Identification and management of the unique risks related to Islamic financial products and services

Due to recent events, Islamic financial istitutions must now look beyond standard risks and examine the changing Regulatory Risks as well as the Anti-Terrorism rules. Risk management requirements include adequate monitoring systems. The sub-categories of Risk Management include (but are not limited to): Financial Risk, Loan Review, Credit Risk, Asset/Liability Mismatch (short-term vs. long-term), Portfolio Composition (short-term overweighting), Currency Risk, Regulatory Risk, Technology Risk, Country Risk, etc. In terms of Islamic alternatives to conventional mortgages, significant progress has been made in that the primary risks may be structured out of the product. Looking at the risks involved in both conventional and Islamic finance, it appears that the developing safeguards will be sufficient to mitigate and manage the risks.