Developing a Framework of Islamic Bank Operational Risk Management: ‘People Risk’

Abstract

The study of human resource has become a crucial topic in understanding the determinants of operational risk. Given the various sources of operational risk, losses resulting from staff performance seemed to be the major cause as employees are the key players who manage the processes and systems of undesired events. This study explored the influence of staff performance attributes toward operational risk management, with a focus on 'people risk.' The study was conducted using qualitative approach via face-to-face and telephone interviews with 14 respondents from 7 Islamic banks in Malaysia. Our preliminary finding showed that training, education, experience and compensation lead toward better management of 'people risk'. Hence, a clear understanding of the factors affecting 'people risk' would help ensuring an effective and successful strategy in managing human resources especially in developing the operational risk management framework for the Islamic banking institutions.

A Scientometric Study on Management Literature in Southeast Asia

“…It is interesting to note that even though Jurnal Pengurusan is not a specific Islamic economics or finance journal, it happens to publish several topics in this domain. The number of papers related to Islamic banking is quite large, discussing various topics, such as the determinants of Islamic bank's brand image (Ab Hamid et al 2021), CSR practice of Islamic banks (Mohd Nor and Hashim 2015), and risk management of Islamic banks (Aisyah and Zaid 2015). In addition, we found other papers related to other Islamic topics, such as takaful (e.g., Mohamed et al 2016;Nizar and Falikhatun 2021;Shaladdin et al 2018), with eight occurrences, and waqf, with five occurrences (e.g., Suhaili et al 2018;Thaker and Thaker 2015;Usman and Rahman 2021).…”

Improve the Competitive Advantage Through Human Resources Management Practices in the Iraqi Banking Sector

“…By way of explanation, the exclusive resources a company might have are mostly prosperous, unidentifiable to rivals, incomprehensible, simply produced again, and transferable with strict ownership and management (Proof et al, 2015). The competitive benefit can be enhanced with a large number of payments, including expense, productivity, dependability, reliability, time on the Field and new products, manufacturing scope, order/order frequency information, freight, transportation, client service improvement, reliable delivery and flexibility (Kwak et al, 2018).…”

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“…Different classifications have been raised for the factors that affect the non-financial operation risk in Islamic banks. Abdul-Rahman and Yazid (2015) concerned the banks' human resources as a major contributor to these risks. They justify that the non-financial risk resulted mainly from human behaviour even though these risks are raised inside or outside the banks.…”