Operational Risk Management in Participatory Banks: Identification and Mapping Challenges under Prudential Requirements

Abstract

Operational Risk Management in Participatory Banks: Mapping Challenges and Identification under Prudential Requirements – This doctoral research investigates how Islamic “participatory” banks identify and manage operational risk within the prudential framework of the Basel Accords. The study follows an exploratory qualitative approach, based on semi-structured interviews with industry professionals in Morocco. In the theoretical section, we clarify the concepts of participatory banking and operational risk, then review key explanatory theories and existing academic literature on the topic. The empirical section presents a case study, including a mapping of operational risk incidents in a Moroccan participatory bank, followed by an analysis of that bank’s risk management and monitoring practices. The findings reveal a concentration of incidents in certain critical categories – notably Shariah non-compliance risk and process failures in financing – which highlights specific organizational weaknesses. These results suggest that despite adopting regulatory frameworks (e.g. the Basel II standard approach), participatory banks face gaps in effectively implementing risk identification and oversight processes. The thesis recommends strengthening internal controls and staff training, improving dedicated technological tools, and fostering a strong risk culture within these banks to better anticipate and mitigate operational risks. By helping to fill the research gap on operational risk in Islamic finance, this work offers insights for a more proactive and context-sensitive management of such risks.

Paper type: Practical research

Classification JEL: G21