GFH initiates development of new Islamic risk management system with Path Solutions, Kuwait

Announcing the path-breaking initiative during the Middle East Financial Technology & Conference (MEFTEC), senior GFH officials said that the risk management solution will be developed jointly with the bank's technology partner, the Kuwait-based vendor of integrated Islamic software, Path Solutions. GFH's core banking system runs on iMal, which is the industry-leading integrated Islamic banking software from Path Solutions.

Commenting on the imperative of having adequate risk management tools in an age of increasing market complexity and regulatory requirements, Mr. Esam Janahi, Chief Executive Officer, GFH said: "By developing a risk management system that caters to a Sharia'h-compliant banking regime, we believe we are taking a pioneering step. It is becoming increasingly imperative that Islamic financial institutions put in place risk management systems that address the unique characteristics of the industry."

"What we are looking at in the new risk management system is a whole host of advanced and integrated features. We expect the system to have the capability not only to address compliance and regulatory requirements but also to help us in creating value for our shareholders and investors by efficient management of our on and off balance sheet risks," he said.

He added that innovation was an integral part of the business philosophy of GFH and the move to develop a customized risk management system was another testimony to this.

Speaking on the new risk management system, Mr. Silvan Varghese, the Head of Risk Management of GFH said: "The risk characteristics of Islamic banks are unique. Apart from exposure to the risks that are faced by conventional banks, Islamic banks face additional risks as a result of the Sharia'h-compliant nature of their business. What we intend to do is to use current techniques available and customize them to meet requirements of Islamic Banks in general and GFH in particular."

He said GFH will be developing the risk management system on iMal platform which currently has a data warehouse and Business Intelligence (BI) module which meet some of GFH's reporting and monitoring requirements. "We plan to work with regulatory agencies and other monitoring bodies to develop the new risk management system as a standard- bearer for the industry as a whole," Mr. Varghese said.

Among a host of features, the new risk management system will have a facility management and monitoring system, collateral and document management system, internal rating methodologies for investments & credit, measurement and monitoring system for balance sheet risks and modules for economic capital allocation, Value at Risk (VAR) and Earning at Risk (EAR), stress analysis etc. The system will also meet reporting requirements under Basel II.

Commenting on the partnership to develop the risk management system, Mr. Naji Moukadam, Executive Vice President (Development), Path Solutions, said: "We are extremely proud to be asked to develop a pioneering, industry-leading risk management system that serves the special nature of the Islamic finance and banking industry. Islamic finance and banking in general is waking up to risk management and we are confident that the new tool we will develop jointly with GFH will be a first-of-its-kind in the industry."