Risk Management in Islamic Banks

Abstract

In the last few years, several significant developments have been witnessed in the banking and financial processes. In the meantime, both the risk and competition faced by banks in stock markets have risen. As a result, the investment mechanisms and approaches of Islamic banks need to be found, bearing in mind that these banks encounter relatively higher risk that traditional institutions. Due to their commitment to the Shari'a rules of financial transactions, they have limited choice about risk and, thus, it becomes necessary to analyze, manage and control risk.To reduce and resist current and future risk, Islamic banks, in particular, should investigate its types and how to manage them. Upon the great success of such institutions in the banking and financial milieus throughout the world, they are urged to develop their risk management methods. The present study analyzes the risk facing all banks, especially those facing Islamic Banks, and the means to manage and control such risk.

Keywords: Islamic Banking Risk, Risk Management, Financial Risk