, but often in a peripheral way. The approach has been to suggest the existence of risk and uncertainty in engineering decisions, and to quantify that risk. The world of financial decision making includes many more powerful tools and techniques for risk management, rather than just risk measurement. The techniques of risk management include diversification, hedging, insuring, the capital asset pricing model (CAPM), futures contracts, options, and other investments. These portfolio tools are useful to engineering decision making, and the engineering economics community would be well served to include these topics in engineering economics undergraduate education.