Risk Management
Topic: A comparative analysis of risk management in conventional banks versus Islamic banks of Pakistan.
Sidrah-Tul-Muntaha
SP14-RBF-094
MS Thesis
In
MSRBF
COMSATS Institute of Information Technology virtual campus - Pakistan
Summery
The purpose of this comparative study is to analyze the risk management of banks and its impact on their performance. Risk is obvious and inborn in each and every economic activity. Every banking activity involves a certain type of risk. So, it’s a fact that risk has always been present in banks and without taking risk growth of business is not possible. Banks like all other businesses may face numerous levels of risks which rise due to the nature of their activities.
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However effective risk management boosts the performance of an organization. Risk management is a part of business policy of every bank. In order to properly implement the active risk management process, it is necessary to observe the process through some of its successive stages that differ when it comes to the conventional and Islamic banking. However, a comprehensive process of risk management in all financial institutions should include the following components, establishment of appropriate environment for risk management, finding appropriate “mitigates” of risk, risk measures, and appropriate internal …show more content…
Pakistani bank follow the Basel II Standard of the capital adequacy ratio. These standard states the limit of the capital must hold with the bank as the least capital requirement. The BASEL II uses as a substance in the loaning decision and make the principle clear to proficiently manage the risk and make the financial institution more competitive. A paper of consultative was issued by the Basel Committee on banking supervision (BASEL) in 1999 which claimed that most of the loan is more risky in the nature of credit. Pakistan has faced the large number of risk such as the credit risk, liquidity risk, foreign exchange risk, market risk, interest rate risk and many more because of the shaky environment of the Pakistan (Shafiq & Nasr, 2010).The major loans of the bank have more credit risk exposure of the bank. The snapshot of the credit risk is not only the loan, but the other of the financial institution have face the credit risk in Pakistani banks such as interbank transactions, trade financing, foreign exchange transactions, financial futures, swaps, bonds, equities, options, the extension of commitments and guarantees, and the settlement of transactions.
Research Objectives:
To evaluate the implementation of risk management in conventional and Islamic banks.
To study the relationship between risk management and performance of both type of banks.
Research questions:
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