Risk Management Innovation of Islamic Financial Institutions

The early of the millennium witnesses fast development in Islamic Financial Institutions. Professional practise and Islamic Financial specialist academics have been breathlessly racing to invent new Islamic Financial Institutions innovation in a rushing attempt to fill in all gaps and satisfy every need that may be thought of. The present paper aims at studying the risk management innovation arrangement in Islamic finance as may be derived from the axioms and rulings, especially in relation to the managing the risk. This is necessary to investigate the means and processes of risk management based on the Islamic financial paradigm. Even though, on average the Islamic Financial Institutions have good risk management practices, there is still enough room for Islamic Financial Institutions to improve their risk management system. The introduction of an effective risk management culture in Islamic Financial Institutions will ensure their competitiveness in the financial industry and financial crises.