By Nurhafiza Abdul Kader Malim PhD
Abstract
In view of the massive failure of banking institutions in response to the global financial crisis (2007-2009), there has been proliferation of writings on risk management as never before. Islamic banking is much less affected by the turmoil for a variety of reasons, especially because it is still a very tiny part of the global system and has yet to develop enough connectivity to catch the cold. The current wave of financial liberalization and globalization naturally prompts for examining the question of risk management in Islamic banking. This paper discusses on risk management in Islamic banking and focuses on the credit, operational and Shari’ah risks. The fact that Islamic banking is submerged in the global system makes the risk treatment not only urgent but also extra complicated. Their exposure to the risk of financial losses is enhanced and performance may be disrupted. Finally, the paper highlights the issues and challenges in risk management and provides suggestions for risk mitigation in Islamic banking.
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