Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010

Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010

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 management adhere to the Shariah principles and values. Failure to comply with Sh...

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Main Authors: Hassan, Rusni, Othman, Ahmad Azam, Omar, Muhammad Naim, Mohd Napiah, Mohammad Deen, Abdullah, Mohamad Asmadi, Yussof, Adnan, Ab. Karim, Mohd. Syahmi
Format: Article
Language:English
Published: UUM Press 2017
Subjects:
KBP173.25 Islamic law and other disciplines or subjects
Online Access:http://irep.iium.edu.my/66150/
http://irep.iium.edu.my/66150/
http://irep.iium.edu.my/66150/1/RISK%20MANAGEMENT%20UUMJLS%20%282017%29.pdf
id iium-66150
recordtype eprints
repository_type Digital Repository
institution_category Local University
institution International Islamic University Malaysia
building IIUM Repository
collection Online Access
language English
topic KBP173.25 Islamic law and other disciplines or subjects
spellingShingle KBP173.25 Islamic law and other disciplines or subjects
Hassan, Rusni
Othman, Ahmad Azam
Omar, Muhammad Naim
Mohd Napiah, Mohammad Deen
Abdullah, Mohamad Asmadi
Yussof, Adnan
Ab. Karim, Mohd. Syahmi
Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010
description 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 management 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 in 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 with regards to Shariah risk management. This research examined the regulatory requirements of 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 discusses the concept of “risk”, “Shariah risk” and “Shariah non-compliant risk” in the context of Islamic Financial Institutions and also examines the 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. ************************************************************************************************************************* Pematuhan Syariah adalah tulang belakang bank Islam. Sebagai sebuah institusiyang ditubuhkan dalam bidang Syariah, bank Islam dijangka memastikan bahawa matlamat, aktiviti, operasi dan pengurusan mereka mematuhi prinsip dan nilai Syariah. Kegagalan mematuhi Syariah, akan mendedahkan Institusi Kewangan Islam (IFIs) kepada risiko ketidakpatuhan Syariah. Selepas itu, adalah tanggungjawab penting IFI untuk menguruskan risiko Syariah dengan betul. Untuk mengatasi kelemahan risiko IFI secara berkesan, langkah-langkah yang sewajarnya untuk pengurusan risiko telah dilaksanakan dalam rangka kerja yang berbeza sama ada di dalam negeri atau antarabangsa. Dalam konteks Malaysia, IFI dipandu oleh peraturan yang berkaitan seperti Rangka Kerja Tadbir Urus Syariah 2010, prinsip IFSB dan Akta Perkhidmatan Kewangan Islam 2013 berkaitan dengan pengurusan risiko Syariah. Kajian ini mengkaji keperluan pengawalseliaan proses pengurusan risiko Syariah untuk institusi kewangan Islam yang beroperasi di Malaysia, dalam konteks Garis Panduan mengenai Rangka Tadbir Urus Syariah 2010 yang dikeluarkan oleh Bank Negara Malaysia. Makalah ini membincangkan konsep “risiko”, “risiko Syariah” dan “risiko tidak patuh Syariah” dalam konteks Institusi Kewangan Islam dan juga mengkaji proses yang diterima pakai oleh IFI Malaysia dalam menguruskan risiko Syariah. Hipotesis ini bertujuan untuk melihat perbezaan antara konsep risiko Syariah dengan risiko tidak patuh Syariah; dan proses pengurusan risiko Syariah yang diterima pakai oleh IFIs adalah berbeza daripada proses pengurusan risiko konvensional disebabkan oleh ciri-ciri unik dan keperluan IFI.
format Article
author Hassan, Rusni
Othman, Ahmad Azam
Omar, Muhammad Naim
Mohd Napiah, Mohammad Deen
Abdullah, Mohamad Asmadi
Yussof, Adnan
Ab. Karim, Mohd. Syahmi
author_facet Hassan, Rusni
Othman, Ahmad Azam
Omar, Muhammad Naim
Mohd Napiah, Mohammad Deen
Abdullah, Mohamad Asmadi
Yussof, Adnan
Ab. Karim, Mohd. Syahmi
author_sort Hassan, Rusni
title Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010
title_short Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010
title_full Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010
title_fullStr Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010
title_full_unstemmed Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010
title_sort shariah risk management process for islamic financial institutions in the context of shariah governance framework 2010
publisher UUM Press
publishDate 2017
url http://irep.iium.edu.my/66150/
http://irep.iium.edu.my/66150/
http://irep.iium.edu.my/66150/1/RISK%20MANAGEMENT%20UUMJLS%20%282017%29.pdf
first_indexed 2023-09-18T21:33:52Z
last_indexed 2023-09-18T21:33:52Z
_version_ 1777412690269962240
spelling iium-661502018-10-03T03:01:03Z http://irep.iium.edu.my/66150/ Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010 Hassan, Rusni Othman, Ahmad Azam Omar, Muhammad Naim Mohd Napiah, Mohammad Deen Abdullah, Mohamad Asmadi Yussof, Adnan Ab. Karim, Mohd. Syahmi KBP173.25 Islamic law and other disciplines or subjects 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 management 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 in 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 with regards to Shariah risk management. This research examined the regulatory requirements of 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 discusses the concept of “risk”, “Shariah risk” and “Shariah non-compliant risk” in the context of Islamic Financial Institutions and also examines the 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. ************************************************************************************************************************* Pematuhan Syariah adalah tulang belakang bank Islam. Sebagai sebuah institusiyang ditubuhkan dalam bidang Syariah, bank Islam dijangka memastikan bahawa matlamat, aktiviti, operasi dan pengurusan mereka mematuhi prinsip dan nilai Syariah. Kegagalan mematuhi Syariah, akan mendedahkan Institusi Kewangan Islam (IFIs) kepada risiko ketidakpatuhan Syariah. Selepas itu, adalah tanggungjawab penting IFI untuk menguruskan risiko Syariah dengan betul. Untuk mengatasi kelemahan risiko IFI secara berkesan, langkah-langkah yang sewajarnya untuk pengurusan risiko telah dilaksanakan dalam rangka kerja yang berbeza sama ada di dalam negeri atau antarabangsa. Dalam konteks Malaysia, IFI dipandu oleh peraturan yang berkaitan seperti Rangka Kerja Tadbir Urus Syariah 2010, prinsip IFSB dan Akta Perkhidmatan Kewangan Islam 2013 berkaitan dengan pengurusan risiko Syariah. Kajian ini mengkaji keperluan pengawalseliaan proses pengurusan risiko Syariah untuk institusi kewangan Islam yang beroperasi di Malaysia, dalam konteks Garis Panduan mengenai Rangka Tadbir Urus Syariah 2010 yang dikeluarkan oleh Bank Negara Malaysia. Makalah ini membincangkan konsep “risiko”, “risiko Syariah” dan “risiko tidak patuh Syariah” dalam konteks Institusi Kewangan Islam dan juga mengkaji proses yang diterima pakai oleh IFI Malaysia dalam menguruskan risiko Syariah. Hipotesis ini bertujuan untuk melihat perbezaan antara konsep risiko Syariah dengan risiko tidak patuh Syariah; dan proses pengurusan risiko Syariah yang diterima pakai oleh IFIs adalah berbeza daripada proses pengurusan risiko konvensional disebabkan oleh ciri-ciri unik dan keperluan IFI. UUM Press 2017-07-15 Article PeerReviewed application/pdf en http://irep.iium.edu.my/66150/1/RISK%20MANAGEMENT%20UUMJLS%20%282017%29.pdf Hassan, Rusni and Othman, Ahmad Azam and Omar, Muhammad Naim and Mohd Napiah, Mohammad Deen and Abdullah, Mohamad Asmadi and Yussof, Adnan and Ab. Karim, Mohd. Syahmi (2017) Shariah risk management process for Islamic financial institutions in the context of shariah governance framework 2010. UUM Journal of Legal Studies, 8. pp. 1-15. ISSN 2229-984X E-ISSN 0127-9483 http://e-journal.uum.edu.my/index.php/uumjls/article/view/4642/616

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