Chapter 17

Managing Risk in Islamic Financial Institutions

In This Chapter

arrow Appreciating the importance of risk management

arrow Walking through the risk management process

arrow Determining why Islamic firms face certain risks that conventional firms don’t

arrow Identifying the risks at play in conventional and Islamic finance

arrow Reading up on risk management standards in the Islamic finance industry

All business organizations face risks, which can range from the loss of a loyal customer to the failure of the entire operation. Data corruption or theft, lawsuits against the company, fines, penalties, loss of competitive advantage, negative media attention, public liability . . . the types of risk that a company may face are seemingly endless.

Financial institutions, including those in the Islamic sector, face certain risks that are specific to their industry. Islamic financial firms encounter an additional set of risks that relate to their adherence to Islamic law (see Chapters 1 and 2).

As the Islamic ...

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