 In this module, we shall study risk management in Isthisna. Risks in Isthisna could be various and they may take different forms at different stages of the Isthisna transaction. Oh, I started Isthisna risks before reminding yourself what is an Isthisna contract. Let me tell you that an Isthisna contract is a commissioned manufacturing contract whereby a buyer and seller, they agree on installment of prices as per the progress of a commodity or a project which is going to be delivered by the seller. And we told you that this is normally used in case of construction projects. So, the installments are there as and when new phase of construction gets completed, the buyer pays 30 amount of money. Now, this Isthisna contract is used in quite a number of very big projects in a complicated way and we would study the risks involved in that kind of use of Isthisna afterwards. That would be the risk management in Isthisna as a mode of financing. And now, we are looking at the risks in Isthisna contract. So, in case of Isthisna, market risk is relevant. During this period of Isthisna, anything can happen in the market. For example, if this was a construction project and it involved 18 months, during this period something can happen in the market, something disruptive or something can happen in another market which would affect this market as well. So, there are some risks associated with market changes. Total loss is another risk. It is quite possible that the construction site has an accident, a fire breaks out and if there was no proper, the car full or insurance cover, this total loss is quite possible as well which poses a risk to the Isthisna based transaction. Delays and default, delays in construction related projects are in many ways a norm. So, delays and default and this default by the seller or default by one of the important supplier to the seller, that could pose a risk as well. Price risk. So, sometimes we take a view that if this commercial tower is built, we would be able to sell the commercial units within it for a certain price. But by the time the project gets finished and those units are in the market, price is different from our expectations. So, this price risk is also a risky proposition. Operational risk because construction projects are very complicated. They involve so many parties, so many vendors and it happens over a certain time period. So, there is a possibility of mistakes and oversight which contribute to the operational risk and sometimes we face quality risk as well. We do not know what would be the actual product when it is produced and we have spent a lot of time effort and money but at the end of the day, we find that the quality of the project delivered was not up to the mark which is another risk inherent in Istisna contract. So, what could be the risk management? In case of market risk, it can be mitigated by selling in advance. Now, if these commercial units, we are not sure about the future price of these commercial units. It is possible in case of Istisna. Islam does allow the advance sale of these units in a Sharia compliant way. Now, to mitigate the total loss risk at the Khaful cover should be taken. If the Khaful in that country is not available, of course, as a compromise solution, conventional insurance can be bought. In order to counter the risks associated with delay and default, effective monitoring and reporting should be exercised. This is absolutely important in this kind of project. If there is no monitoring and effective monitoring and if there is no reporting mechanism, it is quite possible that the project would be actually delayed and there is a possibility of a default of one of the parties. Price risk can be countered by way of use of Sharia compliant hedging solution. These hedging solutions, they are complicated in nature. They are beyond the scope of this course. Hence, I would not be going into details of these hedging instrument. Operational risk, how to counter operational risk? Again, effective monitoring and standardization of processes and procedures. This could be a tool for minimizing operational risk in Isthisna contracts. Quality risk. Again, I would like to emphasize on the role of effective monitoring and standardization of processes and procedures. If you are not happy with one aspect of the project, try to identify it earlier so that it could be rectified. If you haven't been monitoring this commercial tower, at the end when it is delivered to you, you find that actually the whole tower is too hot. It doesn't have proper air conditioning system. However, if this was identified at an earlier stage, the design could have been modified. Now, these are very practical measures to minimize risk in case of Isthisna. Once again, I would like to remind you that we are not looking for avoiding risk, i.e., making the risk to level zero. All these measures would only be helpful in minimizing risks associated with an Isthisna-based project.