Shariah risk management process for Islamic financial institutions in the context of Shariah Governance Framework 2010

Hassan, Rusni and Othman, Ahmad Azam and Omar, Muhammad Naim and Mohd Napiah, Mohammad Deen and Abdullah, Muhamad Asmadi and Arifin, Mahamad and Yusoff, Adnan and Mohd Karim, Muhammad Syahmi (2015) Shariah risk management process for Islamic financial institutions in the context of Shariah Governance Framework 2010. In: The 8th UUM International Legal Conference 2015, 25th -26th Aug. 2015, Golden Flower Hotel, Bandung, Indonesia.

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Abstract

Shariah compliance is the backbone of Islamic banks. As an institution established within the ambit of Shariah, Islamic banks are expected to ensure that their aims, activities, operations and managements adhere to the Shariah principles and values. Failure to comply with Shariah, will expose Islamic Financial Institutions (IFIs) to Shariah non-compliance risk. Subsequently, it is an essential duty of the IFIs to manage Shariah risk properly. In order to effectively manage the risk vulnerability of the IFIs, proper measures for risk management have been put in place on different frameworks that are either domestic or international based. In the Malaysian context, IFIs are guided by relevant regulations such as the Shariah Governance Framework 2010, IFSB principles and Islamic Financial Services Act 2013 as regards to Shariah Risk management. This present research examines the regulatory requirements on the Shariah risk management process for Islamic financial institutions that operate in Malaysia, in the context of the Guidelines on Shariah Governance Framework 2010 issued by the Central Bank of Malaysia. The paper will discuss the concept of "risk", "Shariah risk" and "Shariah non-compliant risk" in the context of Islamic Financial Institutions and also examined process adopted by the Malaysian IFIs in managing the shariah risk. The hypotheses that the paper seeks to establish are that there are differences between the concept of Shariah risk and shariah non-compliant risk; and that the shariah risk management process adopted by the IFIs are different than the conventional risk management process due to the unique features and requirements of the IFIs.

Item Type:	Proceeding Paper (UNSPECIFIED)
Additional Information:	1525/49149 (ISBN: 978-967-0910-03-1)
Uncontrolled Keywords:	Shariah; risk management; Islamic financial institutions
Subjects:	H Social Sciences > HG Finance K Law > KPG Malaysia
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Ahmad Ibrahim Kulliyyah of Laws Institute of Islamic Banking & Finance (IIiBF)
Depositing User:	Prof Dr Rusni Hassan
Date Deposited:	20 Jan 2016 10:28
Last Modified:	26 Nov 2024 11:54
URI:	http://irep.iium.edu.my/id/eprint/49149

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