A Survey and Comparative Analysis of Risk Management Practiced by Islamic and Conventional Banks in Pakistan: An Empirical Study on Improving Risk Management

Abstract

The purpose of this study is to assess the behavior of Islamic and conventional banks towards the improving risk management. This study is focused on survey and comparative of risk management practiced by Islamic and conventional banks in Pakistan. The study also examines the adequacy level of risk management and managerial practices by these banks. Five types of risks faced by both Islamic and conventional banks including market risk, liquidity risk, credit risk, operational risk and risk management practices have been taken into the scope of this study. In order to assess the behavior of these banks towards the attentiveness of minimization of operational risks and following the aforementioned tools, exploratory approach has been adopted by developing a questionnaire for data collection. For this purpose, the concerned managerial level employees of 5 Islamic and 5 conventional banks have been selected. By the analysis of data collected, it is concluded thatcompared to conventional banks, Islamic banks in Pakistan place a greater emphasis on risk management practices to reduce operational risks.However, conventional banksare more focused on credit risk, liquidity risk and risk management practices than Islamic banks while the focus on risk management practice is shared by both types of banks. A conducting of survey and comparative analysis of risk management practices has important implications for improving organizational risk resilience, guiding policy and regulatory decisions, fostering best practices, and promoting overall market stability. Organizations can use the insights to refine their risk management processes, while regulators and policymakers can leverage the findings to enhance industry standards and safeguard public interests.