Enterprise Risk Management in Islamic Bank: A Systematic Literature Review

Abstract

This article aims to review and analyse the implementation of Enterprise Risk Management (ERM) in Islamic banking institutions, drawing on the existing academic literature. Islamic banks operate under unique principles derived from Sharia law, which require risk management practices not only to ensure financial stability but also to comply with ethical and religious standards. Through a comprehensive literature review, this study explores the concept, framework, and application of ERM in Islamic banks, highlighting key risk types, including credit risk, liquidity risk, operational risk, and Sharia compliance risk. The findings indicate that effective ERM plays a crucial role in enhancing governance quality, improving decision-making processes, and strengthening the resilience of Islamic financial institutions. However, the literature also reveals several challenges, including limited integration of Sharia governance within conventional ERM frameworks and a lack of standardised implementation across institutions. This study contributes to a deeper understanding of ERM practices in Islamic banking. It provides insights for future research and policy development to strengthen risk management frameworks in the Islamic finance industry.