The Role of Corporate Governance in Managing the Risk in Islamic Banks in Indonesia

Abstract

Financing risk in Islamic banks is associated with the type of financing distributed. The risk must be managed carefully to build effective risk management. Corporate governance is one tool to influence the management of risks in Islamic banks. Corporate governance mechanism will build adequate policy and procedure in identifying and monitoring the risks. This paper aims to describe the role of corporate governance in managing the financing risk in Islamic banks in Indonesia. Using literature-based method, effective risk management needs the active supervision of the board of director, board of commisioners and sharia supervisory board. The study is expected to contribute in enhancing the role of corporate governance in Islamic financial institution. Keywords—financing risk, Islamic bank, corporate governance