Risk Management in Islamic Finance

Risk management in Islamic finance involves identifying, assessing, and mitigating financial risks while adhering to Islamic principles. Unlike conventional finance, it avoids interest (riba) and speculative activities (gharar). Islamic financial institutions use shared risk approaches, profit-loss sharing, and ethical investments to ensure stability and fairness. They implement strict rules and Shariah compliance, focusing on transparency and equity, to protect investors and prevent excessive risk-taking, ensuring that financial activities align with Islamic moral and legal standards.