Risk management practices in Islamic banks of Pakistan

Purpose – The purpose of this paper is to evaluate the degree to which Islamic banks in Pakistan use risk management practices (RMPs) and techniques in dealing with different types of risk. Design/methodology/approach – A standardized questionnaire is used which covers six aspects: understanding risk and risk management (URM), risk assessment and analysis (RAA), risk identification (RI), risk monitoring (RM), credit risk analysis (CRA) and RMPs. Findings – This study found that the Islamic banks are somewhat reasonably efficient in managing risk where URM, RM and CRM are the most influencing variables in RMPs. Research limitations/implications – The paper's findings are limited to the RMPs of Islamic banks in Pakistan. Originality/value – This paper explores the RMPs of the Islamic banks in Pakistan. The results can be used as a valuable feedback for improvement of RMPs in the Islamic banks in Pakistan and will be of value to those people who are interested in the Islamic banking system.