Harvard Islamic Finance Program publishes short report on Risk Management Seminar

The workshop was made up of a group of influential Islamic legal scholars, academicians, economists, and bankers, who were welcomed by the Directors of IFP and LSE, Dr. Nazim Ali and Sir Howard Davies, respectively. The inancial crisis, which was the backdrop of the discussions, and the need to revisit risk management practices were underscored in the opening addresses. The crisis, at its core, demonstrates the dangers of “group think” and overoptimism in clouding corporate decision-making and risk reigning. In this regard, risk managers and board members of risk committees would have better served institutions as contrarians in their assessment approach. Understanding risk is key to managing risk. Undermining this key tenet was the complexity of financial instruments, which managers failed to understand. The resulting underassessment fed into misaligned models concerning the true risk interactions of various securities within portfolios, causing misleading enterprise risk measures and hedges.

The summary report is free for download