Risk Management in Sharia Banking Governance as a Strategy and Implementation To Improve Performance and Sharia Compliance

Abstract

Risk management plays a crucial role in the governance of Islamic banks. As financial institutions operating based on Sharia principles, Islamic banks must manage emerging risks in a manner that aligns with Islamic law. Effective risk management not only impacts the bank's performance butalso ensures compliance with Sharia principles regulated bythe Sharia Supervisory Board. This article aims to analyze the implementation of risk management in Islamic banks as a strategy to improve operational performance and Sharia compliance, as well as to discuss the challenges faced in risk management within Islamic banks. This research employs a qualitative approach with a literature review method. Data were obtained from various academic journals, books, and relevant research reports, and were analyzed descriptively to explore the role of risk management in enhancing the performance and Sharia compliance of Islamic banks. The research findings indicate that good risk management can improve the performance of Islamic banks by maintaining financial stability and compliance with Sharia principles. Challenges include the limited availability of Sharia-compliant financial instruments, a lack of understanding ofthe application of Sharia in risk management, and limited technological infrastructure. The implementation ofeffective risk management is crucial for Islamic banks to improveperformance and ensure compliance with Sharia principles. Islamic banks need to continuously develop theirrisk management systems, strengthen human resource competencies, and utilize supportivetechnologies to manage risks more efficiently.