Risk management in Islamic vs. conventional banking

1
Risk management in Islamic vs. conventional
banking

• EXPLORING THE LATEST INNOVATIONS IN ISLAMIC
  CAPITAL FUNDINGS
• Tuesday 5th OCTOBER 1999, Sheraton Imperial
  Hotel, Kuala Lumpur .
• Warren Edwardes, Chief executive officer, Delphi
  Risk Management Limited
• Email we_at_dc3.co.uk
• Website www.dc3.co.uk

2
articles on Islamic banking on Delphis website
are on

• "Competitive Pricing of Islamic Financial
  Products",
• May 95, Horizon, Institute of Islamic Banking
  Insurance, London
• www.dc3.co.uk/islamic.htm
• "Islamic Banking
• 1st Quarter 99, Princeton Economics Journal,
• www.dc3.co.uk/islamicbanking.htm

3
financial risk

• some actions can protect
• the same actions can destroy

4
financial risk - a film
5
A check-list of banking risk types

• from my book "Key Financial Instruments
  understanding innovation in the world of
  derivatives" Dec. 99, Commissioned by Financial
  Times Prentice Hall ISBN 0273 63300 7
• discussion Does Islamic banking risk differ from
  Western banking risk?
• Comments invited and discussion will be uploaded
  onto
• www.dc3.co.uk/islamicbanking1.htm

6
A list of Western banking risk types

• To put it simply and directly,
• if the bosses do not or cannot understand both
  the risks and rewards in their products,
• their firm should not be in the business. -
• William J. McDonough, President, Federal Reserve
  Bank of New York

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banking risk types - 1-5

• Acquisition Risk
• Careless Error Risk 
• Competitive Risk 
• Commodity Risk 
• Communication Risk 

8
banking risk types - 6-10

• Country Risk 
• Credit Risk 
• Cultural Risk 
• Currency Transaction Risk
• Currency Translation Risk

9
banking risk types - 11-15

• Currency Economic Risk
• Customer Satisfaction Risk 
• Disaster Recovery Risk 
• Economic Activity Risk 
• Energy Price Risk 

10
banking risk types - 16-20

• Environment Risk 
• Equity Market Risk 
• Fraud (banker) Risk
• Fraud (customer) Risk
• Fraud (staff) Risk

11
banking risk types - 21-25

• Image / PR Risk 
• Information Risk 
• Inflation Risk 
• Interest rate Risk 
• Interaction Risk 

12
banking risk types - 26-30

• Language Risk 
• Legal Risk 
• Liquidity Risk 
• Morbidity Risk 
• Mortality Risk 

13
banking risk types - 31-35

• Operational Risk 
• Performance Measurement Risk 
• Political Risk 
• Competence / Understanding 
• Concentration of assets Risk

14
banking risk types - 36-40

• Concentration of liabilities Risk
• Concentration of business type Risk
• Convertibility Risk
• Property (Real Estate) Risk 
• Rating Agency Risk 

15
banking risk types - 41-45

• Regulatory Risk 
• Religious Risk 
• Resignation Risk 
• Settlement Risk 
• Systemic Risk 

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banking risk types - 46-49

• Tax Risk 
• Technological Risk 
• Transport Risk 
• Weather Risk 

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banking risk types - 50

• No Risk
• Its impossible to take an unnecessary risk.
• Because you only find out whether a risk was
  unnecessary
• after youve taken it
• Giovanni Agnelli, President FIAT

18
banking risk - a movie
19
Risk management in Islamic vs. conventional
banking

• EXPLORING THE LATEST INNOVATIONS IN ISLAMIC
  CAPITAL FUNDINGS
• Tuesday 5th OCTOBER 1999, Sheraton Imperial
  Hotel, Kuala Lumpur .
• Warren Edwardes, Chief executive officer, Delphi
  Risk Management Limited
• Email we_at_dc3.co.uk
• Website www.dc3.co.uk