The Role of Compliance Risk Management in Improving the Sustainability of Islamic Banks

Abstract

This study focuses on the importance of compliance risk management in maintaining the operational conformity of Islamic banks with sharia principles and applicable regulations, as well as its impact on the sustainability and stability of banks. In facing regulatory challenges and operational risks, Islamic banks require an effective risk management system to avoid potential financial losses and reputational damage. This study uses a qualitative approach with a case study design. Data were collected through case study examinations and review of related documents, including annual reports and applicable regulations. Another method of data collection is a literature review, which involves collecting, reading, and processing various relevant literature sources. The research findings indicate that compliance risk management implemented in banks is effective in identifying, evaluating, and mitigating risks related to non-compliance with sharia principles and laws and regulations. This contributes to the sustainability of bank operations, increasing customer trust, and reducing potential losses caused by reputational and legal risks. However, challenges related to regulatory changes and limited human resources remain obstacles to more optimal implementation.