MANAGEMENT

Detailed explanation-1: -Uncertainty in Islam is related to speculative activities like gambling or Mysir, which is highly prohibited, or Haram in Islam. The concept of risk is also associated with the fundamental concept of al-gunm bil ghurmi, where profit is only legitimate when a party engages in real economic activities or venture.

Detailed explanation-2: -From Shari’ah perspective financial risk can be classified as forbidden risk, essential risk and tolerable risk. Forbidden risk must be avoided in order to make a financial transaction Shari’ah complaint. Islamic hedging strategies are only applicable to ‘tolerable financial risk’.

Detailed explanation-3: -On the other hand, Gharar yasir, which means small in amount or trivial is the uncertainty that is always present in all contracts and conducts, thus its existence is tolerated.

Detailed explanation-4: -The Islamic Financial Services Board (IFSB, 2005) recognises six major types of risks: credit risk, equity investment risk, market risk, liquidity risk, rate of return risk, and operational risk.