Review on Risk Management and Managing the risk of Takaful Operator

Nooraslinda A. Aris, Roszana T. & Mohammad Kamil A. T.(2012) Risk and Risk Management of
Takaful Industry. Journal of Global Business and Economics, 4(1).
The journal risk and risk management on takaful industry is written by Nooraslinda,
Roszana from UiTM Shah Alam and Mohammad Kamil from Kemajuan Islam Malaysia
department. In risk management the journal mentioned that Muslim managers of a business
organization, whose actions and decisions are ibadah if they fulfill and comply with Sharia
principles. Therefore providing insurance service to Muslims are actually fulfilling their
obligations as Muslims according to the author. Risk management is about creating awareness,
qualifying risks, and minimizing the impact of uncontrollable risk. While ineffective risk is caused
by lack of formalized risk procedures such identification, poor integration and other key
processes. The journal states that there are three key areas of risk management in takaful
which is shariah compliance, investment management and human resources. When it comes to
shariah compliance, non-compliance of it will result in serious losses to customers,
shareholders, company and the industry. Since the risk profiles and risk preferences are
different among organizations, the author suggested that, there should be a separate board to
review risk assessment and management. The journal provides that in order for effective
management the takaful operators required to observe the guidelines on directorship for takaful
operators and to observe limits and condition of outsourcing management of takaful funds. It is
also vital for takaful operators to ensure its compliance with Shariah rquirements. For Islamic
financial system to operate in accordace with Shariah is by centralized Shariah advisory body at
the bank and internal shariah committee in respective Islamic financial institution. This is to
ensure the structure, processes and operations are accordance with shariah. Furthermore this
will assist the board by discharging duties and outlining the functions relating to shariah. The
sub article conclude by clearly clarifying Shariah risk management is to monitor shariah risk to
avoid shariah non compliances.The author mentioned what is risk management, its key areas
and suggest significant measures for risk management in industry. The journal also have made
significant reference in other journal which shows that a distinctive research study was carried
out when it comes to risk management in takaful industry.
In Managing the risk of takaful operator, the journal defines the objectives of risk
management in takaful as well as the type of classified risks. There are few approaches to risk
management mentioned in this part which is to have a common language in terms of concepts,
definition and classification, creating a strong risk governance, focus on quantifiable aspects
and continuous improvement. The journal also identified the recent trend which is to adopt
Enterprise risk management since it has growing demand in implementing in their organization.
The authors of this journal explains that the Enterprise risk management manages the portfolio
of risk and consequently minimize the risk on and organizations capital earnings. It includes
risks associated with accidental losses, financial, operational and other risks. The authors urged
the need to have insights as to why some organizations embrace Enterprise risk management
and some organizations are not. There is an ambiguity arises whether it can handle risks with
takaful industry.