Answer: 1

Risk management process are steps of underlying any risk management system, which includes
risk identification, assessment and mitigation, measurement, monitoring, reporting and
controlling risks. In case of IBBL, risks are mainly mitigated by observing/following Shari’ah
rules and regulations. The bank has its own risk management philosophy for giving proper
attention to risk management. Based on its philosophy and guideline from the Bangladesh Bank,
the central bank of Bangladesh, IBBL has established a comprehensive risk management
framework. On the top of the framework there will be Risk management committee board will
make the ultimate decisions. Then the decisions will be passed to the Managing Director for
implementation. The Managing Director will forward the given decisions to Head of the
Management wing to take actions on the given tasks. Head of the Management will segment the
tasks to different Committee and teams. Such as Investment Risk management committee,
Foreign Exchange risk management committee, ALCO, ICC risk management, ICT risk
management, Money Laundry Risk management committee. Furthermore, the Head of the risk
management can expand tasks towards Supervisory Review process team, Stress Testing
committee and Basel Implementation committee. The Managing Director can create Risk
management co-ordination committee for any kind of precautions. Co-ordination will help
Managing Director to have a better communication with the committee and teams.

Answer: 2

The reason why I think the Risk Management committee are important for risk mitigation is
because in the Risk Management Committee board there is a complete process of the committee
board of how they communicate with their teams and members on the framework. For example,
Risk management committee board will give their decisions to Managing Director and based on
the decision Director will give tasks to the Head of the management and afterwards will be drop
down to the higher and lower teams and committee. If any of the committee fails to
communicate with the other committee then ultimately the risk mitigation will be hampered and
will fail to meet the company goal.

Answer: 3

Generic risks in Islamic Banks are not as direct as conventional banking. Investment in
Murabaha, Bai-salam, and Ijarah may turn credit risk into market risk at any investment. Shariah
non-Compliance risk arises when a bank fails to comply with Shariah. Changes in rate of return
may have negative impact on bank. Commercial risks arises when the bank has to provide more
than it earned. On Mudaraba and Musharaka contracts the investment risks are made with
partnership and profit sharing and loss bearing basis, if the clients fails to meet the agreement
then both client and bank will face the loss.
Answer: 4

Islamic banks face many unique risks due to the nature of their operations particularly Shari’ah
compliance requirements. IBBL faces some unique risk such as depository risk and displaced
commercial risk associated with the nature of deposits, IBBL is still able to successfully mobilize
deposits through the Mudaraba structure and provide returns to its depositors. But however, since
IBBL has successfully been able to mobilize deposits through Mudaraba, other Islamic banks can
do the same and provide a strong framework to build a proper management. Islamic banks also
tries to invest on low-risk financing to secure the bank and its depositors both.