298 AN INTRODUCTION TO ISLAMIC FINANCE
■ (^) Effective risk management will assist IFIs to integrate with global fi nan-
cial markets. Efforts should be made to enhance transparency in fi nancial
reporting and to development accounting and reporting standards across
markets.
■ (^) Risk management requires highly skilled human resources, which are
currently in short supply. Efforts should be made to develop customized
research and training programs to spread the knowledge and awareness
of the signifi cance of risk management. Such training programs should
provide for the certifi cation of successful participants.
The sub - prime fi nancial crisis was also attributed to the failure of risk -
management frameworks. Several institutions that had such a framework
were surprised when the risk models failed to predict the problems and did
not estimate the risks accurately. During the boom periods, fi nancial institu-
tions had become heavily reliant on risk and other quantitative models, but
as the fi nancial markets increased in complexity so did the risk models. For
example, a well - known and frequently used standard measure for risk, VaR,
came under fi re after the crisis for its unrealistic assumptions and the way it
was applied in the decision - making process. The main lesson of the fi nancial
crisis for the risk management profession was that the fi nancial institutions
need to develop a culture of mixing quantitative with qualitative or subjec-
tive analysis. The use of sophisticated risk measures is still not widespread in
the majority of IFIs and they need to develop both proper risk models and
an institutional culture that supplements risk measures with qualitative judg-
ments based on experience and knowledge of the markets.