 In this module, we would look at risk management in Mudarbha as an Islamic mode of finance. By now, you must have realized that the risks in different Islamic modes of financing are quite similar. Similar in the sense that the relevance of credit risk, market risk, market risk, etcetera is there in all Islamic modes of finance. The difference is only in terms of the quantum of these risks. In one mode of financing, the incidence of operational risk may be more than another one. However, the modes of financing we have covered like Mudarbha, Ejara, Salam, Isthisna, etcetera, all these risks like market risk, operational risk, liquidity risk, credit risk, and reputational risk. In the context of operational risk, they are actually very relevant. We would look at the risks in case of Mudarbha-based profit sharing investment accounts. These profit sharing investment accounts are offered by almost all Islamic banks operating around the world and of course in Pakistan as well. Market risk in the context of profit sharing investment accounts could be one. Anything happens in the market which changes the behavior of the account holder. All of a sudden people start feeling more need for liquidity. People want to keep money because there is a change in the market. That could be one example of market risk. Operational risk. Operational risk as I said previously, this is relevant to all Islamic modes of finance and it is there throughout the life of a product based on any mode of finance. In case of profit sharing investment accounts, operational risk could be because of failure of technology. It could be because of failure of following the protocols by an employee of a bank or this could be in some cases merely due to load shedding. That could have some implications for technology. This could have some implications for crashing of this machine or that machine which was relevant to profit sharing investment accounts as part of the total banking proposition of a bank. So operational risk they are relevant. Liquidity risk. Now liquidity risk in the context of profit sharing investment account may arise if the bank has actually used a major chunk of the profit sharing investment account pool. We call it Mudarabha pool for financing and due to change in for example market condition. Now that financing of finances financing pool might face some kind of default. So there is increasing credit risk over there and as a result of that there is a need for more cash to be held by the bank and that is actually called liquidity risk. Then we have credit risk and I have already given the example of credit risk. If there are defaults on the financing pool that would give rise to credit risk in the context of profit sharing investment accounts. If the defaults are excessive for example the risk goes up that would have implications for the profitability of profit sharing investment accounts which would in turn have implications for the return going to profit sharing investment account holders and shareholders of the bank as well. Now the other one displaced commercial risk. Displaced commercial risk is the risk of loss arising from the disappointing performance of a portfolio. The customers they were expecting this return however the actual return is significantly less than that and because of that there is a mass kind of mass level withdrawal. In order to stop this one the shareholders in certain cases may use their own money to beef up the return for that time period so that withdrawal risk doesn't become excessive. That is displaced commercial risk and that is actually a unique feature of profit sharing investment accounts. Reputational risk. This is a very interesting risk which we are discussing for the first time in this context although this has implications for other Islamic modes of financing as well. Let me give you an interesting hypothetical example of reputational risk. Aaj ke social media doormy fake news bahut jaldi. Ek assa businessman jiske 5 crore rupe ek Islamic bank ek account pe padega. Someone goes to that person and shows him this video that this person was employee of this Islamic bank. He was diagnosed with cancer and the bank fired him. Now this guy gets very upset the businessman. He immediately picks up the phone and talks to his finance guy and asks him how much money we have deposited or put with this bank. The answer comes 5 crore rupe. Just get this money from this bank and put into the other one. This is called reputational risk. Nothing was there it was just a fake news but by the time the management of the bank would come to know of this one the damage would have already been done.