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Risk management in Islamic vs. conventional banking

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Presentation on theme: "Risk management in Islamic vs. conventional banking"— Presentation transcript:

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 Website: Warren Edwardes

2 articles on Islamic banking on Delphi’s website are on:
"Competitive Pricing of Islamic Financial Products", May 95, Horizon, Institute of Islamic Banking & Insurance, London: "Islamic Banking” 1st Quarter 99, Princeton Economics Journal, Warren Edwardes

3 some actions can protect the same actions can destroy
financial risk some actions can protect the same actions can destroy Warren Edwardes

4 financial risk - a film Warren Edwardes

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 discussion: Does Islamic banking risk differ from Western banking risk? Comments invited and discussion will be uploaded onto Warren Edwardes

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 Warren Edwardes

7 banking risk types - 1-5 Acquisition Risk Careless Error Risk
Competitive Risk  Commodity Risk  Communication Risk  Warren Edwardes

8 Currency Transaction Risk Currency Translation Risk
banking risk types Country Risk  Credit Risk  Cultural Risk  Currency Transaction Risk Currency Translation Risk Warren Edwardes

9 Currency Economic Risk Customer Satisfaction Risk
banking risk types Currency Economic Risk Customer Satisfaction Risk  Disaster Recovery Risk  Economic Activity Risk  Energy Price Risk  Warren Edwardes

10 banking risk types - 16-20 Environment Risk Equity Market Risk
Fraud (banker) Risk Fraud (customer) Risk Fraud (staff) Risk Warren Edwardes

11 banking risk types - 21-25 Image / PR Risk Information Risk
Inflation Risk  Interest rate Risk  Interaction Risk  Warren Edwardes

12 banking risk types - 26-30 Language Risk Legal Risk Liquidity Risk
Morbidity Risk  Mortality Risk  Warren Edwardes

13 Performance Measurement Risk Political Risk Competence / Understanding
banking risk types Operational Risk  Performance Measurement Risk  Political Risk  Competence / Understanding  Concentration of assets Risk Warren Edwardes

14 Concentration of liabilities Risk Concentration of business type Risk
banking risk types Concentration of liabilities Risk Concentration of business type Risk Convertibility Risk Property (Real Estate) Risk  Rating Agency Risk  Warren Edwardes

15 banking risk types - 41-45 Regulatory Risk Religious Risk
Resignation Risk  Settlement Risk  Systemic Risk  Warren Edwardes

16 banking risk types - 46-49 Tax Risk Technological Risk Transport Risk
Weather Risk  Warren Edwardes

17 It’s impossible to take an unnecessary risk.
banking risk types - 50 No Risk It’s impossible to take an unnecessary risk. Because you only find out whether a risk was unnecessary after you’ve taken it Giovanni Agnelli, President FIAT Warren Edwardes

18 banking risk - a movie Warren Edwardes

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 Website: Warren Edwardes


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