RISK MANAGEMENT ACCORDING

TO SHARIAH

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 RISK MANAGEMENT ACCORDING TO SHARIAH

Risk Concept

Risk is defined as the probability or possibility of

lost and hazard that could happen. Risk has captured
attention in Islam as reflected in the al-Quran and
Hadith of the Prophet:

َ ُ‫ك أَ ْغ ِن َيا َء َخ ْي ٌر ِمنْ أَنْ َت َذ َر ُه ْم َعالَ ًة َي َت َك َّفف‬

َ ‫ون ال َّن‬
‫اس‬ َ ‫ك أَنْ َت َذ َر َو َر َث َت‬
َ ‫إِ َّن‬

Verily If you leave your beneficiary in rich is better from

your leave them in poor and cadge from other people.
(Bukhari and Muslim)

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 CONCEPT OF SHARIAH RISK

Yusuf said: “You will do cultivation for seven years as usual; than (save well, spend well,
so) what you reap let it then remain in its ear (store in granary) except a little wherefrom
you will
it (during the period).”

“Then there will come after that (period) seven (years)of hardship (due to serve famine),
they will consume (all the stores) what you put up in advance for them (for the hard
days), except a little which you will preserve (for seed).

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HAZARD

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RISK

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ACCIDENT

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 CONCEPT OF SHARIAH RISK

“and We will surely test you with something of fear and hunger and a loss of wealth and
lives and fruit, but give goods tiding to the patient:
(Surah Al Baqarah :155)

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SHARIAH COMPLIANCE RISK MANAGEMENT
IN TAKAFUL OPERATING FRAMEWORK
The Takaful operator is required to have
an adequate Risk Management level as
well as fund size to mitigate the risk
therein. Takaful is one of most reliable
risk management model. It carry its
function by accept a group of risk from a
different type of people that willingly to
participate to maintain a solidarity of
each other members.
It takes a permissible risk and sometime
adverse it to other party and
occasionally reject to accept risk that is
not compatible with the desirable risk
appetite.
 RISK CATEGORIES

Shariah Financial

Acceptable

Rejected Regulatory Liquidity

Operational Reputational
Transferable
ACTUAL SHARIAH NON-COMPLIANCE RISK
ACTUAL SHARIAH NON-COMPLIANCE RISK

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 SHARIAH RISK RATINGS
Comply

Comply when it clearly attains the Shariah approval and its official sign-
off and any subsequent issues also comply with the Shariah principles.

Non Comply

Totally contravene with Shariah principles or the SC’s rulings or SAC

decisions or does not have Shariah unit’s sign off or approval.
RISK MITIGATIONS

Accept

Tolerate

Reject
EFFECT OF NON-SHARIAH COMPLIANCE
EVENTS
Impediment
from Allah’s
blessing

Impose a Against the

monetary command of
penalty Allah

TAKAFUL
OPERATOR
Invalidation
Business
of aqad
reputation
(contract)

Possibility of
cancellation Non halal
of income
registration
 REJECTED RISKS ACCORDING TO SHARIAH

1. Risk related to element of polytheism (syirik)

2. Risk related to element Usury (Riba)
3. Risk related to gambling & gaming
4. Risk related to liquor e.g. brewing, beverage & bottling
5. Risk related to element of pork industry
6. Risk related to Tobacco, cigarettes and other tobacco products &
retailers
7. Risk related to producing impermissible things that could bring
harmful effects to the community
8. Risk related to permissible activities like entertainment activities
which contradict with the Shariah
9. Bring bad image to Hong Leong MSIG (HLMT) as a Shariah based
Takaful Operator
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Shariah Internal Risk Incidents
Shariah Risk Area Of Concern
Shariah Risk Area Of Concern
 Risk Assessment
Date Business unit Subject
27 January 2014 General Underwriting MIDF

Ref. Area of concern Type of risk Risk Rating

1 Boar director’s house All risk Comply

2 Office equipment Fire and all risk Comply
3 Financial Advisory Professional indemnity Non comply

4 Money in transit Fidelity Guarantee Comply

5 Financing amount Credit guarantee Non comply

Overall Risk Rating Recommendation

Comply Accept with condition
 Q & A SESSION

How many Shariah risk rating?

Is it permissible to accept risk from conventional loan?
What are the consequences of failing to apply Shariah
risk assessment for Takaful operator?

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