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Islamic Finance

Applications of Islamic Finance including the Risk Management of Islamic Finance

This 2 day training event is designed to provide an understanding of the methodologies and risks within Islamic Banking and how these should be implemented and controlled in practice.

This course covers Islamic finance from both a technical and Sharia perspective, reviewing the risks applying and the controls operating within Islamic finance. Aimed at new and existing risk management professionals considering Sharia’a compliant finance, trade, investment and insurance, this course considers the nature of the risks that are specific to this industry, but also covers the legal aspects of Sharia’a which underpin all Islamic contracts.

Learning objective


Classroom lectures and interactive practical workshop format intended to affirm the learning objectives.

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The course is delivered in 11 sessions which are outlined below

Session 1: An Introduction to Risk and Process  Management within Islamic Finance

  • The principles and concepts which underpin Islamic Finance;
  • The nature of Islamic law and its application;
  • The role and constitution of the Sharia'a Supervisory Board
  • What are the current key risks within the finance industry?
  • How are these different within a Islamic Finance environment?
  • The key risks existing within Islamic Banking

Case Study:  Develop an initial analysis of the key risks existing within Islamic Finance

Session 2: An introduction to Risk Management in Islamic Banking

  • The basis of Islamic banking and finance
  • The main components of the Islamic banking industry and its operating structures
  • The application of risk appetite within Islamic Finance
  • The development of risk registers within Islamic Finance

Case Study:  Consideration of personal and corporate risk appetites
Case Study:  Design the systems/structures needed to ensure Islamic compliance with each product
Case Study:  What are the key elements that should be included within an Islamic Banking control & risk policy

Session 3: Islamic Law of Contracts

  • Principles of Islamic business including the avoidance of riba and gharar
  • The concept of Wa’d (promise)
  • The different types of contract
  • The purchase and sale of currencies
  • The use of commodities
  • The nature of the control environment applying within the legal functions of Islamic institutions

Case Study:  What are the key risks arising from the application of Islamic law?  How should these be controlled in practice?

Session 4: Financial Techniques Applied by Islamic Banks

  • The risk and control of Islamic current accounts;
  • The differences in risk and control within the major Islamic contract types:
    • Mudaraba
    • Musharaka
    • Murabaha
    • Ijara
    • Salam
    • Istisn'a
  • The risk and control of letters of credit and guarantees in Islamic finance contracts.

Case Study:  What are the key control risks for Investment gathering products?
Case Study: what are the key risks for application (“Lending”) products
Case study: How would you control these risks?

Session 5: Basel and Islamic Finance

  • The framework for Basel;­ does this provide additional challenges to the Islamic firm?
  • Credit risk
  • Market risk
  • Operational risk
  • Liquidity risk
  • Strategic risk
  • Reputational risk

Case Study: What are the key issues faced by Islamic institutions in implementing the Basel Accord?  How can these be overcome?

Session 6: Islamic Asset and Fund Management

  • The purpose of investment in Islam;
  • Prohibited industries and the problems of Groups
  • The issues relating to replicating conventional deposit structures using Murabaha and Mudaraba
  • The Islamic stock selection process and the role of the Sharia'a Supervisory Board

Case Study:  What are the key controls that are required over the Islamic asset business?  How do these vary from traditional investment companies?

Session 7: Islamic Bond Market - Sukuk

  • The nature of Sukuk compared with conventional bonds
  • The risks and controls over the issuance of Sukuk bonds
  • The different types of Sukuk
  • How Sukuk issues are rated
  • How to value Sukuk bonds

Case Study: What are the key risks and controls operating within the Islamic bond market?  How should these be controlled in practice?

Session 8: Islamic Insurance ­ Takaful

  • The nature and structure of Takaful compared with conventional insurance;
  • The limitations on products within Islamic insurance
  • How to remunerate the insurance operator
  • The Sharia'a governance of Takaful undertakings.
  • The risks and controls within Takaful firms

Case Studies:  What are the greatest risks within Takaful?  How will these be controlled in practice?

Session 9: Risk Management Techniques within an Islamic Finance environment

  • Control and risk self assessment
  • Key risk, performance indicators and risk appetite
  • Loss databases
  • Stress testing and scenario modelling

Case Study:  What are the stress tests and scenario models which are most suitable for a Islamic Finance firm?
Case Study:  What are the key risks within Islamic Finance and the indicators that should be applied?

Session 10: Course Wrap Up, summary & open Forum



Session 11: Short Multiple Option Test



Session 5: Basel and Islamic Finance

Case Study: What are the key issues faced by Islamic institutions in implementing the Basel Accord?  How can these be overcome?

About Us

Learning through action - every program we deliver is highly practical and addresses real live issues.  We use simulations, exercises and case studies and all our methods are based on the latest neuroscience and positive psychology research findings.  Everything we deliver and challenge our participants to think about leads back to one simple question ­ “what am I going to do differently back at work and how?”.

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United Kingdom

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