Meet on best practices in banking from June 5

Islamic Banking differs significantly from conventional banking approaches not solely by its nature, but also by way of the challenges it faces due to the complexity of its sophisticated nature, in the form of operational risks.

According to Basel II, “Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and system or from external events”.

However, according to the Islamic Financial Services Board (IFSB), in Islamic banks, operational risk is associated with the loss resulting from ‘inadequate, or failed internal processes, people, and system, or from external events, including losses resulting from Shariah noncompliance, and the failure in fiduciary responsibilities.

Thus the best way for Islamic banks to combat operational risks is to develop risk management strategies and practices, which will be discussed in great detail by Arsalan Ahmed Qureshi, AVP — Senior Manager, Operational Risk — Risk Management Dept, Al Baraka Bank at the Oman Islamic Banking and Finance Conference 2012, taking place from June 5 to 6, 2012 at Grand Hyatt Muscat.


Keeping in line with this definition by the IFSB, simply put, the elements of operational risk exposures, related to Islamic banks are Shariah non compliance risk, fiduciary risk, people risk, technology risk, and legal risk.


According to IFSB guidelines, Shariah noncompliance risk arises from Islamic banks’ failure to comply with the Shariah rules and principles determined by its Shariah Board or the relevant body in the jurisdiction in which the Islamic bank operates resulting in the transaction being cancelled, and inability to recognise income or loss.

Fiduciary risk is the risk that arises from Islamic banks failure to perform in accordance with explicit and implicit standards applicable to their fiduciary responsibilities resulting in the deterioration of reputation. People risk is caused due to the lack of people who are adequately trained in modern financial transactions as well as Fiqh al Muamalat (Islamic law relating to financial transactions).

Technology risk occurs due to the Islamic banks’ inability to capitalise on the use of its technology in different ways.

Meet on best practices in banking from June 5


Finally legal risk may arise from uncertainty in laws, the lack of a reliable legal system to enforce financial contracts, legal uncertainty in the interpretation of contracts, the legality of financial instruments, lack of availability of legal experts, and exposure to unanticipated changes in laws and regulations.

Operational risks are a recent addition to a list of risks faced by financial institutions which can lead to significant losses.

This sees various techniques being applied by these institutions, including Islamic banks, to measure and manage operational risks.

At Al Baraka Bank,  Qureshi’s responsibilities are twofold, one as a strategic partner to the business units which involves advising them on risk/ regulatory issues and the best way to identify and manage operational issues.

The second is that of a risk controller setting parameters for risk activities. This makes him an expert on the subject of operational risks, risk strategies, measurement of operational risk capital, operational risk capital charge and tools and practices to combat operational risk — issues that will be highlighted in great detail at the Oman Islamic Banking and Finance Conference 2012.



Understanding banking customers better with Mr. Hamza at the Oman Islamic Banking and Finance Conference 2012

“The Customer is King” is an expression often used and never disregarded. However while the power of the customer is not underestimated, lesser attention is paid to his care and understanding, two elements important in fostering long-term relationships with customers. These two elements apply to fields all over the world, but more importantly to sectors offering services to niche audiences.

Mr. Jamsheed Hamza, Chief Executive Officer, Blue Ocean, will throw light on the same, with relation to Islamic Banking at the Oman Islamic Banking and Finance Conference 2012 taking place from 5th- 6th June 2012 at the Grand Hyatt.

As the CEO of Blue Ocean Academy, Mr. Hamza brings to his role, a wealth of experience in customer service, process reengineering and corporate relations, having worked for some of the leading organisations in the Middle East. Prior to joining Blue Ocean, he held the post of the Head of Corporate Banking, Islamic Banking Division at the National Bank of Abu Dhabi (NBAD), where he was entrusted with improving customer service quality while also creating an ideal working environment for staff. During his career he has gained valuable experience in spearheading organisational change, problem solving and crisis management, and identifying and understanding key business drivers.

Understanding banking customers better with Mr. Hamza at the Oman Islamic Banking and Finance Conference 2012

In light of the global crisis, Islamic Banking is gaining prominence with many customers switching to more risk-averse banking approaches. In addition to Mr. Hamza enlightening attendees on the role of customer care and understanding in the successful implementation of Islamic banking at the Conference, the presentation will also list out common customer complaints faced in an Islamic banking system and solutions for addressing those concerns.

Islamic Banking based on the Islamic Law or Sharia’h offers a variety of options involving different regulations and customer requirements, which calls for banks to formulate greater understanding of their customer’s needs and demands in order to ensure profitable banking services. Islamic Banking provides its varied customer segments with different product, service and brand criteria. Based on perception, customers will interpret acceptable levels of Sharia’h compliance differently. For e.g. traditional customers may be willing to pay premium for most Sharia’h compliant products but other customers may be prefer products that are less rigidly Sharia’h compliant and have more competitive rates, factors banks need to keep in mind while designing Sharia’h compliant product concepts, features, benefits, services etc. Since customer requirements are dependent upon factors like age, lifestyle, education and others, offering Sharia’h compliant products which cater to different customer segments can be in the bank’s favour.

Always keen to pass on his experience, Mr. Hamza regularly addresses seminars and conferences for organisations across the world. This has included addressing the UOP, Teens Summits, EEG and the International Islamic Banking Seminar. He has also worked as a trainer and consultant for international names namely the Worldwide Fund for Nature, Sony Middle East and Children’s Film Society. His presence at the Oman Islamic Banking and Finance Conference 2012 will help attendees walk in the shoes of an Islamic banking customer and help interested related parties develop Sharia’h compliant products, keeping the interests of their customers in mind.